Overall Equipment Effectiveness (OEE) - The Key Production Figure Explained

Due to the complexity of this subject area, Overall Equipment Effectiveness is a practical key figure that allows those responsible in manufacturing companies to get a rough overview of overall equipment effectiveness at a glance. We explain exactly what this key figure is all about.

What Is Overall Equipment Effectiveness (OEE)?

Overall Equipment Effectiveness (OEE) is a very common key figure in the manufacturing industry. OEE makes it possible to calculate the overall efficiency of a production plant. For the calculation, the availability and performance of systems and the quality of products are included in the assessment.

In theory, the best possible OEE value is 100 percent. A production plant of this type would be optimally utilized at all times, would operate as quickly as possible and without failure, and would only manufacture products of impeccable quality.

In practice, values of 65 - 85% are usually considered a good average, and anything above 85% is generally rated as very good and efficient. However, these values can vary depending on the industry.

Important Aspects of Overall Equipment Effectiveness

There are three key elements that are of particular relevance to OEE:

• Availability
  Availability describes the proportion of the planned operating time during which the machine or system is working productively. This includes the time in which no downtimes occur due to maintenance, retooling or malfunctions. 

• Performance
  Performance describes how efficiently a machine works in comparison to the maximum possible production speed. Poor performance can be caused by slow production processes, material bottlenecks or otherwise inefficient workflows (microstops).

• Quality
  The quality factor is used to calculate how high the proportion of fault-free products is compared to the total production quantity. The higher the quality of the products, the less waste is produced and the more efficiently resources are used along the production chain. 

When recording these three factors, it is important that data is collected comprehensively and without gaps. This is the only way for companies to be certain that the OEE calculation is both correct and representative.

Overall Equipment Effectiveness - Formula for Calculation

The respective factors are calculated according to the following formulas:

• Availability =  Actual production time : Planned production time
• Performance = (Units produced x Production time per unit) : Maximum production
• Quality = Defect-free units : Produced units
• OEE = Availability x Performance x Quality

Let us carry out a sample calculation. To do this, we assume the following data for a fictitious production company:

• Planned production time: 480 minutes
• Actual production time: 420 minutes
• Maximum possible quantity of units: 2000 units 
• Units actually produced: 1800 units
• Defect-free units: 1700 units

The OEE calculation based on this data from production is as follows:

• Availability = 420 : 480 = 0.875 (87.5 %)
• Performance = 1800 : 2000 = 0.90 (90.0 %)
• Quality = 1700 : 1800 = 0.944 (94.4 %)
• OEE = Availability x Performance x Quality = 0,875 x 0,9 x 0,944 = 0,743 (74,3 %)

In this example calculation, the Overall Equipment Effectiveness of the machine/system of the fictitious production plant is 74.3%. Put simply, this is a solid value that still offers potential for optimization.

The OEE Indicator and its Added Value in Production

For companies in the manufacturing sector, overall equipment effectiveness is an important key figure that is used for a variety of evaluations and analyses. The following use cases are particularly important.

Performance Comparisons of Systems

Regular calculations for different machines / systems offer companies the opportunity to compare the performance of individual production lines with each other based on data. Comparisons can also be made with other locations in order to uncover any structural problems or obstacles in production.

Identification of Inefficiencies

Is the scrap rate very high in certain production lines? Is the throughput lower than expected? The OEE calculation incorporates numerous valuable key production figures that give those responsible for planning an overview of where inefficiencies exist and resources are being used inefficiently.

Uncover Optimization Potential

By comparing important production KPIs and ongoing benchmarks, companies can accurately identify those systems and production lines where investments are likely to deliver a high ROI. This allows machines to be specifically optimized or replaced with new models in order to increase the efficiency and effectiveness of these systems.

It is important that companies not only collect these key figures, but also take appropriate steps to gradually optimize their own production. This is the only way to ensure that they remain competitive in a competitive environment that is more data-driven than ever before. 

The Advantages of High Overall Equipment Effectiveness

If production companies consistently use the key figures determined to optimize their production lines, workflows and processes, experience has shown that these companies benefit from this decision in several ways:

• Increasing Production
  An awareness of Overall Equipment Effectiveness helps companies to continuously improve the key OEE factors of availability, performance and quality. Over time, this also increases the company's overall production capacity.

• Reducing Costs
  The better the overall equipment effectiveness, the lower the reject rates or machine downtimes will necessarily be. This saves costs insofar as products do not have to be manufactured multiple times and systems can be operated very efficiently (in terms of resources).

• A Competitive Edge
  Companies with a high OEE produce more efficiently than their competitors. They can provide more products of competitive quality at comparable costs and therefore have cost advantages that they can pass on to their customers. This in turn strengthens their own competitive position on the market.

• Sustainable Production
  The higher the Overall Equipment Effectiveness, the more efficient a company's entire production is. This also includes factors such as energy consumption, CO2 emissions and the use or waste of resources.

Optimizing OEE - What Companies can Do

The factors availability, performance and quality are all known values that are included in the calculation of overall equipment effectiveness. In order to develop these positively in the long term, companies must take measures that influence these factors as directly as possible. The following tips have proven their worth in practice.

Technology & Software Solutions

The use of MES software enables many companies to establish effective machine and process data acquisition along the entire production process. Such software solutions help to consolidate and jointly evaluate vital production data.

Such powerful tools often reveal where inefficiencies exist within production, where processes come to a standstill or where other problems occur. MES software and corresponding sensors are essential in order to gain simple and comprehensive access to important data from the entire production process.

Automation of Processes

Experience shows that the better processes can be fully or partially automated, the greater the efficiency gains in these areas of production. This applies in particular to sectors such as the automotive industry.

Naturally, not every production step can be automated. Nevertheless, it makes sense to consider automation technologies and AI systems when gradually optimizing existing processes and workflows.

Training of Employees

A sound understanding of production data is crucial in order to implement targeted improvements. Employees also need to know how to use the relevant tools and what relevant information they can obtain from an MES dashboard. 

Training for employees helps them to interpret OEE key figures correctly and to use the necessary software solutions effectively, thereby actively participating in the optimization of processes.

Lean Management Methods

It is not one-off improvements that are essential for a lasting improvement in OEE, but the continuous adaptation and optimization of processes. Numerous lean management approaches emphasize this step-by-step approach.

By repeatedly adapting, re-evaluating and re-adapting production steps, companies achieve an actual and, above all, sustainable increase in overall equipment effectiveness.

Audits & Benchmarks

Conducting regular audits and benchmarks of the systems goes hand in hand with modern management approaches such as Kanban, value stream mapping or the continuous improvement process (CIP).

Using the right KPIs and in conjunction with the appropriate tools, the progress of your own work is regularly recorded and re-evaluated. This helps the company to continuously develop its own production processes.