OEE Basics from Europe

by Charles Lukey
What is OEE and what can it do?
OEE stands for Overall Equipment Effectiveness. Done correctly, it can show you where your machines are losing money and what you can do about it.
OEE is a powerful metric, calculated from three simple numbers:
Equipment AVAILABILITY
Equipment PERFORMANCE
QUALITY of Product Produced On the Equipment
Those measures, defined as percentages, are multiplied together to create the machine’s OEE. Getting started is a challenge, but once you know a machine’s OEE, you’ve got a management tool that can be used by everyone involved machine operators right on up to the CEO.
Recently, I spent a week in Holland learning about OEE and a new software product designed to simplify OEE calculation and reporting.
OEE Toolkit is a software package designed by FullFact Bv of Aarle-Rixtel, Holland. Gemba Research has partnered with FullFact to bring OEE Toolkit to the US.
Arno Bouten, a lead consultant for FullFact, was my teacher.
I will assume you can know nothing about OEE so we start with the basics, he said, but of course you probably understand more than you know. With this Zen-like introduction, we began. Arno uses a series of one-page word problems (Here we call them Challenges) to teach the novice.
Since we’re in Holland, let’s use the example of a beer bottling plant.
This plant, Venlo Brewing, uses a bottle & packaging line known as a BP-4. The bottling line can run 40,000 bottles an hour. Though they try to stay inside a one day shift, VB frequently runs into overtime.
So let’s calculate an OEE for one day on the BP-4.
First, determine Equipment AVAILABILITY. The day shift starts at 6:00 am and ends at 5:00 pm. One 15 minute break in the morning, a half hour lunch, another 15 minute break in the afternoon. That’s 11 hours of machine availability. Hey, the machine doesn’t need breaks, right? So that’s 660 minutes.
The crew worked 10 hours, or 600 minutes. So, 600 minutes actual divided by 660 minutes available makes 90.9 percent. There’s our first number.
Equipment AVAILABILITY: 90.9%
Now, let’s measure Equipment PERFORMANCE. The BP-4 is rated at 40,000 bottles an hour. That’s known as the Name Plate Capacity. One of the main reasons Venlo bought a BP-4 was that capacity. On this day, however, the machine produced 24,800 bottles an hour. So, smaller divided by the larger, 24,800 divided by 40,000, is 62%.
Equipment AVAILABILITY: 90.9%
Equipment PERFORMANCE: 62.0%
Finally, let’s measure QUALITY of Product Produced on the Equipment. The BP-4 produced 248,000 bottles of beer today. Of that total, 24,800 bottles were rejected. Now, 24,800 divided by 248,000 is 10% which gives us:
Equipment AVAILABILITY: 90.9%
Equipment PERFORMANCE: 62.0%
QUALITY of product produced on the equipment: 90%
Multiply them together (.909 x .620 x .900) and you get an OEE of 50.7%.
I looked up at Arno. Is that good?
He replied, Well 85% is considered world class.
So Venlo has a way to go.
It would seem so, yes.
So now that we know, what can we do with an OEE number beside post it on the wall?
Well, Arno replied, we can start by doing a little root cause analysis – start asking why.
Why do we lose an hour’s production to breaks every day? Can we split the breaks up and keep running?
Why can’t the BP-4 run at 100% of Name Plate Capacity?
What issues do we need to address to get to 100%?
Why don’t we establish an acceptable reject rate?
Is 10% high or low?
Can we really shoot for zero?
All these questions and we’d only done one Challenge. And really, it was a pretty simple problem. I needed a break. Arno and I walked into the village for a cup of coffee. As we walked, he explained how OEE Toolkit created actionable data. This afternoon you’ll see how the software really makes it easy in the early going it’s all about commitment.
Commitment – and making sure you do the math.

5 Comments

  1. k.Hariprasad

    May 24, 2007 - 5:14 am

    please give the details about oee, ope,&kaizen

  2. pat hutchinson

    July 13, 2008 - 1:33 pm

    is oee the same as yield ie if i increase the oee by10% will the yield increase by 10% also

  3. Jon Miller

    July 13, 2008 - 11:00 pm

    Hi Pat,
    If by yield you mean quality yield then the answer is no. OEE is calculated as
    Availability x Performance x Quality
    such that Quality includes yield, defects, scrap losses etc.
    So increasing the OEE by 10% can be a result in increasing any or all of A, P and Q. You can increase OEE but still not increase yield.
    If by yield you simply mean output over a period of time, the answer is approximately yes.

  4. Grant

    July 22, 2009 - 6:27 am

    Is it more difficult to measure OEE by pounds or by cases? Can the upside down philosophy be applies for both?

  5. Luciano

    July 30, 2010 - 6:37 am

    Hi Jon, I’m Luciano from Argentina. I have a question about the application of OEE:
    One of the most important wastes in Lean Thinking is ‘Overproduction’. One of the most well-known metrics in Lean Thinking is OEE. What happens if one, as a kaizen activity, tries to increase the OEE of a not-bottleneck machine? Overproduction appears… Am I wrong if I say that OEE should only be measured and controlled in bottleneck resources?
    Great blog.