How to Calculate OEE The Real OEE

Formula with Examples

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A lot of time and effort can be wasted collecting data and analyzing the
results. Fortunately, Overall Equipment Effectiveness, or OEE, is one of those metrics that
is easily calculated and can be applied to any process, department, or the entire
organization.

We have created a number of Excel spreadsheets that are immediately available from our
FREE Downloads page or from the Free Downloads widget on the side bar. These
spreadsheets can be modified as required for your application.

OEE is comprised of three factors: Availability, Performance, and Quality. While

calculating these factors is fairly straightforward, it is important to recognize that a standard
industry definition for OEE does not exist. It is important to understand the assumptions
you are making to make sure that you understand the final OEE result. This is increasingly
more important when attempting to compare the results of one department or plant against
the performance of another.

OEE measures how effectively TIME is used to produce a quality product. We have
established the following definitions of TIME to be used to calculate OEE:

1. Scheduled Production Time or Planned Production Time

2. Planned Down Time: Scheduled down time events
3. Unplanned Down Time: Unscheduled down time events
4. NAT = Net Available Time (Scheduled Production Time Planned Down Time)
5. NOT = Net Operating Time (Net Available Time Unplanned Down Time)
6. IOT = Ideal Operating Time (Time to Produce All Parts at Rate)
7. LOT = Lost Operating Time Due to Production of Scrap or Non-Saleable Product.

Although we will provide examples of these calculations, the following formulas are used
to calculate each of the OEE factors and overall OEE:

1. Availability % = NOT / NAT * 100

 2. Performance % = IOT / NOT * 100
3. Quality = (IOT LOT) / IOT * 100
4. OEE = Availability * Performance * Quality

You will notice that a quick way to check your OEE result is to calculate the time required
to make good parts divided by the Net Available Time:

OEE = (IOT LOT) / NAT

A word on Availability:

Availability is based on the actual scheduled production time. Assuming a production

process is scheduled to run over an 8 hour shift or 480 minutes (60 * 8), the following
definitions are applied for planned and unplanned downtime.

Planned Downtime:

1. Scheduled break times.

2. Scheduled clean up at the end of the shift.
3. Scheduled Preventive Maintenance.

Unplanned (Process/Equipment) Downtime:

1. Setup / Tool Changes

2. Material Changes
3. Material Handling
4. Quality Concerns
5. Process Downtime
6. Equipment Failures
7. Personnel Relief

While it could be argued that setup or tool changes are planned events, they are considered
part of the overall production process. If tool change or set up events affect equipment or
capacity utilization, then an effort to reduce these times will reflected by improved
availability and an increase in available capacity. It also makes capacity utilization much
easier to calculate. Again, knowing what is in the definition is important. The purpose of
establishing OEE is to drive improvement in your organization. For example, Quick Die
Change, or SMED, programs are specifically geared to improve the change over process. If
a separate program is used to manage the change over process, then you may so choose to
leave this activity as a separate entity.

A word of caution! OEE is a metric, not a program. Use existing systems and processes
wherever possible to manage or support your OEE activities at launch. New initiatives
often fail because they are introduced in isolation and are often accompanied by new
ways of doing business and tend to disrupt other existing work flows. A true
improvement or initiative that saves the company time and money will stand on its own
merits. This same initiative can be acted upon regardless of whether an OEE
Improvement Plan exists.

I highly recommend reading Velocity: Combining Lean, Six Sigma and the Theory of
Constraints to Achieve Breakthrough Performance A Business Novel. This engaging
story exemplifies the challenges of integrating new initiatives into a company and how to
overcome them. This book ranks among the best with other books like The Goal.

Calculating OEE: A real life example

An 8 hour shift is scheduled to produce three parts as shown in the schedule below. The
shift has two 10 minute breaks and a 5 minute clean up period.

