Lessons Learned On How to
Increase OEE Performance
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Table of Contents
Where to Start...........................................................................................................................................4
Roadmap to Increasing OEE Performance...................................................................................5
Lessons Learned From Improving OEE Performance.............................................................7
Conclusion............................................................................................................................9
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• A leading industrial goods manufacturer was able to reduce scrap rates by 27% over four
months by standardizing on Overall Equipment Effectiveness (OEE) as their primary
manufacturing measure of performance.
• An injection molding manufacturer was able to increase OEE performance by 7% in three
months, increasing gross profit by $1.2M across six production plants globally.
• Attaining an OEE score in the 80 to 85% range is widely considered to reflect a world-class
manufacturing operation.
• OEE is calculated by multiplying the (%) of time manufacturing machinery is available
by production performance (ideal cycle time x total count/runtime and product quality
(Good Count/Total Count).
Overall Equipment Effectiveness (OEE) continues to gain in popularity as manufacturers
seek to quantify plant, manufacturing line, and machine-level performance, finding ways each
area can be improved. Lean manufacturing and total productive maintenance (TPM) are the
foundations of OEE and are contributing to its growth today. By providing valuable data to
manufacturers at the machine, assembly line and plant level, they can produce the highest
quality products at the lowest cost within the challenging constraints of short lead times.
OEE and comparable manufacturing metrics are also fueling the development of advanced
analytics and business intelligence (BI)-based software that includes the next generation of
Manufacturing Intelligence applications.
At the same time, it is important to step back from all the intensity, hype and urgency
surrounding OEE and set expectations as to what this metric can and can’t do. Many times,
OEE slows down production and causes companies to be less customer-centric and lean.
As useful as OEE is as a metric, it can mask bigger and more potentially more challenging
manufacturing problems if not used in the right context. In particular, too much reliance on
OEE can hide manufacturing performance gaps at the machine, production line, and plant or
factory level. The goal of this e-book is to provide insights on how manufacturers can improve
OEE performance.
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Where To Start
The majority of manufacturers begin using the Overall Equipment Effectiveness (OEE) metric
to establish a performance baseline for specific machinery and production assets. Taking this
baseline-driven approach at the machine level enables manufacturers to scale the OEE metric
across manufacturing units, production lines, and eventually production centers.
Manufacturers who are attaining OEE scores in the 80% range and higher, combining insights
gained from OEE with additional manufacturing metrics to improve production performance.
The highest performing manufacturers realize that OEE’s greatest value comes from its
ability to help stabilize production and establish accurate baselines of performance. OEE
excels at quantifying availability, performance, and quality for machines and assets, enabling
comparisons across production centers.
OEE is calculated by multiplying machine Availability by Performance by Quality. Starting
with Availability, unplanned downtimes (UDT) and planned downtimes (PDT) are subtracted
from the total potential production time to provide the Run Time Availability. Total Availability
is then calculated by dividing Run Time by Planned Production Time.
OEE’s Performance component is defined as the difference between the theoretical maximum
output a given machine is capable of compared with actual output. Actual output is derived
by subtracting out minor stoppages, reduced speed and any other factor that reduces the
performance levels of a given machine or asset. Performance is defined as the Ideal Cycle
Time multiplied by the Total Count divided by the Run Time. Performance is also defined as
the Total Production Count divided by the Run Time, divided by the ideal Run Rate.
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Quantifying quality is a valuable component of any OEE measurement, unifying the measures
of Availability and Performance from the customer’s perspective. Quality is the one undeniable
measure of how well OEE is being managed from the machine, product line and plan level.
Comparing the actual output to good product yields net of scrap and rework is how Quality
is measured as part of the OEE metric. In discrete manufacturing operations, OEE quality
resembles First Pass Yield. Like yield metrics, OEE quality measures the number of good
parts successfully produced in a specific timeframe. Quality is calculated by taking the good
product count divided by the total product count produced.
The diagram below illustrates how OEE can be combined with real-time monitoring to track
and report on early signals of equipment malfunction, averting costly shutdowns. The scenario
shown below is why OEE is rapidly gaining adoption in manufacturing for monitoring the
stability and reliability of machinery. Manufacturers are also relying on OEE to predict when
specific machinery will need preventative maintenance.
OEE Brings Greater Stability To Production
And Greater Machine-Level Preventative Maintenance Insights
Roadmap To Increasing OEE Performance
OEE has the potential to revolutionize manufacturing from the shop floor to the top floor.
