OEE stands for Overall Equipment Effectiveness. It is a very commonly used efficiency measure.
What do we mean by efficiency? Put simply, it is “How much did we make, compared with how much we could have made.”
OEE splits our efficiency down into three categories. The idea here is that we can get some understanding of which types of losses are bringing our efficiency down.
Performance Rate (sometimes called Speed or just Rate)
Here’s a bit more explanation of each:
Availability: How much of the available time were we running for? If we planned to run a machine for 10 hours, but it was only working for 5 hours, then our Availability would be 50%. This measure might show stoppages caused by problems, lack of materials or process problems. This is sometimes referred to as “downtime” – although downtime is the % of time we are not running, whereas availability is the % of time we are running.
Performance Rate: You can “lose” output by machines or lines running slower than they should. So a machine set to make 100 widgets a minutes that was set to only run at 70 widgets per minute would be running at 70% speed/rate/performance (sorry, all these names are used – it’s a bit confusing). This measure would show us problems that caused lost output but were not serious enough to completely stop production.
Quality Rate: We may manage to make some product that is not good enough to sell. The ratio of bad to good produce is a called the “quality rate”. If we make 350 widgets, but only 280 of them are good enough to sell then our quality rate would be 80%
To work out OEE we multiply the three numbers together then express it as a percentage
OEE Example Calculation
I am wrapping Christmas presents. I know that a I should be able to wrap 4 presents an hour. I settle down having planned a 2 hour wrapping session.
For the first hour I struggle, only wrapping 2 presents. One of these presents is so badly wrapped that I can’t send it out. For the second hour I get distracted and end doing other things for the entire hour.
What’s my OEE?
Availability: I work for 1 hour out of the 2 I planned= 1 / 2 = 50%
Performance rate: When running (i.e. available) I wrapped at a “2 presents an hour” against my known best of “4 presents an hour”. My performance rate is 2/4 = 50%
Quality rate: My output is 2, but I scrapped 1, so my quality rate is (2-1) / 2 = 50%
My OEE is Availability x Performance x Quality = 50% x 50% x 50% = 12.5%
OEE Calculation Tip
A quick way to work out OEE is to use the ratio of actual good product to total potential output. Here’s how I would do it for this example.
Actual good output = 1 present
Potential output = 4 (ideal output rate) x 2 (planned hours) = 8 presents
Actual output / Potential output = 1/8 = 12.5%
The only drawback is that this method does not show what type of losses contributed to our 87.5% loss in efficiency.
Want to share you definition in an easy to read format?
Have a look at this KPI Cheat Sheet guide to learn a great way to do this.