OEE: get to know this effectiveness indicator in industries

Have you noticed that in most factories there's always a conversation going on about something called OEE? It's like the star of the show when it comes to measuring production performance. But do we really know what OEE is and how to use it to power up the factory's performance? Let's dig a bit deeper into the topic and uncover the tricks of this indicator!

OEE, which comes from Overall Equipment Effectiveness, was born to support TPM (Total Productive Maintenance) and is considered the gold standard for evaluating manufacturing productivity. It's a central concept in lean manufacturing and a key performance indicator for any production facility, plant or individual workstation.

The big insight of OEE is that it's not just a pretty number for us to admire. It's here to truly make a difference, pointing out where production needs help  and how we can improve.

But of course, it's not enough to just have OEE up your sleeve and wait for magic to happen. Implementing it properly is a process that requires organization, and having a team aligned is crucial. You need the right data on hand, understanding the basic principles and, most importantly, the benefits it brings to the company.

OEE works as a production problem detector, revealing flaws along the line and on the machines — often called the "hidden factory." It shows where we're losing production opportunities with the resources we have available.

In addition, OEE guides resource allocation and maintenance strategies by highlighting the real problems inside the factory. By focusing efforts on eliminating waste, OEE not only measures performance but also drives the pursuit of continuous improvement. We can go further: if you have OEE in real time, connected to an APS (advanced planning & scheduling) tool, you can predict whether you'll meet production orders, adjust customer deliveries and, by anticipating issues or complaints, take your company to a different level of information.

What's interesting about this indicator is that it focuses on critical areas of productivity loss, grouped into three main categories: availability, performance and quality. These categories are fundamental to understand how factory equipment is used and how products are delivered to customers.

But how do we actually calculate this OEE? Well, OEE is the result of multiplying three parts: availability, performance and quality. Let me explain what each one means and how to calculate it:

Availability

‍This is how much time the machine or production line was available to work as planned, without unplanned stops. To calculate it, we look at the total time the machine or line should have been working and subtract the time it was stopped for some reason. The reasons can be planned or unplanned stops: let's explain the planned ones, which weren't covered in the text.

Unplanned stops are when the machine stops unexpectedly, without us scheduling it. It can be due to equipment breakdown, lack of operators or even lack of material. Planned stops, on the other hand, are those we know in advance  will happen, like  maintenance, adjusting a tool or even cleaning the machine.

It's important to remember that the list of reasons for stops can vary depending on the type of production and the company. But a good way to start understanding is to record the most common stoppage causes.

And one more thing: already-scheduled stops, such as major planned maintenance (like end-of-year ones, for example) or refurbishment, don't count as availability loss. Also, planned shutdowns of entire shifts due to lack of demand or seasonality, which leave the machine with no production schedule, don't count either. These are excluded from the OEE calculation. On the other hand, setup times and waiting for production from other sectors are counted.

Performance

‍Here we observe the real speed of the machine or production line compared with the planned speed. This planned speed, sometimes called the "maximum demonstrated rate" (MDR) or "ideal cycle time," represents the maximum the machine should be able to produce.

Performance shows how much the machine actually output during the time it was running, compared to the maximum it could have output operating at that maximum speed.

We divide performance losses into two types:

Micro stops: those moments when the machine stops for a short period, usually less than a minute. Often the operator can quickly resolve the problem themselves. However, these stops can be so frequent that their impact may go unnoticed. Examples include feeding failures, material jams, incorrect settings and even quick cleanings that occasionally need to be done.

Slow cycles: these are the moments when the machine runs more slowly than the expected speed. This can be caused by several reasons — dirty or worn machine, inadequate lubrication, lower-quality material or incorrect settings. Human factors, such as lack of operator training or experience, can also play a role.

Quality

‍The third aspect of OEE focuses on the quality of the products made. In simple terms, quality refers to the percentage of products coming off the production line meeting customer specifications the first time. Quality losses are divided into two categories: production rejects and startup rejects.

Production rejects: these are the defects that arise during stable production, that is, when the line is operating without major issues. These defects can often be corrected through rework. For example, products with incorrect weight, labeling problems, chemical or physical non-conformities and damaged packaging.

Startup rejects: here we have the defects that occur from production start until the line stabilizes. These defects are usually more noticeable after shift changes or when starting equipment operation. Examples include out-of-spec products, equipment that needs time to warm up or that generates waste at the start of operation.

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To make it easier to understand how to bring it all together in the formula, we built the example below so you can better understand and calculate your OEE. Take a look:

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An important point: each of these OEE calculation pillars has some common mistakes we should be careful with to avoid distorting the indicator with a wrong calculation.

See examples below:

Availability:

Availability is an area with several challenges in the OEE calculation. A common mistake is excessive exclusion of stops from the OEE calculation.

For example, shift changes are often omitted from the calculation even though they represent significant downtime periods. Imagine a changeover that takes 30 minutes when it was scheduled for only 10. That results in a 20-minute loss in the process, which can considerably impact production. Identifying and understanding these losses is crucial to improve operational efficiency.

Performance:

A common challenge related to performance is the lack of understanding of the machines' maximum potential output. Often manufacturers underestimate the real production speed, which can lead to an incorrect OEE reading with performance percentages above 100%.

One way to solve this is to contact the machine manufacturer for the maximum demonstrated rate (MDR). If that's not feasible, you can set a reference based on records of the fastest changeovers. Periodically adjusting cycle times based on operator performance can also help improve calculation accuracy.

Quality:

Regarding quality, two main challenges arise in the OEE calculation:

The lack of a reliable method to automatically record scrap, which often requires operators to log rejections manually.

The delay in obtaining quality information, which can result in imprecise data when computing OEE retroactively.

Solving these issues is essential to ensure the OEE calculation accurately reflects the efficiency and quality of production operations.

Understanding and implementing OEE is fundamental to set achievable targets and optimize equipment utilization. Following a successful implementation guide ensures you're on the right path to reaching your lean manufacturing goals.

Now that we better understand what OEE is, how can we start implementing it in real time at our company? At NEO, we're specialists in this subject and have already helped companies all over the world reach their full potential. To make this journey easier, we're offering 30 free days of our OEE tool, along with the hardware needed to connect to your equipment and transmit signals (Yes, you read that right! It's 30 days with the equipment at no cost!). And before you ask about catches or fine print, know that if you don't like it or it doesn't fit your process, just return the equipment. Simple as that, because our mission is to help industry reach its full potential.

If you're interested, get to know Evocon and request your free 30-day demo. Our team will reach out to organize all the details.

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