Redefining OEE: Taking OEE from Abstract to Practical

Posted on January 12, 2022 by David P. Hicks and John Alford

Blog OEE Blog HeaderAlthough many manufacturers have implemented overall equipment effectiveness (OEE) over the last few decades, not every facility has embraced it effectively. Often facilities either knowingly or unknowingly neglect or overemphasize one of the three essential components of OEE. Manufacturers apply OEE inconsistently, include too much, or exclude unpleasant data. When used correctly, OEE is an excellent resource for driving continuous improvement in manufacturing facilities. Facilities that are struggling to meet goals or seeking to move up a few extra percentage points can gain the edge they need by returning to basics and evaluating processes honestly.

If you are struggling to meet KPIs or just looking to improve your current approach to OEE this blog is for you. We will discuss: New call-to-action

  • The Three Components of OEE and Why They Matter
  • The Value In Getting It Right First Time
  • Speed Loss: An Opportunity for Growth
  • The Power of Built-In Problem-Solving

The Three Components of OEE and Why They Matter

Honestly examining availability, performance, and quality provides manufacturers with the information needed to track each of the Six Big Losses. There are several ways to calculate OEE, but the preferred version utilizes the three loss-related components:

  • Availability: Availability loss is anything that brings a process to a halt, even if only for a few moments. This includes planned and unplanned stops and change over time. Everything left after accounting for stoppages is called Run Time.
  • Performance: Anything that interferes with a process or causes that process to run slower than maximum speed is causing performance loss. Net Run Time occurs after accounting for performance loss.
  • Quality: Quality loss encompasses all products that must be reworked or scrapped because they do not meet specifications. 

It is easy for manufacturers to overlook or undervalue one or more of the three components of OEE. Availability gets a lot of attention from the enterprise level because it is the easiest to translate to economic impact. A manufacturer may assume that performance is as optimal as it can get or that no further improvements are necessary for quality processes. But making assumptions without tracking the data essentially accepts that the overlooked process is perfect. And facilities are much like people—there is always room for improvement. Identify which OEE components are currently driving the value and which need a closer look. Then develop a holistic plan that supports all three.

The Value In Getting It Right First Time

Ideal design means a facility produces a product that satisfies customers without rework or scrap. Many facilities allow specifications to guide manufacturing without closely tracking variations, which is a mistake. Unchecked variations or inconsistencies can lead to costly returns or rejections from dissatisfied customers. Letting Right First Time principles lead from design and engineering through production means implementing statistical process control (SPC) to minimize variance. Manufacturers can track rework, scrap, and returns to determine a cost figure illustrating the value of this aspect of OEE to the enterprise level. Continually monitoring quality targets leads to incremental process improvements, including better time resource management. Right First Time principles bring first pass yield and quality yield closer together.

Speed Loss: An Opportunity for Growth

When equipment runs at less than the maximum rated speed, that is known as speed loss. Addressing speed loss is one of the easiest ways to drive performance, but manufacturers often overlook it. It’s common for facilities to assume a process is running normally simply because it is consistent. It is not unusual for manufacturers to accept processes at theoretical maximum because they’ve always been that way. Taking continuous improvement seriously means letting go of assumptions. Manufacturers may be meeting schedules but still be running at reduced capacity.

Challenging assumptions about equipment and processes provides opportunities for moving the OEE needle, even when the existing percentage is good. A facility might meet schedules and produce high-quality products without running near the theoretical maximum. Underperforming equipment may or may not struggle to meet demand, but without determining if equipment is consistently running at theoretical maximum, manufacturers won’t have a clear picture of whether there’s a capacity problem. Facilities that consistently post a high percentage in OEE performance do not accept slippage and regularly assess equipment to determine how closely it is running to capacity.

Identifying the Three Components of Waste

Any OEE loss falls within three categories: people, material, or energy. Lean manufacturing identifies seven different types of waste, and each can fall into one, two, or all three of these categories. The seven wastes are:

  • Overproduction: Overproduction is a waste that can cause all other wastes. It utilizes excess material and energy, consuming work hours and overworking employees. Producing too much may use too many raw materials or produce product that deteriorates before getting to the consumer. 
  • Inventory: Often a result of overproduction, unprocessed inventory consumes a great deal of energy as product is transported to and from storage. Excess inventory requires storage facilities that in food manufacturing often must be climate-controlled. Finally, inventory can conceal wastes related to the product’s initial production.
  • Transport: Not only does the transport itself accrue expenses in terms of fuel, vehicles, and employees to perform the transport, but the more product moves, the more chances for damage to occur. Transport can cause significant loss in the energy and material categories, and to a lesser extent, in the people category.
  • Waiting: When an unplanned stop occurs, it can cause significant waste due to waiting. Employees are getting paid to wait for product to arrive or for equipment to come back online. Product may deteriorate while waiting for the next step. Facilities may have to hire additional employees temporarily, driving people costs up.
  • Over-processing: Any unnecessary actions to deliver a high-quality product to the customer fall under over-processing. It adds value that customers did not ask for and may drive the cost of the product up beyond what the customer is comfortable paying. It also consumes excess raw materials and employee time.
  • Motion: It is ideal to reduce motion, whether by people, product, equipment, or raw resources. Many manufacturers perform processes without scrutinizing them for excess motion. Often by breaking down each movement, facilities can minimize unnecessary motion without compromising standard operating procedures (SOPs).
  • Defects: When manufacturers take a Right First Time approach, they proactively work to minimize product defects. Customers will return defective products, which uses up hours and resources. 

The goal is to take a problem-solving approach to get to the root cause driving the losses rather than reacting to the symptoms of existing waste.

Tracking Value, Hour by Hour

Hour-by-hour tracking is a way to take the vital signs of the facility and reveal the pacing of processes. These charts often contain key data. Managers can read hour-by-hour charts to consistently get the pulse of production, while operators and employees can learn to use hour-by-hour charts to contribute to target goals for each shift. Hour-by-hour charts let management track output in real-time and make adjustments when and where needed while problems are smaller and easier to address.

The Power of Built-In Problem-Solving

Training employees to become real-time problem solvers will positively impact OEE. While operators don’t need to be able to rattle off the Six Big Losses or the Seven Wastes, they can certainly actively participate in driving the components of OEE. Employees that understand how waste impacts their coworkers, their line, and the company overall are more invested in following SOPs. Investing in quality training and communicating an OEE-driven culture from enterprise-level down creates an environment that builds problem-solving into the equation.

Learn more about SafetyChain’s comprehensive OEE software, and take a product tour by requesting a software demo today.

Topics: Profitability, Productivity, Technology, OEE