An Introduction to Overall Equipment Effectiveness (OEE) - A Powerful Method to Improve Manufacturing Productivity

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Overall Equipment Effectiveness
TM
The Critical KPI to Drive
Manufacturing Productivity

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A net reduction in cost of operations directly and positively affects the bottom line. Companies can boost revenue
without sacrificing profitability by factoring in long-term debt-to-capital ratio. Since finance puts a premium on
a company’s ability to maximize productivity and use existing assets, you have to continually measure, analyze,
and adjust your processes. This is accomplished by a rigorous practice of productivity gains, cost cutting with
increased efficiencies, and maximizing returns on fixed assets.
Though complex, this productivity improvement affects labor, equipment, consumables, procedures, quality, and
capital investment.
As part of the plan to improve, the following goals are common for most manufacturers:
• Increase capacity / decrease time to produce
• Increase return on assets
• Reduce operating costs
• Better manage capital
• Increase total shareholder returns
How do you accomplish these goals?
An Introduction to OEE
A powerful method to improve manufacturing productivity
Overall Equipment Effectiveness (OEE) has emerged as a powerful method of evaluating the productivity of
production systems. This ebook will be a guide to OEE – so you can lead your Operational Excellence team.

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Definition of OEE
OEE is an effective methodology to help improve the
productivity of manufacturing processes. Since the
early 1990s, OEE has emerged as a leading approach for
accurately measuring true plant productivity.
Initially, OEE was regularly associated with Total
Productive Maintenance (TPM) programs. It is now being
looked at as a powerful means of evaluating the Key
Performance Indicators (KPIs).
By definition, OEE is the
product of Availability,
Performance, and Quality
category percentages:
Where:
Availability = Downtime Losses
Performance = Speed Losses
Quality = Defect Losses
OEE =
Availability * Performance * Quality
Total Productive Maintenance (TPM) is a maintenance system covering life of all equipment:
planning, manufacturing, and maintenance. Improving performance via elimination of the 6 major
types of waste. OEE is the formula for defining equipment effectiveness in a TPM program.
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OEE is made up of three categories:
Each one of these OEE components represents losses that result in a reduction of Production Time. We begin with
Total Available Time and subtract time losses due to Availability (Downtime), Performance (Speed), and Quality
(Reject/Rework). Very quickly, one can see the effects of these losses on production time.
Productive Time becomes a fraction of Total Available Time. By using and understanding the losses, you can take
the actions necessary to increase Productive Time as much as possible. Figure 1 illustrates the time losses due to
various OEE categories.
Understanding OEE Terminology
Figure 1 – Time Losses
*Planned Shutdown Time, or time when the productive capacity is not needed, is not normally
Total Available Time
Planned Production Time
Planned
Shutdown*
Operating Time Availability
Loss
Net Operating Time Performance
Losses
Productive Time Quality
Losses
}OEE
Availability
The ratio of the
Operating Time to the
Planned Production Time
Performance
The rate at which equipment
converts available time
into product. Calculation
excludes availability and
quality losses.
Quality
Percentage of parts which
meet specifications. OEE
recognizes quality as only
one aspect of equipment
utilization.
included in the OEE calculation.

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Total Available Time: This is the time the plant is open and could be used for production
(excluding holidays).
Planned Production Time: This is the Total Available Time minus the Planned Shutdown Time.
Planned Shutdown could include meal breaks, or scheduled maintenance; changeover is often
categorized as loss of Planned Production Time.
Operating Time: This is the difference between Planned Production Time and the time lost to
downtime. Downtime events include equipment breakdown, unscheduled maintenance, setup
time and changeover. This is included in the OEE calculations.
Net Operating Time: This is the difference between the Operating Time and time lost to Speed
reduction. Speed reduction events include operating equipment at below rated speed (increased
cycle time), frequent short-lived stoppages not requiring maintenance, and certain operator
errors. This is included in the OEE calculations.
Productive Time: This is the difference between the Net Operating Time and the time lost to
Quality issues. Quality losses include rejected and reworked products. This is included in the
OEE calculations. Figure 1 describes how each OEE Category is calculated.
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OEE Calculations
Downtime
Losses
Availability: The ratio of Operating Time to Planned
Production Time (Operating Time is Planned Production
Time Less Downtime Loss). Availability of 100% means the
process has been running with no stops.
Availability = Operating Time / Planned Production Time
Speed
Losses
Quality
Losses
Quality: The ratio of Good Parts to Total Parts. Quality of
100% means there have been no reject or rework parts.
Quality = Good Parts / Parts Produced
Performance: The ratio of Theoretical/Ideal Speed to Actual
Speed. Performance of 100% means the process has been
consistently running at its theoretical maximum speed.
Performance = Parts Produced / (Ideal Speed * Operating Time)

