Module 1

 Introduction to OEE


 OEE stands for Overall Equipment Effectiveness. It is the benchmark for measuring the productivity
of a manufacturing operation (time, material, machinery). OEE was first introduced in 1989 by Seiichi
Nakajima in his book TPM Development Program: Implementing Total Productive Maintenance, the
translated version of TPM Tenkai, published in 1982.

OEE was the pioneer which introduced many concepts that are considered fundamental in achieving
optimal productivity nowadays. After its introduction; it became possible to measure the efficiency of
equipment to produce a quality product, that the product is at least of specified quality, that the
equipment is running at ideal speed and is readily available whenever required. 

Before OEE, the widespread method of measuring equipment productivity was by comparing
Downtime and Availability. As a result, it was observed that the same equipment with an equal
amount of availability does not necessarily result in an equal amount of productivity since the speed
and the quality are not taken into account. Therefore, equipment was barely used to its full potential.

 Example of Defects before OEE

 Case Study: Consider a petroleum refining factory. Over a 10-day period, it was discovered that the
equipment suffered a single major failure for a total downtime of one day, i.e., 24 hours of
unavailability. It makes 10% downtime from the overall operative period of 10 days. Now consider
another factory with another organization working as a refinery. Over the same period, it was
discovered that the second factory suffered smaller periods of downtime per day, i.e., 2.4 hours per
day on average which equates to 24 hours in ten days and that again makes 10% downtime.

o Relying on Downtime Only
 By relying on the downtime alone, it can be summarized that both factories suffered the same
amount of productivity compromise.

But practically, it is observed that the productivity of the second factory is not only counter-
productive, but it may also have many short-term and long-term complications.

This problem can easily be eliminated using OEE by taking product quality into account.

By identifying the percentage of productive manufacturing time, quality, and the underlying losses
that occur, important insights can be made which can further be refined to improve manufacturing
processes systematically.

 Overall Equipment Efficiency (OEE) Formula & Losses

 Experts gave the following formula for measuring OEE:
 Overall Equipment Effectiveness = Availability x Performance rate x Quality rate
 Furthermore, there are 6 Big Losses that affect OEE:

o Up-time
o Production Performance
o Quality rate
o

Two factors compromising up-time are

• Breakdowns

• Planned adjustment losses


o Up-time
o Production Performance
o Quality rate

Two factors compromising performance are:

• Minor stoppages losses

• Reduced speed


o Up-time
o Production Performance
o Quality rate

Two factors compromising quality are:

• Quality defects
 • Yield rejects


o Up-time
o Production Performance
o Quality rate

Two factors compromising quality are:

• Quality defects

• Yield rejects

 Guidelines to Minimize Losses


 OEE encompasses all departments of industrial value such as Engineering, Production, Quality, and
Maintenance, etc. To keep all these departments functioning well, full responsibility, and
accountability is handed over to the Production department.
 To minimize losses, certain guidelines are established for OEE:

o Predict Equipment deterioration

o Detect deterioration

o Set-up repair techniques

o Repair deterioration


o Establish and maintain operating standards and equipment conditions

o Minimize avoidable errors: operation errors and repair errors

o Improve equipment design and eliminate weaknesses

 Understanding the Framework of OEE


o Understanding the Framework of OEE
o The Framework of OEE (1)
o The Framework of OEE (2)
o Formula for Calculating OEE
o Understanding the
Proper Use of OEE

Manufacturing a product of required quality is a complex job, and without a proper framework, it’s
tough to remain competitive in the modern market. If proper guidelines are not maintained or
implemented, it is easy for the manufacturing process to be costly and not meet the quality/market
demands. Hence, OEE is a vital process that cuts down the costs in the long-term and maintains a
production standard. To properly implement OEE in manufacturing processes, a clear understanding
of the components' influence must be made. Some components may have a bigger impact on
production than others. Similarly, the impact can vary between different manufacturing components.

 Understanding the Framework of OEE

 
o Understanding the Framework of OEE
o The Framework of OEE (1)
o The Framework of OEE (2)
o Formula for Calculating OEE
o Understanding the
Proper Use of OEE
o 1.Availability / Up-time:

In order to maintain a steady flow of production, it is required that the equipment is available
whenever required. Availability is the percentage of time that the equipment is available to operate
during a manufacturing process.

