**Q: OEE, Isn’t that just a fruit salad of several numbers, a complete bogus?**

Arno Koch • Is OEE fruit salad? No, it is a simple yet powerful balanced time study that helps shop floor people to visualize and eliminate equipment losses. Why is it not fruit salad?

Let me explain. First of all we have to make a clear distinction between *EFFECTIVENESS* and *EFFICIENCY*. In many discussions this- and other things unfortunately are being mixed up; I hope to get it clear with some examples.

## Effectiveness

**Effectiveness** is the relation between what theoretically could come OUT of a process and what really came out.

If your machine is capable of making 100 good units an hour, and it makes 60, it is 60% EFFECTIVE, but we do not know how EFFICIENT it was, because nothing is said about what we had to put in (how many operators, energy, raw material).

## Efficiency

So if a machine runs 50% effective with 1 operator and becomes 60% effective with 2 operators, the EFFECTIVENESS goes up 20% (yes, 60 is 20% more than 50…) but it’s **EFFICIENCY** dropped down to 50% !

The same goes for YIELD. If you are making French Fries, all fries can be perfect, so the quality is 100%, but if you throw away halve the weight of the potato because you make the potato square first, your yield is only 50%; in this example you would be 100% effective but only 50% efficient.

Basically OEE is (as the name says) about EFFECTIVENESS; it is the rate between what a machine theoretically could produce and what it actually did. So the fastest way to calculate it is simple: If you take the theoretical maximum speed (i.e 10 units per minute) you know that at the end of a 480 minutes shift there should be 4800 units. Then count what’s on the pallet; if there are 2400 good units your EFFECTIVENESS was 50%, right?

## Where are the losses?

No rocket science so far… Now why bother to have *availability*, *performance* and *quality* in there? Well; every loss-buster wants to know where those OTHER 2400 units are gone, that are NOT on the pallet. Why are thy not on the pallet? (assuming we would have the customer waiting for the product, otherwise we could have stopped producing after half a shift).

Now OEE is going to track down where we lost it. And now we have to take care; every day where we run 50% OEE, we can lose units in a different way, and every loss pattern has its own cost structure. If we lose 2400 part because the machine ran beautiful smooth with no quality loss but at halve the maximum speed, that’s completely different as producing 4800 units at full speed, and then dumping 2400 out of specs parts.

Aha, so now it starts to make sense why OEE is not calculated the fast way, because you would have mist that tiny detail… (at least on paper, sure you would have seen this, but mostly it is more complex!).

So how do we find out what we lose when and how do we prevent to make a fruit salad of numbers?

Lets track down a normal day in our potato factory;

A shift takes 480 minutes.

## Availability

First of al we are going to find out whether the machine runs or not. One thing is for sure; if it does not run although it should, is simply can not be effective right?

Our operators take 10+10+30 minutes breaks, and do 2 setups of 25 minutes each; the rest of the time the machine runs. This means we lost 100 minutes and there is only 380 minutes left to be effective. Even if we run the rest of the time at full speed with no quality losses, we can never be more than 380/480= 79.2% effective at this shift. This ratio we call ‘**availability**’.

## Performance

Lets see how we spent those 79.2% of our time…

Let’s assume our potato cutter has an ideal cycle time of 1 second per cut; so it can make 60 cuts per minute.

This means in the resting 380 minutes the machine can make 380×60 cuts= 22800.

So if at the end of this shift the machine would have performed 22800 cuts, that would mean that during the time it was running, it performed at 100% speed. If it would be slower, let’s say the cycle time would become 2 seconds, it would slow down to halve the maximum speed, thus its performance would become 50%. The actual output now at 50% **performance** is 11400.

Running at 50% performance in this case would mean that we lose another (380 * 50% = 190 minutes.

If at this point all output would be in spec, what would be the effectiveness?

From the 480 minutes we lost 100 minutes in ‘not running’ and 190 minutes on ‘to slow cycle time’; so (480-(100+190))/480 = 39.6% so far.

## Quality

Whether this is the actual effectiveness depends on how many cuts where in spec.

If from the 11400 cuts, there were 2000 out of spec cuts, the quality rate of those cuts was (11400-2000)/11400 = 82.4%

## Combining Availability, Performance and Quality

In other words:

- we lost 100 minutes by not running, (=21%)
- from the resting 380 minutes we lost 190 minutes by slow running (=50%)
- from the remaining 190 minutes we lost 33 minutes making scrap (=17.4%)

Theoretically we could make 480 * 60 = 28800 cuts. At the end there where 9400 cuts, so the Overall Equipment Effectiveness was 9400 / 28800 = 32.6 %

As we did it here;

availability 79.2% * Performance 50% * Quality 82.4% = 32.6%

Conclusion: **OEE is purely time based, but since 1 tact time equals 1 unit, OEE can be calculated partially in units for ease of use**.

At many machines operators will not say ‘Today I ran at 0.027 seconds’ but ‘today I ran 2222 units per minute’ which is the same!

‘I stopped for 5 minutes’ is the same as ‘I lost 11111 potential units’

‘We changed the tact to 0,031’ means 2222 units à 1935 unit per minute. We are losing 287 units every minute, potentially 480 * 287 = 137760 units a day.

## Awareness

OEE helps to create this kind of awareness; with operators, with engineers, with logistic departments, and with anybody else involved in the value adding process. It gives a common language to everybody involved in manufacturing.

Now for those who like formulas instead of my Mickey Mouse explanation; please read i.e. TPM development program by Seiichi Nakajima, Productivity press (originally published by the Japanese Institute of Plant Maintenance)

Also: TPM for the Lean factory; Ken’ichi Sekine and Keisuke Arai, Productivity press.

I sincerely hope that this gives some basic understanding of OEE. I was by no means complete and we can have long discussions about the role of OEE in lean transformation and OEE versus cost price. I studied the subject intensely and I can assure you OEE is not the only- but the most beautiful and powerful KPI’s I have ever seen. Specially if you define it a little wider and tie the 100% time limited together with the actual time limit which is 24 hrs * 365 days a year. If you want to now how to do so, please read the OEE Industry Standard (www.oeeIndustryStandard.org)

See also:

The relationship between efficiency, effectiveness and productivity