How to Determine Your Equipment Effectiveness

Do you know if your equipment is making or costing you money? Can you answer this question confidently and accurately, or do you have to guess the answer?

Before we get to the bottom of this ever-important question, I want to dig into a few of the terms I will be using so we are all on the same page. Different manufacturing companies may use different terms to describe the same thing, so let’s eliminate any confusion up front.

Equipment means every piece of machinery that is needed to make a product. It includes the copy machine used to make prints, the plant’s hot water heater, the company truck, and all the machines on the shop floor.

Availability is the time that any piece of equipment is available and in safe operating condition.  

Efficiency is performing a task with the least effort and the best result. As far as machines, this means operating the machine at its optimal operating conditions. For example, if you need to operate your CNC machining center at 90% of feed-rate to ensure good surface finish, you are not using the right cutter or have a machine that is not right for the job,  and you are losing efficiency.

Effectiveness is how well the job is done or how well you use your machines. In other words, if you run a simple part that needs a few holes drilled on your most expensive 5-axis CNC machine, that is not very effective. Instead, put it on a 3-axis or manual machine.

Performance is a combination of effectiveness and efficiency, meaning you use the best equipment for the job at its optimal operating parameters.

Quality is a measured standard. In manufacturing, that means making the product to the customer’s expected standard.

OEE is a measurement of your overall equipment effectiveness. It is a tool used within lean to identify equipment availability, performance, and quality. The results give you a great overview of where you can improve your bottom line. Here are the accepted world-class standards:

• OEE Factors - World Class
  • Availability - 90.0%
  • Performance - 95.0%
  • Quality - 99.9%
  • OEE - 85.0%
  • Availability x Performance x Quality = OEE

Let’s get back to the question at hand—Do you know if your equipment is making you money or costing you money?

OEE lets you look at your equipment to measure if it is making you money or not. Your first OEE indicator is availability. If you schedule your machine to run 8 hours and the machine runs 8 hours, you would have 100% availability. If the machine breaks down, you lose availability. For example, if your machine was down for 1 hour, your availability is 87.5%. A solid preventative and predictive maintenance program will help increase machine availability so your machines are available to run production when needed.

The second factor in OEE is performance or the way you operate your equipment when you are running it. For example, if you have a 380-quart dough mixer and only run 220-quart batches, your performance would be 57.89%

The third factor for OEE is quality, a measure of good product. For example, if you are making 50,000 loaves of bread per day and must destroy 250 under-weight loaves, your quality is 99.5%.

Using the above example, your OEE calculation would be:

87.5% Availability X 57.89% Performance X 99.5% Quality = 50.4% OEE

Did you think the OEE would be that bad with those little losses? Most people don’t think the losses above would make much of an impact on the bottom line, but that is just over 50% OEE. It's hard to make money at that level.

If you can raise the availability of your machine by only 30 minutes, your availability would raise to 93.75%, bringing your overall OEE up to 54%.

(93.75% X 57.89% X 99.5% = 54% OEE)

If you would run your dough in 320-quart batches, your performance would be 84.21%. Changing this number in the equation would give you an OEE of 73.31%

(87.5% X 84.21% X 99.5% = 73.31% OEE)

If you raise the level of quality by 125 loaves of bread, your good part percentage would be 99.75%.

(87.5% X 57.89% X 99.75% = 50.5% OEE)

As you notice, just making improvements to one of the three OEE factors will show you gains. You can also see that improving all three performance indicators will give you a big gain.

OEE calculation with improved numbers in all three:

(93.75% x 84.21% x 99.75% = 78.75% OEE)

OEE will show you what impact even the slightest changes make to your operating effectiveness. It will help you identify where you can gain the most improvement, help you with ROI justification, and many other things. 

Before you start implementing OEE, make sure you and your team understand what it does and how all three factors are interdependent. Establish clear terminology and criteria for your measurements. Everyone needs to understand what you are measuring, how you are measuring, and how you are reporting your numbers.

I have worked at companies where OEE has been used to “white wash” operational inefficiencies. An example would be that 100% quality was deemed unobtainable, so the standard for quality was set to 90% output, giving the quality indicator a boost, and not showing that quality was a drag on reaching 85% OEE. This practice is not good, as it doesn’t give you a true picture of your operations.

I believe OEE doesn’t have to be complicated and can help you identify areas for improvements. You can also use it to benchmark your business to similar businesses, showing you where you stand.