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Defining OEE Events
Within each OEE Category, there are several events that must be identified, correctly measured, and analyzed.
There are situations (or events) that may require further thought to decide to which category they belong. For
example, short-lived stops and operator errors could be recorded as either Availability (Downtime) or Performance
(Speed) losses. The correct categorization will be made based on the specific manufacturing process and plant. It
is important to be consistent and uniform in categorizing events in order to get reliable results.
As stated above, there are many events that affect OEE. By implementing an OEE practice, you can reduce these
commonly occurring loss events to increase the overall plant productivity. Figure 2 provides a list of the Common
Loss Events, and the attributed categories.
Common Events OEE Category Comment
Equipment Breakdowns Availability Loss Depending on the specifics of the production environment,
certain variety of breakdowns not requiring maintenance could be
categorized as Performance/Speed Losses
Process Setup and Adjustments Availability Loss Includes certain operator errors and product changeovers
Short Stops and Idling Performance Loss Short stops are typically those which do not require maintenance.
Generally, problems with consumables could be categorized as
Performance/Speed Losses
Reduced Speed Performance Loss Factors such as equipment age or production anomalies that keep
the operation from running at the maximum theoretical speed
would be included in this category
Startup Rejects Quality Loss Production loss (rejected) during initial stages (transition) of
startup prior to reaching steady state (regularly producing good
products)
Production Rejects Quality Loss Products lost (rejected due to defect) during the normal production
stages
Figure 2

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The purpose of implementing an OEE program is to improve productivity.
It is important to know what you are aiming to achieve. What is considered to be world-class OEE? Are the
components of OEE important by themselves? These are very significant questions.
By general consensus, world-class OEE is 85% or higher. By contrast, most manufacturing plants have an OEE
in the range of 30 – 60%. It is not unusual for these plants to experience daily fluctuations of about 10% - there
is room for improvement.
What is Considered World-Class OEE?
Availability
90%
Performance
95%x x
Quality
99.9%
Overall OEE
85%=
Components of World-Class OEE

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Achieving world-class OEE is quite challenging and requires the
need to consistently follow a rigorous program. This means regular
measurement, analysis, and taking action based on the findings.
An important point to keep in mind is that you must look at all four
numbers (OEE, Availability, Performance, and Quality) together and
individually. Though it may sound contradictory since OEE is a measure
of productivity, it is possible to have a reasonable OEE without having an
acceptable individual component score.
With each component of OEE being counted equally (A*P*Q), each needs
to be diligently inspected. Don’t forgo quality (more rejects or rework) to
increase output or performance. If the balance in achieving a higher OEE
is off, the outcome may be unacceptable.
Scrutinize each
component of OEE:
Quick tip
• Availability
• Performance
• Quality
• Overall OEE
A
PQ
P
AQ
Q
AP

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Benchmark OEE
In a recent survey conducted by LNS Research, nearly 200 companies across multiple disciplines reported
their OEE numbers. From these findings, it seems world-class OEE is being met in a number of factories –
especially in Life Sciences and Discrete – but just how far is this from reality?
From these ranges, the numbers seem to be significantly inflated compared to the reality of most
manufacturers. The OEE of these industries tend to be more shocking in practice. With the proper
methodology, technical ability, and infrastructure in place, you can achieve world-class manufacturing
numbers.
You cannot misrepresent the numbers if you plan to act on them. Get accurate, automated, real time insight
into your shop floor with TrakSYS™.
Let’s look at a real life example.
Highest Reported OEE Median OEE Lowest Reported OEE Average OEE Range
100
10
20
30
40
50
60
70
80
90
Batch
Manufacturing
94
75
58
Discrete
Manufacturing
99
85
50
Food & Beverage
/ CPG
95
78
55
Life
Sciences
98
85
45
Process
Manufacturing
94
80
72

