Overall Equipment Effectiveness (OEE): Definition + Formulas

The largest and most successful manufacturing plants in the world are able to measure and drive key parameters that contribute to the plant’s high performance.

Overall Equipment Effectiveness (OEE) was conceptualized and introduced by the father of Total Productive Maintenance (TPM), Seiichi Nakajima. In his book Introduction to TPM published in 1988, he notes that prize-winning companies have OEE scores of 85% or more—known as the world class rating. An average company, on the other hand, might have an OEE score of around 40%.

What is overall equipment effectiveness?

Overall Equipment Effectiveness (OEE) is a standard used for measuring plant performance. OEE is used as a gauge to assess how well the plant is performing. Calculating a plant’s OEE helps identify areas that are holding the plant back from performing at maximum capacity.

World Class Standards For Overall Equipment Effectiveness

Three main factors drive the plant’s performance: availability, performance efficiency, and rate of quality products.

Seiichi Nakajima further provides ideal scores for each of these factors to achieve a world class OEE rating:

• Availability > 90%
• Performance efficiency > 95%
• Rate of quality products > 99%

Aim to have an OEE of 77% or greater.

How to calculate overall equipment effectiveness

To calculate the overall equipment effectiveness, three main factors need defined and quantified:

1. Availability

Availability quantifies the amount of time that equipment is able to perform its function. It is calculated as the ratio of the actual operation time to the available time per day, where the available time per day is equated to a full working shift.

For example, assuming that a full working shift per day is eight hours, with an accumulated planned downtime of one hour per day, the actual operation time equals 7 hours per day.

This brings the availability to 87.5% as shown by the calculation:

Availability = (Actual operation time / Available time) = [(Available time - Planned downtime) / Available time)] = (8 hours - 1 hours) / 8 hours = 7 hours / 8 hours = 0.8750 = 87.5%

2. Performance efficiency

Performance efficiency quantifies how much longer it takes to complete a process compared to its ideal cycle time.

A simplified calculation is taken by multiplying the number of processed units by the ideal cycle time, then dividing the product by the actual operation time.

For example, if 440 units are produced with an ideal cycle time of 0.5 minutes to produce each unit, and the actual operation time is recorded to be 420 minutes, then the performance efficiency is calculated to be 52.38% as shown below:

Performance efficiency = [(# processed units * Ideal cycle time) / Actual operation time]]

Example:

[(44 units * 0.5 minutes per unit) / 420 minutes] = 0.5238 = 52.38%

3. Rate of quality products

Rate of quality products quantifies how much of the total produced units are within the acceptable standards of good quality.

For a batch of 440 units produced with only 435 units of acceptable quality, the rate of quality products is calculated to be 97.73%.

Rate of quality products = (# units of acceptable quality / # units produced)

Example:

435 units of acceptable quality / 440 units produced = 0.9773 = 97.73%

4. Overall equipment effectiveness

The overall equipment effectiveness is then calculated by taking the product of its three main factors. Given the examples above, the OEE score is 44.79% as shown by the following calculation:

OEE = Availability * Performance * Quality

Example:

0.8750 * 0.5238 * 0.9773 = 44.79%

6 ways to improve OEE

Being aware of the factors contributing to the overall equipment effectiveness allows for proper planning to proactively reduce process inefficiencies and losses. Clearly, improving one or all of the factors will in turn improve the overall equipment effectiveness of the plant.

A good start to boost the plant’s effectiveness is to eliminate the “six big losses” that every manufacturing unit should be aware of.

Each of these six points directly impact at least one of the factors that constitutes the overall effectiveness. Addressing these losses will inevitably lead to an improved OEE.

1. Avoid Equipment failure
   Refers to mechanical breakdowns of key equipment, or generally any unplanned downtime that can cause a significant decrease in availability
2. Expedite Setup and adjustment
   A period of reduced or stopped activity (usually planned) when equipment is being set up and adjusted (e.g. system preparations, warmup, maintenance)
3. Minimize Idling and minor stoppages
   Minor interruptions in production that can cause unnecessary increases to the production time
4. Troubleshoot Reduced speed
   Occurs when equipment is running at increased cycle times that vary too much from ideal levels
5. Minimize Defects in process
   Any errors along the processing flow that cause flaws to the finished product and therefore a decrease in the number of “quality products”
6. Prevent Reduced yield
   Occurs when equipment is not working under the optimal conditions to produce products within the acceptable quality standards (e.g. units produced while the equipment has just started running or is being set up)