Production Schedule:

M/C: A Part #: A123, Cycle: 10 (seconds), Produced: 2240, SCRAP: 50,

Unplanned Downtime: 32 minutes
M/C: B Part #: B456, Cycle: 45 (seconds), Produced: 450, SCRAP: 25,
Unplanned Downtime: 18 minutes
M/C: C Part #: C789, Cycle: 70 (seconds), Produced: 229, SCRAP: 11,
Unplanned Downtime: 22 minutes

Lets start by calculating our time factors for each machine:

Net Available Time: Since each machine is scheduled to run for the full 8 hour shift, the
Net Available Time for each machine is calculated as follows:

1. Scheduled Time = 8 hours = 480 Minutes (8 * 60)

2. Planned Down Time = 2 breaks * 10 minutes + clean up 5 minutes = 25 minutes
3. Net Available Time (NAT) = 480 25 = 455 minutes

Machine A

1. Unplanned Downtime = 32 minutes

2. Net Operating Time (NOT) = Net Available Time Unplanned Downtime
3. NOT = 455 32 = 423 minutes
4. Ideal Operating Time (IOT): 2240 total parts * 10 seconds = 22400 / 60 = 373.33
minutes
5. Lost Operating Time (LOT): 50 scrap parts * 10 seconds = 500 / 60 = 8.33 minutes

Machine A: OEE Factors are calculated as follows:

1. Availability: NOT / NAT = (423 / 455) * 100 = 92.97 %

2. Performance: IOT / NOT = (373.33 / 423 ) * 100 = 88.26%
3. Quality: (IOT LOT) / IOT = (373.33 8.33) / 373.33 * 100 = 97.77%
4. OEE = A * P * Q = 92.97% * 88.26% * 97.77% = 80.22%
We could also have calculated OEE using the Quick Check as shown below:

Time to produce good parts ONLY: 373.33 8.33 = 365

OEE = (IOT LOT) / NAT = (373.33 8.33) / 455 * 100 = 80.22%

Using the same formulas as above the time factors for Machines B and C follow.

Machine B

1. Unplanned Downtime = 18 minutes

2. Net Operating Time (NOT) = Net Available Time Unplanned Downtime
3. NOT = 455 18 = 437 minutes
4. Ideal Operating Time (IOT): 450 total parts * 45 seconds = 20250 / 60 = 337.5
minutes
5. Lost Operating Time (LOT): 25 scrap parts * 45 seconds = 1125 / 60 = 18.75
minutes

Machine B: OEE Factors are calculated as follows:

1. Availability: NOT / NAT = (437 / 455) * 100 = 96.04 %

2. Performance: IOT / NOT = (337.5 / 437 ) * 100 = 77.23%
3. Quality: (IOT LOT) / IOT = (337.5 18.75) / 337.5 * 100 = 94.44%
4. OEE = A * P * Q = 96.04% * 77.23% * 94.44% = 70.05%

We could also have calculated OEE using the Quick Check as shown below:

Time to produce good parts ONLY: 337.5 18.75 = 318.75

OEE = (IOT LOT) / NAT = (337.5 18.75) / 455 * 100 = 70.05%

Machine C

1. Unplanned Downtime = 22 minutes

2. Net Operating Time (NOT) = Net Available Time Unplanned Downtime
3. NOT = 455 22 = 433 minutes
4. Ideal Operating Time (IOT): 229 total parts * 70 seconds = 16030 / 60 = 267.17
minutes
5. Lost Operating Time (LOT): 11 scrap parts * 70 seconds = 770 / 60 = 12.83
minutes

Machine C: OEE Factors are calculated as follows:

1. Availability: NOT / NAT = (433 / 455) * 100 = 95.16 %

2. Performance: IOT / NOT = (267.17 / 433 ) * 100 = 61.70%
3. Quality: (IOT LOT) / IOT = (267.17 12.83) / 267.17 * 100 = 95.20%
 4. OEE = A * P * Q = 95.16% * 61.70% * 95.20% = 55.90%

We could also have calculated OEE using the Quick Check as shown below:

Time to produce good parts ONLY = 267.17 12.83 = 254.34

OEE = (IOT LOT) / NAT = (337.5 18.75) / 455 * 100 = 55.90%

Our next post will show you how to calculate a truly weighted OEE based on the examples
given here.

Until Next Time STAY Lean!

If you have any questions regarding this post or simply want more information, please feel
free to send an email to leanexecution@gmail.com

How high should the OEE be?

