OEE: Overall Equipment (Service) Effectiveness - ABIDIAN Business ...

OEE Presentation for ASQ 1124 

OEE: Overall Equipment 

(Service) Effectiveness 

Presented to Section 1124 of the 

American Society for Quality 

OEE - 1 

We’ve learned about … 


Abidian, Inc. abidian.com 

info@abidian.com 843-536-0942 Page 1


Goals for Tonight 

• Learn about OEE and how to use it to 

improve our overall efficiency, throughput, 

and quality in a plant, office, or service environment 

• Gain an understanding of the financial opportunities 

available 

• Learn how to use OEE to 

1) Improve real-time efficiencies 

2) Ensure compliance to budget 

3) Evaluate capital expenditures 

4) Compare one operation to another 


Imagine a new car … 





Ideally … 

Reality is … 

We want our systems to 

operate 100% of the time 

at 100% of our best 

demonstrated speed 

producing 100% good 

quality product/services 


Our systems are not 

ideal … it’s 

unreasonable to 

expect to operate all 

the time at best ever 

speeds producing 

nothing but good 

product/services 





Soooo …Why is OEE so important? 

• Companies make money by adding value to materials 

and services to make products customers want 

• As most companies use machines, people, and 

production lines to add value to their products, it’s 

important they perform efficiently 

• Overall Equipment/Service Effectiveness (OEE) is a 

metric used in Lean and Six Sigma to indicate how 

efficiently business systems are performing 

• OEE promotes openness in information sharing and a 

no-blame approach in handling system-related issues. 


The Dollars: Overall Equipment Effectiveness (OEE) 


• Software simulations 

can help vividly 

illustrate the value of 

increasing the OEE 

components of 

Performance, Availability, 

and Yield 

• In this example, 

improving OEE one (1) 

percentage point from 

28.1% is worth $120,000 

per year … note this is 

about a $30M business 

and the profit per piece is 

only $10 

• Similarly, improving the 

current sigma value of 

3.27 by 1 is worth over 

$1.1M per year! 




Overall Equipment Effectiveness (OEE) 

• OEE helps us to maximize 

1. Performance … speed and/or utilization 

2. Availability … uptime 

3. Yield … quality 

• On a real-time and budgeting basis 

• Allows us to compare processes across plants, 

divisions, offices, and companies 


Availability (Uptime) 

Time Available (24/7/365) 

Time Operating 

Time running 

Availability: A comparison of the potential operating 

time and the time in which the system is actually 

making products or providing services 

Availability 

Losses 

(1) Breakdowns, minor stops, offline PM’s, 

meetings, no sales 

(2) Changeovers & adjustments 

For Example 

For Example: We operate 

7 hours during an 8 hour shift 

… our Availability would 

be 7 divided by 8 or 87.5% 


AVAILABILITY 

Time Avail-Downtime 

x 100% 

Time Available 




Yield (Quality) 

Amount Produced/Served 

Good Material/ 

Services 

Time running 

Yield: A comparison of the raw materials (or 

occurrences) put in to the process and the number of 

products/services that meet the customer’s specifications 

Quality 

Losses 

(5) Quality defects in process, rework, 

callbacks, returns, … 

(6) Start up and Transition losses 

For Example: We input 

100 parts of which 3 are bad at 

output … our yield is 100 minus 

3 divided by 100 or 97% 


Performance (Utilization or Speed) 

Time operating 

at maximum 

rate 

Performance: A comparison of the speed/actual 

output with what the system could be consistently 

producing in the same timeframe 

Performance 

losses 

For Example: We produce 80 

For Example: We produce 80 

units versus a best ever of 100 … 

our Performance would be 

80 divided by 100 or 80% 

(3) Idling, Breaks, Minor Stops … 

(4) Rate Losses (including ramp up) 



info@abidian.com 843-536-0942 Page 6 

or 

YIELD 

Actual output - Defects 

x 100% 

Actual input 

Utilization 

Actual Output 

Max output in time 

running 

Speed 

Actual Speed 

Best Demonstrated 

Speed 

x 100% 

x 100%


Overall Equipment/Service Effectiveness (OEE) 

Time Available (24/7/365) 


Time Operating at 

Maximum Rate 


at 

Quality 

Maximum Rate 

Losses 

and 

Good Quality 

Performance 

losses 

Availability 

Losses 

“6 Big Losses” 

(1) Breakdowns, Minor Stops, Offline 

PM’s, Meetings, No Sales 

(2) Set Ups, Changeovers & Adjustments 

(3) Idling, Breaks & Minor Stops 

(4) Rate Losses (including ramp up) 

(5) Quality defects in process, rework, 

callbacks, returns, … 

(6) Start up and Transition losses 

OEE for World Class Manufacturers is 80+ % 


OEE: How it’s Calculated 

OEE is the product of Three Components: 


Availability 

Time Avail-Downtime 

x 100% 

Time Available 


info@abidian.com 843-536-0942 Page 7 

x 

Performance 

Actual Output 

Max Output in Time 

Running 

x 

Yield 

x 100% 

Actual Output - Defects 

x 100% 

Actual Input 

1. PERFORMANCE (Speed/Utilization) = Percentage of the output (# of parts or 

occurrences) that the process actually produced, while it was running or the actual 

speed vs. the best demonstrated speed for a given product, product family, service, or 

transaction 

X 

2. AVAILABILITY (Uptime) = Percentage of the total available time that the 

process/equipment was actually operating vs. 7/24/365 

X 

3. YIELD = Percentage of the total parts/services produced that were good 

OEE = Performance x Availability x Yield


OEE: How it’s Calculated (Cont.) 