The most successful OEE strategies begin based on organizational goals that impact every
aspect of a manufacturer’s business. OEE is most often contributing to the strategic goals of
improving quality, decreasing costs, improving productivity and increasing capacity.
Every manufacturer’s roadmap to increasing OEE performance is going to vary based on their
unique supply chains, production processes, product lifecycles and extent of manufacturing
data to the machine level. The roadmap of how to improve Overall Equipment Effectiveness
(OEE) is a framework that all manufacturers can use to get the most value out of OEE possible.
In using the roadmap below it’s important to keep in mind the following regarding how
improving OEE performance increases production quality, efficiency and contributes to
increasing revenues and profits:
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• OEE is one of the best manufacturing metrics for stabilizing the production levels of
a given machine or asset. Consider scaling OEE across an entire production line after
pilot tests with specific machines are complete. Comparing lines using OEE provides an
accurate baseline of machines and their capacity to improve.
• Include OEE measurements by machine in quality management dashboards and reports
to gain insights into how machine yields, scrap rates and reject rates are impacting
Cost of Quality (CoQ) and acceptance rates. OEE’s first contributions will be to stabilize
production levels by machine or asset across the shop and plant floors. By combining
OEE with other metrics, it’s possible to quantify manufacturing reliability. Using the
roadmap below manufacturers can transition OEE from being a metric used to stabilize
manufacturing machinery for quantifying plant-level manufacturing reliability.
• The most effective OEE strategies are intentionally created to support long-term
organizational or strategic goals, focused on improving line performance and process
quality. OEE is a great stabilizing metric in manufacturing in the short-term. Long-term
goals need to be measuring the reliability of the entire manufacturing process, tying
performance back to business outcomes and return on OEE investments. World-class
manufacturers are using real-time monitoring to track OEE to the machine level while
gaining new insights into manufacturing’s contribution to cost reductions, improved
productivity, quality, and increased capacity.
• Scaling OEE to improve production line performance forces process quality to also
improve. When a production operation transitions from using OEE as a manufacturing
stability metric for predicting manufacturing performance, plant floor processes improve.
This is driven by the greater insights gained into how each machine’s performance on a
production line can be improved with less complex, more scalable processes across the
production floor.
• Tying line performance and process quality gains to business outcomes fuels OEE
performance gains. The key to accelerating OEE performance is tie back improvements
to business gains and outcomes. When a solid connection is made between improving
OEE performance and seeing improved business outcomes, cost and revenue goals are
achieved quickly. The key to improving seeing OEE performance payoff is knowing how
each incremental gain by machine, line, and plant improve revenues and reduce costs.
The following graphic provides an overview of IQMS’ roadmap of how to improve Overall
Equipment Effectiveness (OEE), illustrating how all steps need to lead to business outcomes
and delivering a solid return on investment.
Roadmap Of How To
Roadmap of Improve Overall Equipment
How to Improve Effectiveness
Overall Equipment (OEE)
Effectiveness
Organizational Goals Strategic Focus Areas Value Drivers Business Outcomes Return on OEE Investment
Increased Production • Increased Production By • Identify and Prioritize Production Operations for
Reducing Scrap Greatest Return
Decrease Production Cost
• Decrease Manufacturing • Plant-Wide Insight Into What Most Improves OEE
Cost at the Machine to Line Level
Line Performance Increased Productivity
• Maximize Energy Efficiency • Real-Time Updates on the Health of Machines
Higher Return on Assets • Increased Productivity and • More Accuracy with Corrective Actions
Machine-Level Performance • Gain Predictive Accuracy
Increased Quality • Assign Confidence Levels to Predictions
• Decrease Costs • Continuous Improvement
• Isolate, Track and Improve the Causal Factors that
• Improve Productivity • Avoiding Quality Failures Impact Equipment Life
• Increased Quality • Extending Equipment Life • Early Detection of Equipment Failure
• Increased Capacity • Aligning Resources to • Attain Higher Rates of Machine and Line
Reduce Manufacturing Cost Priorities Optimization
• Efficiency Optimization • Increase the Accuracy and Speed of Shop Floor
Increased Quality Scheduling, Preventative Maintenance and
• Decreased Man Hours
Quality Management Decisions
Process Quality Higher Energy Efficiency • Improved Process Efficiency
• Improved Trace and Traceability to the Machine
• Improved Process Stability Level
Overall Equipment Efficiency
• Improve Plant-Wide OEE • Improved Production Stability and Understanding
Increased Labor Efficiency • How OEE Impacts the Overall Production Line
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Lessons Learned From Improving OEE Performance
Keeping revenue growing and costs under control is the fuel that keeps a manufacturer strong.
