OEE? Yeah you know me!
OEE is like 90’s Rap for Manufacturing Productivity - it’s the gold standard.
Continuous, profitable manufacturing is orders of magnitude more difficult than just building a single unit, and OEE provides a framework to understand where any losses are coming from - so you can know what you need to fix.
To start, let’s assume it takes you 1 hour to build your product from start to finish. If you work 8 hours a day, 5 days a week, 50 weeks a year, you’ll be able to easily make 2000 units a year (8 x 5 x 50), right ?
Unfortunately, no.
That would require continuous operation at 100% efficiency, meaning you will only build good parts, within planned cycle time, without any interruptions or equipment downtime. But you’ll be slow on some days, you’ll randomly create defects, and tools may go down or break causing lost time. You can try to make up these losses with overtime, but that will be unsustainable and drive up costs, killing profitability.
OEE helps you to quantify your efficiency into those 3 practical categories, where Mathematically:
OEE = Yield x Uptime x Cycle Time Performance
Yield
Good parts produced/Total parts produced. In the example above, if one of your 8 units is defective, you can’t sell it. So that day’s productivity drops by one unit, and then you have to decide what to do with the defect. Do you throw it away? Do you repair it offline? Run it through the process again to fix it? Whatever you do - you’re going to incur a lot of waste. One way to think about it is that each defect actually costs 3 units - the defect, the time it takes to repair or replace the defect, and the opportunity cost of the good unit that you could have been making while you were working to repair or replace. Keeping yield high is critical for profitability, and it’s arguably the most important component of OEE.
Uptime
(Planned operating time - Downtime)/Planned operating time. Importantly, your planned operating time is not necessarily the same as the length of your shift - breaks for rest, lunch, or planned downtime should not be included in the calculation. For example, if you have an 8 hour shift, but during that shift you will be taking a 30 minute lunch and 2 15- minute rest breaks, your planned operating time will only be 7 hours. Downtime then is time that you were planning to be working, but are unable to due to issues that arise during the shift. It can be caused by any number of reasons, including (but not limited to) equipment stoppage, running out of raw materials, a safety concern, or a quality issue.
Cycle Time Performance
(Planned Cycle time x Total Parts Produced)/(Planned Operating Time - Downtime). This is the measure of how well your process is able to hit it’s planned cycle time. There will always be some variation in performance that causes some loss (especially with manual processes) and it’s important to be able to quantify this aspect of efficiency. As well, it’s important to note that this should never exceed 100%. If it does then you should re-set your planned cycle time, otherwise a >100% performance component will end up hiding other issues and drive other wastes (like idle waiting) into the system.
With these 3 numbers, we can calculate OEE, and it’s almost always much lower than you think. For example, 90% yield, 90% uptime, and 90% Cycle Time performance look pretty good (a 90 is an “A”, right?), but your calculated OEE is the product of the three, or only 73%. Operating with this OEE in the example above means you’re only going to get ~6 units/day, and 1460 units on the year. If you’ve made commitments to hit 2000, and can’t figure out how to increase each component and/or speed up and re-set your planned cycle time, you’ll end up having to run almost 2 full shifts of overtime each week, killing your profitability.
“World Class” OEE is often considered to be about 85% (roughly 95% for each component), and it’s not uncommon for it to be significantly lower. However, understanding what it is and where it comes from is critical in understanding how to put together a successful plan, and continuously monitoring and OEE will allow you to know where you need to put your efforts (improving yield? Reducing downtime? Improving performance or figuring out how to speed up the process) in order to ramp effectively and continuously improve your profitability.
You’ll find it in Threaded at the top of each node in your value stream. It’s automatically calculated as you add planned and actual performance to each node, as well as your operating parameters to your value stream, and we’ll use it to help drive insights into your opportunities for profitability improvement.