Availability = (All Available operating time – All downtime) / All Available operating time

2.Performance / Rate:

For the manufacturing process to meet market demands, it is vital that the equipment is working at
the best speed possible. Rate is used to determine the amount of product produced when the
equipment is working at a less than optimal speed.

Reported Production Time = All Available operating time – All downtime

Factor 1 = Product processed/(Reported Production Time x Equipment speed)

Factor 2 = Equipment speed/Ideal speed 

Rate = Factor 1 x Factor 2

 Understanding the Framework of OEE


o Understanding the Framework of OEE
o The Framework of OEE (1)
o The Framework of OEE (2)
o Formula for Calculating OEE
o Understanding the
Proper Use of OEE
o

3. Quality:

Quality refers to the manufactured product that meets the required standard. The product that
doesn’t match the standard and the time to identify the product is known as quality loss.

Quality = (Standard quality product produced) / (Total product)

 Understanding the Framework of OEE


o Understanding the Framework of OEE
o The Framework of OEE (1)
o The Framework of OEE (2)
o Formula for Calculating OEE
o Understanding the
Proper Use of OEE

The formula of OEE expressed again;

OEE = % Up-time x % Rate x % Quality

 Understanding the Framework of OEE


 o Understanding the Framework of OEE
o The Framework of OEE (1)
o The Framework of OEE (2)
o Formula for Calculating OEE
o Understanding the
Proper Use of OEE

Scenario 1:

A production line producing canned bottles records 85% OEE which is given by:

Availability = 99%; Rate = 95%; Quality = 90%, OEE = 85%

Scenario 2:

A 2nd production line also producing canned bottles records 85% OEE too:

Availability = 90%; Rate = 95%; Quality = 99%; OEE = 85%

Both scenarios involve 85% OEE but the efficiency of production may vary. Although the equipment
in the 1st scenario suffers less downtime, the cost loss of 10% wasted product might be significantly
greater than the 1% wasted product obtained from the 2nd line.

 Important Terms Related to the Management of OEE

 There are many terms which may or may not necessarily influence OEE:

o Terms related to Equipment Efficiency
o Terms related to Equipment Losses  (1)
o Terms related to Equipment Losses  (2)
 o Terms related to Equipment Losses  (3)

• Overall Equipment Effectiveness:

OEE is used to monitor line performance on site level. It should not be used as a comparative tool as
it is an improvement driver to produce good output.

• Line Utilization:
It is used at the corporate level to determine whether it will be more profitable to buy new equipment
to increase production rather than increase the number of shifts. It is dependent on the ability to sell
the capacity of the line.

• Production Efficiency:
It is used to compare pure operating performance rather than the performance adjusted for planned
downtime and setup downtime losses.

 Important Terms Related to the Management of OEE

 There are many terms which may or may not necessarily influence OEE:

o Terms related to Equipment Efficiency
o Terms related to Equipment Losses  (1)
o Terms related to Equipment Losses  (2)
o Terms related to Equipment Losses  (3)
o Once equipment efficiency definitions are established, it is time to define different losses:

• Planned Downtime:
This is the approved downtime by the management, authorized at least 48 hours in advance. These
 include maintenance routines, planned stoppages due to meetings or personnel training, mealtime
stoppages, etc.

• No Demand:
When lacking customer orders or extreme lack of product demand, managers may authorize no run
time for equipment and crew disassembly at least one week in advance. As a result, no product is
produced, and the equipment is not crewed.

• Special Events:
Annual shut down due to large-scale maintenance or time allocated to the trials of a new product.

 Important Terms Related to the Management of OEE

 There are many terms which may or may not necessarily influence OEE:

o Terms related to Equipment Efficiency
o Terms related to Equipment Losses  (1)
o Terms related to Equipment Losses  (2)
o Terms related to Equipment Losses  (3)
o Once equipment efficiency definitions are established, it is time to define different losses:

• Planned Downtime:
This is the approved downtime by the management, authorized at least 48 hours in advance. These
include maintenance routines, planned stoppages due to meetings or personnel training, mealtime
stoppages, etc.

• No Demand:
When lacking customer orders or extreme lack of product demand, managers may authorize no run
time for equipment and crew disassembly at least one week in advance. As a result, no product is
produced, and the equipment is not crewed.

