Revisiting OEE

June 21, 2011
OEE is a frequently misunderstood metric that provides critical information, says one manufacturing expert.

Overall equipment effectiveness is a performance metric that people seem to love or hate. Rarely does it garner a lukewarm reaction.

OEE tells users the percentage of time that equipment, when running or required for production, is producing good-quality product at an acceptable rate. It is calculated by multiplying availability rate (utilization) by production rate (efficiency) by first-pass yield (quality).

Larry E. Fast, founder of Pathways to Manufacturing Excellence and a former senior operations executive at General Cable Corp., believes it is the single most-powerful metric on the shop floor.

"It's a metric you can measure by the hour. You don't have to wait until tomorrow morning to find out; you don't have to wait until the end of the week. You literally measure on an hour-to-hour basis, which means you can get real-time response to significant changes in any one of the three components of OEE," Fast says.

As an example, he outlines a scenario in which OEE had slipped to 80% from a demonstrated capability of 82%. One means to boost it back to 82%, theoretically, is to convince the operator to increase the machine speed to raise the efficiency measure. However, that efficiency increase leads process yield to decline by 2%, leaving OEE at 80% and not improving anything.

"Obviously, the run speed was not the correct issue. And since first-pass yield had not been a problem until after the speed change, the value stream folks should be looking hard at utilization issues and solving those problems," he says.

OEE Eliminates Silo' Thinking

As the example illustrates, the OEE metric helps drive a holistic look at the manufacturing process rather than drive an over-reaction to a single metric, the consultant says. As such, one of its benefits is that it removes "silo" thinking.

"With an OEE metric, you can't fix one [metric] and just move the problem somewhere else because the overall OEE's not going to change," he says.

On the other hand, a faltering metric should drive maintenance, engineering, operators, "or whoever can bring a solution to bear" to the issue to start asking the 5 Whys "and find out why you are seeing erosion in the critical metric," Fast says.

Some critics of the OEE metric argue that it can promote overproduction, the antithesis of lean thinking. Not so, Fast says. He advises organizations to set the OEE metric around the scheduled hours of the constraint equipment, not all the support equipment.

"You want to maximize the constraint, and you want to run the support equipment at whatever rate you need to to maximize constraint throughput," he says. "If the volume declines so much that you no longer want to maximize the constraint, then you've got to [re calculate] the value stream so that you have a head count that matches up with the demand requirements of the constraint."

OEE in Assembly Operations

Many assembly operations are machine-controlled, meaning that the process is paced by a piece of equipment even if manual operations predominate. In such instances, OEE remains an important metric, Fast says.

A variation of the same metric can be applied to truly manual processes, the consultant suggests. He calls it overall labor effectiveness. "Then I would measure the utilization of labor, the efficiency of the labor, and I'm still very interested in first-pass yield."

See Also:

OEE: The Heart of the Matter

About the Author

Jill Jusko

Bio: Jill Jusko is executive editor for IndustryWeek. She has been writing about manufacturing operations leadership for more than 20 years. Her coverage spotlights companies that are in pursuit of world-class results in quality, productivity, cost and other benchmarks by implementing the latest continuous improvement and lean/Six-Sigma strategies. Jill also coordinates IndustryWeek’s Best Plants Awards Program, which annually salutes the leading manufacturing facilities in North America.

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