Q: I have been reading in different sources about the OEE measurement and I
have not been able to find any concrete agreement about what the value for OEE
should be. Could you please give me any references?
I have read that there is no common agreement but that it is generally suggested that
bellow 65% should be considered unacceptable, since it represents a very low
competitiveness and a great number of economic losses. A value between 65 and 75%
is considered as regular, only acceptable if it is being improved. A value between 75
and 85 % means an acceptable level with slight economic losses and which can be
easily improved to World Class levels. A value between 85 and 95 percent is considered
as good and equals World Class values; it represents a high level of competitiveness.
And finally, a value above 95% is considered as excellence; an excellent
competitiveness and World Class values.
Arno Koch There are many angles to approach this question. Let me try to elaborate
a bit on it.

What number are we looking at?

First of all there is no such thing as an OEE number that could be referenced to,
simply because it could be defined in a thousand different ways.

Would you like to see an OEE of 85%? Well Ill get it for you tomorrow on your
machine! It is just a matter of changing some of the definitions; lower the maximum
speed, exclude some waiting-times like breaks and maintenance, stretch the
specifications of good product etc. Do not laugh! I have heard about consultants who
earn money in this way.
What is the criterion for good?
So lets assume we are going to use the OEE industry Standard for all machines. Now
what is a good OEE for a machine that continuously runs just one bulk product? And
what OEE is good for a machine that runs 60 different products a day?
Lets take the first machine, running just one product all day, feeding a line. Is 95% now
OK? Well not if the downstream equipment would only process the volume of 65%.
Now would 65% be a good OEE? No, not necessarily! Why not?
If the machine jumps fort and back between 45% and 95%, with an average of 65%
OEE, it still would cause a lot of problems!

Ok, now we have a stable OEE of 65%. Is it now OK? No, not if it runs at a quality-rate
of 90% (or any other number that is not (near) 100%!

Well lets go on: Now it is stable at 65% with a quality-rate of 100%. Now OK? What if
we need to make huge and expensive efforts to get this done? Maybe now your costs
are so high you are losing money with your beautiful machine!

So you see, it just does not makes sense to focus on the number as such. This is a
typical western style of thinking that many managers suffer from. Deming repeatedly
referred to this as the lack of profound systemic knowledge. In other words: Instead of
looking at a number, one should understand really what is going on.

Some important questions with regard to the OEE number could be:

1. Is there an OEE level we can run the machine stable and reliable? I.e. can we run
continuously between 40 and 44%? I would call that already a hunch of World
Class since I have rarely seen such machine! It would be an indicator for a process
that is -or can be- in control.
2. Is there a range of OEE in which we can run a stable OEE; I.e. could we run any
desired OEE between 20 and 50% on demand for days. (Wow, ever seen that?)
3. What OEE is desired to fulfill demand, and are we able to run such an OEE on this
equipment?
4. Are we able to run the machine without rejects?
5. Are we able to run the machine without any unexpected interruptions?
6. Are we able to swap between one product and the other, following demand
flawlessly?
To go short; instead of focusing on the height of the number, start to focus on
those components that may be indicators for an understood- and controlled
process. As a result, the number will go up, costs will go down, etc.
How high are OEE numbers normally?
In my experience, measuring over 2000 machines in all kind of branches and
continents, most machines will not exceed 35 to 45% of OEE (assuming OEE Industry
Standard definitions being applied). In some branches (like pharma) the typical
machine runs far less, while in others (like some- automotive) it can be higher. Some
particular types of machines (like extrusion-machines) tend to have higher OEEs by the
nature and the stage of development of the equipment.
After some years of TPM implementations and applying lean principles to prevent the
loss of flow, equipment (again very generalized) may grow in the 60s or even 70s
which (as a number) is really good.

What about the economic losses?

Lets take my statement about the average machine in the average factory running 35-
45% OEE. Are they running economic losses? Most of them earn quite some money.
Even worse: The conversion cost (if we may believe the controllers, which you should
be very careful with) is mostly just a small part of the total cost. This explains why such
low OEEs are commonly accepted (otherwise they would not be there)

The real economic loss is not in the height of the OEE, it is in the lack of flexibility and
reliability of it. Think about it; what would it mean to the cost of the supply-chain if
every step would respond and follow the demand. Just imagine the economic
consequences.