• Special Events:
Annual shut down due to large-scale maintenance or time allocated to the trials of a new product.
 Important Terms Related to the Management of OEE
 There are many terms which may or may not necessarily influence OEE:

o Terms related to Equipment Efficiency
o Terms related to Equipment Losses  (1)
o Terms related to Equipment Losses  (2)
o Terms related to Equipment Losses  (3)
o • No Production Required:
Primarily used in Fixed Input or Fixed Output plants, used to measure crew time when the batch of
required goods has been produced or input has been processed, and no more production is needed.

• Setup Downtime:
This is only applicable in plants that produce multiple products. Setup downtime is the time required
to produce the next good batch after the last good batch following a product changeover.

• Unplanned Recorded Downtime:

Those types of downtime losses that do not fall into Setup downtime or Planned downtime are
officially recorded or monitored under Unplanned Recorded Downtime. These include equipment
overheating, equipment jamming, etc.

 Important Terms Related to the Management of OEE

 There are many terms which may or may not necessarily influence OEE:

o Terms related to Equipment Efficiency
o Terms related to Equipment Losses  (1)
o Terms related to Equipment Losses  (2)
o Terms related to Equipment Losses  (3)
o • Minor Unrecorded Stoppages:
These are observed stoppages that occur during a plant operation. Some companies categorize
stoppages of smaller downtimes (5 or 10 minutes) as Minor Unrecorded Stoppages.

• Reduced Speed:
Slower than ideal speed over the whole of Net Production Time is identified as Reduced Speed loss.
 • Rejects and Rework:
The time loss that occurs when the product doesn’t meet quality requirements and needs to be
reworked or recycled while the equipment is running at ideal speed.

• Startup and Yield:

This takes into account the time required for startup and yield while at ideal speed.

 Important Terms Related to the Management of OEE

 There are many terms related to OEE which may or may not necessarily influence OEE:

o Terms related to Plant Speed (1)
o Terms related to Plant Speed (2)

The three ways to define ideal speed are:

• Design Constraint Speed:

The maximum speed a critical piece of equipment can attain due to design constraints or limitations.
This is greater than the recommended speed of the equipment.

• Sample Speed:

The speed attained by best condition equipment under best environmental conditions operated with
the best feed from the best operator without damage to the machinery is known as Sample Speed.

• Upper Control Limit Speed:

 The actual equipment speed of a critical piece of equipment on a daily or weekly run chart divided
into at least 15 points with special causes removed.

 Optimal Practice for an OEE Program


o Aim of OEE
o Reality Check
OEE for Machines and not for the Production Lines
o
o Case Study: Negligible Demand and High Quality Situation
o General Statistics of Companies on OEE Performance

Since OEE aims to improve productivity, it is important to ensure the OEE program is as efficient
and cost effective as possible. 

Theoretically, an ideal OEE program may provide a 100% score meaning machinery putting out
perfect products without any waste at a non-stop rate; Quality score of 100%, a Performance score
of 100% and Availability score of 100%.

 Optimal Practice for an OEE Program


o Aim of OEE
o Reality Check
o OEE for Machines and not for the Production Lines
o Case Study: Negligible Demand and High Quality Situation
o General Statistics of Companies on OEE Performance
o

In reality though the best practice OEE is often considered to have an 85% score; with a Quality
Score of 99%, a Performance score of 95%, and an Availability score of 90%.

 For Continuous Operations: If continuous production is required, then best practice OEE is
often considered to have a 95% score; Quality score of 99%, a Performance score of 98% and
Availability scOptimal Practice for an OEE Program

o Aim of OEE
o Reality Check
o OEE for Machines and not for the Production Lines
o Case Study: Negligible Demand and High Quality Situation
o General Statistics of Companies on OEE Performance
o As with most manufacturing practices, the actual implementation depends on on-site developments
and analysis. OEE is best used on a machine rather than the entire production line. Ultimately the
OEE is best used to remove the constraints on the machinery.

ore of 98%.

 Optimal Practice for an OEE Program


o Aim of OEE
o Reality Check
o OEE for Machines and not for the Production Lines
o Case Study: Negligible Demand and High Quality Situation
o General Statistics of Companies on OEE Performance
o Case: If a high-quality product is required, but the demand is significantly low, then even an OEE
score of 12.5% is considered good for the manufacturing plant.
 Reason: Since we don't need the production rate and the plant's availability at that level, only 100%
Quality is required.

