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What is Overall Equipment Effectiveness (OEE)? A User’s Guide

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Key Takeaway

  • Overall Equipment Effectiveness (OEE) is a key performance indicator that measures manufacturing productivity by evaluating the availability, performance, and quality of equipment to determine the percentage of planned production time that is truly productive. OEE can uncover important insights into the reliability of your individual tools and instruments.
  • The practice of OEE measurement first began in the late 1960s as a metric to optimize individual tools and has been refined in recent decades to assess the performance of entire manufacturing lines. Manufacturing performance should always be considered from several perspectives and OEE can be a valuable resource for your factory and warehouse teams.

    This user’s guide will present a detailed overview for measuring, understanding, and leveraging OEE metrics. We’ll also look at the important benefits of using OEE and how your organization can implement practices that take advantage of the insights that these metrics offer.

    What is Overall Equipment Effectiveness?

    Workers discussing overall equipment effectiveness in a manufacturing plant

    Overall equipment effectiveness is the primary method for measuring and reporting productivity in a manufacturing environment. One of the main reasons that this metric has become a manufacturing best practice is its simplicity. The actual measurement of OEE, which we’ll cover in a later section, can be a bit challenging to establish but the final calculation will yield a simple percentage.

    This percentage is calculated in the three areas of quality, performance, and availability. By comparing your equipment data to industry benchmarks, you can gain a better understanding of your manufacturing processes.

    Overall Equipment Effectiveness (OEE) Overview
    DefinitionA standard for measuring how well a manufacturing operation is utilized in terms of facilities, time, and material against its full potential.
    Optimal OEE Value100%, indicating only good parts are produced (100% quality), at the maximum speed (100% performance), and without interruption (100% availability).
    Components of OEEOEE is determined by three factors: the quality of products produced, performance efficiency, and equipment availability.
    PurposeOEE identifies the percentage of manufacturing time that is truly productive, aiding in the identification and elimination of inefficiencies.

    The 3 Benefits of Using Overall Equipment Effectiveness

    The use of overall equipment effectiveness metrics can result in many operational benefits. In addition to improving decision-making, overall equipment effectiveness can also help eliminate non-value-added process steps in your manufacturing workflows. The ability to diagnose equipment problems and inefficiencies also helps to improve maintenance management activities.

    These are some of the most common benefits of using OEE.

    1. Manufacturing Quality

    It’s logical to assume that an improvement in equipment effectiveness cloud also results in an improvement in product quality. Many factors of quality are determined by the accuracy and precision of the equipment. Focusing on overall equipment effectiveness improvements can also lead to greater gains in first-pass yield and a reduction of manufacturing time and costs.

    2. Data Accuracy

    When manufacturing equipment is more reliable and less subject to unplanned downtime, it is easier to determine process cycle times. This reduction in outlying data points is also a great way to enhance the precision of your manufacturing workflows.

    3. Equipment Uptime

    The ability to influence equipment performance can help increase the available capacity for tools and the throughput of your facility. As a diagnostic tool, OEE metrics also help identify shifts in equipment performance that can lead to unplanned downtime and preventable repairs.

    How To Calculate and Measure OEE

    Worker documenting OEE metrics in a manufacturing facility

    As mentioned previously, overall equipment effectiveness must take into account three factors that measure availability, performance, and quality. When combined, these metrics create a complete picture of a tool’s effectiveness. We’ll break down each one individually to better understand how OEE is calculated.

    Equipment Availability

    ((Run Time (Planned Run Time – Stop Time))/Planned Run Time

    This measurement represents the amount of time that a machine is available versus the amount of time it is scheduled for use.

    Equipment Performance

    (Ideal Cycle Time x Total Count)/ Run Time

    This equation measures the actual performance time of the equipment versus the expected cycle time for an operation.

    Equipment Quality

    Number of Good Items / Number of Produced Item

    A simple calculation, the equipment quality simply identifies the number of in-spec items versus the total number of items produced.

    After measurements are completed the three values for availability, performance and quality can be multiplied together to reach a final overall equipment effectiveness percentage. This number is then best used as a benchmark to identify suitable improvements.

    Ensuring Accurate Data Collection with Asset Tags

    Calculating these three factors requires complete and accurate data. Tagging equipment with durable asset tags helps to streamline documentation and ensure a high degree of accuracy by eliminating human error that’s common with manual documentation methods.

    With a variety of asset tags and barcode solutions available, such as asset tags for facilities management, equipment tags, high-heat barcode labels, work-in-process labels, and other barcode solutions, it’s possible to tag all your equipment assets, even those that operate in harsh manufacturing environments.

    Metalphoto® anodized aluminum asset tags, for example, offer exceptional durability to withstand the harshest environments in both indoor and outdoor applications. Metalphoto asset tags have an expected exterior lifespan of more than 20 years when treated with Camcode’s image intensification process. 

    These durable asset tags and labels can be quickly and easily scanned with a barcode scanner to document maintenance work, operational times, and other data to calculate OEE with accuracy.

    Leveraging The Value of OEE

    While an overall equipment effectiveness value of 100% would be ideal for any manufacturer, it’s best to compare your values to accepted benchmarks. This is a basic set of guidelines for understanding the OEE measurements that can get you started:

    • 40-60% – Poor. Many first-time measurements can be in this range with several improvements necessary to increase scores.
    • 60-80% – Good. Equipment is likely performing to baseline expectations, but opportunities for improvement exist.
    • 80-100% – Excellent. When a higher level of performance is achieved, it’s important to create strategies to maintain these levels and identify incremental improvements that are cost-effective.

    As you collect data and identify improvements, one great way to categorize your findings is by using the “six big losses.” The six big losses are the most common areas of difficulty that are encountered in a manufacturing environment. They are:

    1. Unplanned Stops (Availability)
    2. Planned Stops (Availability)
    3. Small Stops (Performance)
    4. Slow Cycles (Performance)
    5. Production Rejects (Quality)
    6. Startup Rejects (Quality)

    In many ways, these six categories represent another level of detail for your overall OEE measurement can eliminating the appearance of these losses can improve your OEE scores over time.

    Final Thoughts on Overall Equipment Effectiveness

    The use of overall equipment effectiveness is an excellent practice to monitor the performance of your manufacturing equipment. When combined with other metrics and a strong commitment to performance management, it’s possible to achieve higher levels of product quality and throughput.

    Understanding how the OEE metric works will also help you educate and inform your team about the value of measuring these important areas.

    Frequently Asked Questions

    Questions about the article? Let us help!

    Our sales engineers are experts in automatic asset tracking, tagging and identification,a nd can answer all your questions. Get in touch now.

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