The definition of Overall Equipment Effectiveness (OEE) is the measurement of an industrial operation’s productivity in lean manufacturing, derived from a formula involving performance, quality, and availability of resources.
KPI that measures lean productivity of factory
Formula is OEE = P x Q x A
Indicator for Total Productive Maintenance (TPM)
highlights "six big losses" framework
OEE is meant to quantify the lean productivity of your manufacturing operations. An OEE score represents the percentage of time that is spent productively.
The higher an OEE score, the more quality items are produced in as quick runtime as possible with as little interruption or downtime as possible.
You measure an Overall Equipment Effectiveness score by multiplying the productivity, quality, and availability of your product and materials during production. In short, OEE = PxQxA.
For example, a factory is producing 80% quality products, at 50% speed, where the machines are running at 75% availability.
OEE = P x Q x A
OEE = 50% x 80% x 75%
OEE = 0.5 x 0.8 x 0.75
OEE = 0.3
OEE = 30%
Why so low? An OEE score of 85% or higher is considered world-class, and many manufacturers are at 40% or lower. It is nearly impossible to get a score of 100% because there are always scheduled and unscheduled moments of productivity loss in real life. The percentage is merely an indicator of how well you are balancing your resources to get quality output.
Okay, but how do you calculate the P, the Q, and the A in the first place? Let’s break it down.
Performance is calculated by dividing the parts produced per cycle by the operating time.
EXAMPLE: A machine prints 100 copies of a book per day. Lately, the machine has been through much wear and tear, so the operator reduces the speed to ¾ as fast as normal, resulting in only 75 copies a day. The performance score for this process does not refer to quality produced, so it is 75%.
Quality is calculated by dividing the good product by the total product produced (good and bad).
EXAMPLE: A machine seals approximately 5000 lids on cans of product per day, but every time the operator loads the feeder with more lids, the first lid malfunctions as the machine calibrates. At the end of the day, the operator has loaded 20 sets of lids into the machine, which included 20 individual malfunctioning lids, resulting in a quality score of 96% per day.
Availability is calculated by dividing the actual running time of machinery by the total planned time for the operations.
EXAMPLE: A machine is available in the factory from 8am to 8pm, but after daily cleaning, inspection, and setup between tasks, it is only running for about 5 hours total, or an availability score of approximately 42% per day.
TEEP stands for Total Effective Equipment Performance, and is an OEE score adjusted for a full calendar year. A TEEP score of 100% means that your factory is producing all good quality parts 24/7 every day of the year at maximum speed.
TEEP = 100% x 100% x 100%
TEEP = 100% productivity over the course of a full calendar year
Now obviously that lofty 100% is practically unattainable. However, it is useful to compare a TEEP score against an OEE score to judge the ratio of possible productivity hours for a factory. It is therefore often used for big-picture process mapping and lean continuous improvement.
Much like the “wastes” of lean manufacturing, you can identify “6 big losses” through OEE calculations. These losses are important to consider because they are the most relevant detractors from your overall productivity.
Note that it may not be possible to eliminate all of the losses completely. For example, a factory with a high OEE score may still have a high performance loss when it comes to minor stops, because they value frequent safety inspections more than marginal gains within that process.