For example; Quality = 100

Production Rate Required based on demand = 35

Availability of the Plan Required based on demand = 35

OEE = 100% x 35% x 35% = (1 x 0.35 X 0.35) x 100 = 12.25%

 Optimal Practice for an OEE Program


o Aim of OEE
o Reality Check
o OEE for Machines and not for the Production Lines
o Case Study: Negligible Demand and High Quality Situation
o General Statistics of Companies on OEE Performance

o Most companies only have an OEE score of 60%. In fact, there are more companies with an OEE
score of 45% or lower; than companies with a score of 80% or higher.
 OEE Practices for Improvement & Comparative Analysis

o Steps for Practicing OEE
o Same OEE Levels ≠ Equal Efficiency
o Two Examples
o Explanation
o • Obtaining real-time analysis of equipment.

• Using real-time data to identify problems.

• Practice preventive maintenance

• Avoid bottlenecks and under-performance by optimizing production speed

• Additionally, a good practice is looking at the 6 Big Losses and determining how they affect your
equipment, and then eliminating or reducing their influence.

 OEE Practices for Improvement & Comparative Analysis


 o Steps for Practicing OEE
o Same OEE Levels ≠ Equal Efficiency
o Two Examples
o Explanation

Care must be taken when determining the influence of the three underlying factors: Quality,
Performance, and Availability. 

Two processes of equivalent OEE score may not be equally efficient since factors such as demand,
standard, cost of raw products, etc., come into play.

 Consider two scenarios with equivalent OEE scores:

Case 1: 80% Quality x 75% Performance x 85% Availability = 51% OEE

Case 2: 75% Quality x 80% Performance x 85% Availability = 51% OEE

 Even though both sets of equipment give similar scores, depending on external factors, they might
not be equally effective.

For example, if both cases are related to the production of low-quality cigarettes then Case 2 is
more efficient as it’s producing more cigarettes in the same amount of time and since both cases
produce low-quality cigarettes; the quality doesn’t matter much.
 In the end, it also goes down to the equipment itself. The equipment might not be designed to
achieve a high OEE score, making it impossible to reach the target OEE score. Therefore a greater
emphasis should be placed on a score relative to its own performance rather than comparing it with
a machine with an entirely different design.


o
Aim Of OEE
o The Reasons for Incorrect Measurements in OEE
o The Reasons for Incorrect Measurements in OEE (2)
o Rather than using OEE to achieve average or budgeted results, the aim of OEE is to achieve close
to ideal results.

o Aim Of OEE
o The Reasons for Incorrect Measurements in OEE
o The Reasons for Incorrect Measurements in OEE (2)

Since OEE is used to achieve world-class or higher than the standard performance of machinery,
then due to a variety of factors and misconceptions, the true purpose of OEE may not be realized or
implemented improperly.

Seiichi Nakajima, author of TPM Development Program – Implementing Total Productive

Maintenance, explained this by a reduction in speed. According to Nakajima, the end goal is to
surpass design speed, not bring operational speed to design speed. In the publication TPM in
Process Industries, Tokutaro Suzuki uses the plant's ideal (design) capacity rather than the plant's
operational capacity as the Standard Rate.


o
Aim Of OEE
o The Reasons for Incorrect Measurements in OEE
 o The Reasons for Incorrect Measurements in OEE (2)
o Rather than using OEE to achieve average or budgeted results, OEE aims to achieve close to ideal
results.

Another common error encountered in OEE measurement is that it is used as a benchmark for all
processes rather than using OEE for improvement. It has already been discussed that the target
OEE score is dependent on the company's needs. The most important thing when evaluating OEE is
to make sure that the problems and bottlenecks affecting the plant are eliminated rather than
achieving a score across all plants and processes. Therefore OEE should be used as a performance
“driver” rather than a benchmark.

 Lesson Summary

o OEE stands for Overall Equipment Effectiveness. It is the benchmark for measuring the productivity
of a manufacturing operation (time, material, machinery).

o OEE was the pioneer which introduced many concepts that are considered fundamental in achieving
optimal productivity nowadays.

o Importance of OEE
By identifying the percentage of productive manufacturing time, quality, and the underlying losses
that occur, important insights can be gained which can further be refined to improve manufacturing
processes systematically.

o Overall Equipment Effectiveness = Availability x Performance rate x Quality rate.

o There are 6 Big Losses that affect OEE including:

• Up-time
• Production Performance
• Quality rate

o Guidelines to Minimize Losses

OEE encompasses all industrial value departments such as Engineering, Production, Quality,
Maintenance, etc. To keep all these departments functional, full responsibility and accountability are
handed over to the Production department.