Knowing how effective each machine is in meeting production goals by tracking availability,
performance, and quality is the essence of OEE.
The following are the lessons learned from manufacturers who have successfully integrated
OEE into their daily operations:
• Use OEE to reduce downtime losses by stabilizing all machines on the shop floor
during the pilot phase. Tracking and analyzing, in real-time, if a given machine on the
shop floor is about to break, factoring in equipment set-up times, and unplanned and
planned downtimes are just a few of the many ways OEE is making an immediate impact
on manufacturing performance. Consider how an initial OEE pilot can capture and provide
data as to which production machines need immediate attention to reduce and eliminate
downtime losses.
• Set the goal of creating trusted, scalable datasets that accurately reflect 100% of all
machine activity and states of operation. Be sure to guard against OEE measurements
becoming biased or too politicized. OEE has started to be included in manufacturing,
quality and production teams’ compensation and bonus plans. With annual reviews,
quarterly and year-end compensation, and bonuses riding on OEE levels, manufacturers
are practically asking for the data to be skewed. While achieving high OEE scores is
important, it is far more important to have a trustworthy, credible process for arriving at
OEE that scales across the company. Consider de-linking OEE from salary increases and
bonuses and redefining how it is measured to ensure the data produced is accurate and
can be trusted.
• When comparing aggregate OEE metrics between one production line to another
factor-in the individual machine first pass yields, scrap rates, and run times. There’s
an exponential increase in the number of manufacturers who are using OEE to compare
production line performance. Many are using aggregate product line metrics at the top of
their dashboards and scorecards, and also have drill-down metrics to the machine level all
on one screen. Enabling production and quality management teams to drill down into OEE
calculations and seeing the mix of availability, efficiency and quality metrics is invaluable.
Having drill-down data available helps to troubleshoot individual problems quickly that
may be hidden behind a single aggregate OEE metric. Comparing machines with two
identical OEEs doesn’t ensure accuracy. One could have 70%x90%x80% and the second
could have 90%x70%x80%. Both have the same OEE, yet one has limited availability (70%)
while the second is not as efficient (70%) compared to the second machine. The same
logic holds for comparing production lines and entire plants.
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• Factor out equipment setup times from OEE measurements. Reducing overall equipment
setup times has a direct impact on Availability, further artificially inflating OEE performance.
Equipment setup times often skew value stream-based production scenario calculations, so
it’s a good idea to also factor them into any process re-engineering projects across the shop
floor. Initiating a time series analysis of setup times in conjunction with OEE measurements
provides insights into how Availability can be improved quickly. One extrusion molding
manufacturer is tracking setup times for their largest machinery and working to reduce
them, indexing gains in OEE as a result. It’s working, and OEE is improving, also, to yield
rates for their largest, most expensive machines to operate.
• Consolidate OEE measurements on a single dashboard, enabling real-time monitoring
to accelerate machine, production line, and plant performance gains. Every machine
operates at a unique cadence with its variations in the key components of Availability,
Performance, and Quality. By having real-time data from every machine in a production
line, heads-up displays like the one shown below are being used across production floors
today. This specific dashboard reflects OEE performance across work centers, breaking
out Availability, Performance and Quality components. This specific view of the dashboard
shown below also reflects time series results by the calendar year and month, which is
invaluable for finding trends in each OEE component’s value over time.
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Conclusion
Stabilizing machinery performance is the factor that drives the majority of manufacturers
first to adopt OEE. As individual machines and production lines stabilize, OEE reflects
manufacturing reliability.
For all of its contributions to improving manufacturing performance, it’s not meant to be used
as a single, end-all metric of manufacturing performance. Instead, it’s best to group OEE into
a dashboard of metrics that expand on visibility into Availability, Performance, and Quality at
a deeper dimension than the structure of the OEE metrics allows for on its own. OEE has the
potential to revolutionize production operations taken in the context of overall manufacturing
performance.
Bottom Line: OEE delivers insights at the machine, production line and plant level that have
not been available before to many manufacturers. Knowing how Availability, Performance,
and Quality impact the most financially important areas of their business including time-to-
customer, order cycle times, perfect order performance and meeting customer ship dates can
revolutionize how manufacturers meet and exceed customer-driven goals for their business.
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