A plain English guide to OEE

OEE stands for Overall Equipment Effectiveness. It is a very commonly used efficiency measure. Put simply, it answers the question “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.

• Availability
• Performance Rate (sometimes called Speed or just Rate)
• Quality Rate

The three components of OEE

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 percentage of time we are not running, whereas availability is the percentage of time we are running.

Availability = Actual run hours / Target run hours

Performance Rate

You can “lose” output by machines or lines running slower than they should. So a machine designed to make 100 widgets a minute 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.

Performance Rate = Actual bottleneck speed / Ideal bottleneck speed

Quality Rate

We may manage to make some product that is not good enough to sell. The ratio of good output to total output is 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%.

Quality Rate = (Total output – scrapped output) / Total output

How to calculate OEE

To work out OEE we multiply the three numbers together, then express the result as a percentage.

OEE (%) = Availability (%) x Performance Rate (%) x Quality Rate (%)

Example OEE calculation

I am wrapping Christmas presents. I know that 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 up 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 “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%

A quick shortcut for calculating OEE

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.

Next steps

OEE is just one example of a well-structured process measure. If you are building process KPIs of your own, you may find these useful:

• Process KPIs, the pain-free way – a quick guide to creating process measures
• Free KPI definition template – define your measures clearly, so calculations like OEE never get misinterpreted