 Lesson Summary
 
o To minimize losses, certain guidelines are established for OEE
• Predicting Equipment deterioration
• Detecting deterioration
• Set-up repair techniques
• Repair deterioration
• Establish and maintain operating standards and equipment conditions
• Minimize avoidable errors: operation errors and repair errors
• Improve equipment design and eliminate weaknesses

o OEE is a vital process that cuts down the costs in the long-term and maintains a
production standard. A clear understanding of the components' influence must be
made to implement OEE in manufacturing processes properly. Some components
may have a bigger impact on the production than others. Similarly, the impact can
vary between different manufacturing components.

o Framework of OEE
• Availability / Up-time
Availability = (All Available operating time – All downtime) / All Available operating
time
• Performance / Rate
Rate = (Product processed) / ((All Available operating time – All downtime) x
Equipment speed) x ((Equipment speed) / (Ideal speed))
• Quality
Quality = (Standard quality product produced) / (Total product)

 Lesson Summary

o Formula of calculating OEE

OEE = % Up-time x % Rate x % Quality

o Some Important Terms Related to the Management of OEE

• Overall Equipment Effectiveness
OEE is used to monitor line performance on site level. It should not be used as a
comparative tool as it is an improvement driver to produce good output.
• Planned Downtime
This is the approved downtime by the management, authorized at least 48 hours in
 advance. These include maintenance routines, planned stoppages due to meetings
or personnel training, mealtime stoppages, etc.
• Setup Downtime
This is only applicable in plants that produce multiple products. Setup downtime is
the time required to produce the next good batch after the last good batch following a
product changeover.
• Rejects and Rework
The time loss that occurs when the product doesn’t meet quality requirements and
needs to be reworked or recycled while the equipment is running at ideal speed.

• Upper Control Limit Speed

The actual equipment speed of a critical piece of equipment on a daily or weekly run chart divided
into at least 15 points with special causes removed.
• Required Speed
The speed required to meet consumer demands. It is useful in measuring Required Equipment
Effectiveness.

 Lesson Summary

o OEE aims to improve productivity. It is important to ensure the OEE program is as efficient and cost-
effective as possible.

o Theoretically, an ideal OEE program may provide a 100% score meaning machinery putting out
perfect products without any waste at a non-stop rate: a Quality score of 100%, a Performance score
of 100%, and an Availability score of 100%.

o In reality, though the best practice OEE is often considered to have an 85% score: a Quality Score
of 99%, a Performance score of 95%, and an Availability score of 90%.

o As with most manufacturing practices, the actual implementation depends on on-site developments
and analysis. OEE is best used on a machine rather than the entire production line. Ultimately the
OEE is best used to remove the constraints on the machinery.

o Most companies only have an OEE score of 60%. In fact, there are more companies with an OEE
score of 45% or lower, than companies with a score of 80% or higher.

o Steps for Practicing OEE include:

• Obtaining real-time analysis of equipment.
• Practice preventive maintenance.
• Additionally, a good practice is looking at the 6 Big Losses and determining how they affect your
equipment, and then eliminating or reducing their influence.

 Lesson Summary

o Same OEE Levels ≠ Equal Efficiency
• Care must be taken when determining the influence of the three underlying factors;
Quality, Performance, and Availability.

• Two processes of equivalent OEE score may not be equally efficient since factors such as
demand, standard, cost of raw products, etc., come into play.

o Rather than using OEE to achieve average or budgeted results, OEE aims to
achieve close to ideal results.

o Since OEE is used to achieve world-class or higher than the standard performance
of machinery, then due to a variety of factors and misconceptions, the true purpose
of OEE may not be realized or implemented improperly.

o The most important thing when evaluating OEE is to make sure that the problems
and bottlenecks affecting the plant are eliminated rather than achieving a score
across all plants and processes. Therefore OEE should be used as a performance
“driver” rather than a benchmark.

Module 2