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It is good to know what OEE and its components are but in order to have a good understanding of the
concept, it is helpful to look at a real example. Consider a beverage plant with the following production
schedule for the bottling area:
A Real Example
Figure 4 - Production Data for Calculation of OEE and its Components
Item Data
Days of Operation Planned 5
Number of Shifts 15 (3 per day, 8 hrs. each)
Total Planned Shutdown 2,400 minutes (160 minutes/shift)
Downtime 1,250 minutes (for all shifts)
Theoretical (Ideal) Rate 600 bpm (bottles per minute)
Total Bottles Produced 1,656,502
Rejected Bottles 1,207

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The Breakdown
Planned Production Time
Total Available Time – Total Planned Shutdown
Operating Time
Planned Production - Downtime
Good Bottles
Total Bottles - Rejected Bottles
7,200 - 2,400 = 4,800 minutes
4,800 - 1,250 = 3,550 minutes
1,656,502 - 1,207 = 1,655,295
Availability
Operating Time / Planned Production Time
Quality
Good Bottles / Total Bottles Produced
Performance
Bottles Produced / (Ideal Rate * Operating Time)
3,550 / 4,800 = 0.73 (or 73%)
1,655,295 / 1,656,502 = 0.99
(or 99%)
1,656,502 / ( 600 bpm * 3,550 )
= 0.7777 (or 77%)
Real-Time
Plant Data
Calculated
Metrics
OEE
Availability * Performance * Quality
0.73 * 0.77 * 0.99
= 0.57 (or 57%)
KPI

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Considering that OEE can also be defined as:
OEE = Productive Time / Planned Production Time
Then:
Productive Time = OEE * Planned Production Time
= 0.5748 * 4,800 minutes
= 2,759.04 minutes
Also, consider if downtimes and short-lived stoppages were reduced by 10% or 125
minutes, the same factory would be able to produce 58,327 more bottle during the same
five-day period (assuming the same effective performance). With the wholesale price of
each bottle at $0.85, during each five-day period, the bottling area can produce $49,578
more sellable product. If the bottling area is operating 260 days during the year, the extra
production will be worth $2,578,056 without extra shifts or overtime.

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Global competition dictates the need to optimize assets, labor, and processes, making Overall Equipment
Effectiveness (OEE) an essential KPI. Though important for continuous improvement, many companies
still struggle with collecting accurate OEE data and characterizing the root cause(s) behind variations in
productivity.
A manual process to collect OEE data, e.g. clipboards and whiteboards, is often inaccurate, delayed, and/or
involves extra paperwork and operator dependencies. The next improvement step is to implement software
capable of directly monitoring the control systems running the plant assets.
Web-based reports, automated alerts via email or text message, and web journals create a highly engaged
and responsive team for significant improvement. These results will tie directly to specific plant initiatives,
whether expanding capacity of the existing assets, reducing changeover times, reducing overtime, reducing
rework and scrap, or improving customer service levels.
Conclusion
To learn more, visit
pages.parsec-corp.com/productivity.html
or contact us
marketing@parsec-corp.com

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About Parsec
Parsec Automation Corp. (Parsec) is the developer of TrakSYS™, the leading real-time operations & performance
management software. Manufacturing companies worldwide rely on Parsec for flexible and configurable tools to
execute manufacturing operations across the value chain more effectively.
Without production disruption, TrakSYS™ helps manufacturers to significantly improve asset utilization and
efficiency, increase capacity with no new capital equipment, reduce production costs, decrease lead time, and
improve profitability. With measurable ROI, TrakSYS™ fuels Lean, Six Sigma, TPM, and Operational Excellence
efforts. For more information about Parsec, please visit the corporate Web site at www.parsec-corp.com.
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