Let’s look at an example: 

We have a good plant. It averages 90% uptime on a 

7/24 basis. Production for the last month was 12,500 

pallets versus a best ever month of 14,000 pallets. 

Scrap ran about 1.5%. 

What is our OEE? 

What is our OEE? 

OEE = Overall Equipment Effectiveness 

= Performance x Availability x Yield 

= (12,500/14,000) x (0.90) x (.985) 

= (0.893)(0.90)(.985) 

= 0.792 



Let’s look at an example: 

This is a good plant, yet the OEE 

We have a good plant. It averages 90% uptime on a 

calculation gives us insight that even 

7/24 basis. better Production results might forbethe achieved last month was 12,500 

pallets by attacking versus performance a best ever and andmonth availability of issues 

14,000 pallets. 

Scrap ran about 1.5%. 

OEE = Overall Equipment Effectiveness 


= (12,500/14,000) x (0.90) x (.985) 

= (0.893)(0.90)(.985) 

= 0.792 






Let’s look at service/transactional example: 

An Accounts Payable Department for a Fortune 100 company operates 2 8-hour 

shifts Monday through Friday. For a given month they processed 256,126 invoices 

versus a best ever of 278,309. During the 28-day month they had 12,004 invoices 

paid after the due date, 58,732 paid 5 or more business days before the due date, and 

38 that were missed/paid incorrectly. 

What is the OEE? 

OEE = Overall Equip (Service) Effectiveness 


= (256,126/278,309) x ((16 x 5) / (24 x 7)) 

x (256,126 - 12,004 - 58,732 - 38) 

/ 256,126 

= (0.92)(0.48)(.72) 

= 0.318 


Overall Equipment Effectiveness (OEE) 

The last example is 

consistent with most 

businesses having an 

opportunity to increase 

capacity and/or 

productivity by 25 to over 

100%!! 





To compare OEE … 

For comparison purposes 

… everyone should use 24/7/365 

as the basis for their availability 

and best demonstrated (versus plan 

or design) performance (speeds/ 

utilization) 

Counting unscheduled 

time will encourage 

creative ideas for 

reducing the time! 


Budgeted Production Efficiency (BPE) 

“It’s not fair” to a business that 

is limited by sales to take a “hit” 

for not being able to run 24/7 

… for this reason a 

Budgeted Production Efficiency (BPE) 

should be calculated to compare the 

business to budgeted/planned production 

schedules, line speeds, etc. 





Capital Appropriations 

Before expanding a 

business or adding a 

line, we should ensure 

we’ve maximized 

current production; 

i.e., performance, 

availability and yield! 


Realtime Production Effectiveness (RPE) 

For comparison and trending 

purposes, “OEE” should be based 

on at least a week’s worth of data, 

and ideally, a month or more … for 

realtime trending, calculate instead 

a Realtime Production Efficiency 

(RPE) using available 

performance, availability, and yield 

information 





Real-time Work Area Scoreboard 

95.6 SPEED 

00:22:29 DOWNTIME 

97.5 YIELD 

89.0 EFFICIENCY 

RPE: 

Realtime Prod Efficiency 

… reset each shift/day 

Improving OEE 


PERFORMANCE: 

Compare current operations 

against best ever 

AVAILABILITY: 

Track in “seconds” to create 

a sense of urgency 

YIELD: 

Ideally “weighed/counted” ... Might have 

to estimate… include everything! 

• We use OEE to monitor the condition 

of our equipment … similar to the way 

a nurse takes your temperature to see 

whether you’re health has improved 

• The point of using OEE is to drive 

system improvement 

• Some improvement will occur from 

“awareness” when you start to measure 

OEE 

• Sustained improvement requires a 

dedicated approach 





Improving OEE 

Summary 

• Your approach should incorporate 

quantitative expectations, milestones, 

and a firm schedule for improvement 

• A proven, effective way of quickly 

improving OEE is through a kaizen 

improvement event … the kaizen is 

also a great way to also increase 

worker/supervisor buy-in 


• OEE helps maximize throughput efficiency 

• It focuses on Performance, Availability, and Yield 

• OEE should be based on data for at least a week, and 

ideally, a month to wipe out the effects of product mix 

• Use Realtime Production Efficiency (RPE) to 

maximize realtime/current operations 

• Before capital expansions, check your OEE! 

• To account for circumstances “beyond your control” 

… i.e., don’t have enough sales to run 24/7 … 

calculate a Budgeted Production Efficiency (BPE) to 

compare your business to budget/plan 





ABIDIAN: Business-Speak for Excellent Change 

Over 6000 individuals from 

North America, Europe, and 

Asia have attended our 

workshops, presentations, 

and improvement events. 

Abidian has been recognized 

by the American Society for 

Quality, United States 

Congress, and U.S. 

Commerce Association. 

The Numbers … 



Recognized Leadership 

in Continuous 

Improvement 

• 97% of the attendees at Abidian's workshops and kaizens have 

rated the knowledge of their workshop facilitator as excellent. 

• 94% of all workshop and kaizen attendees rated the hands-on 

exercises and practicality of the illustrations provided as very 

good or better. 

• 100% of all attendees have given their kaizen improvement 

event or workshop an overall rating of very good or excellent. 

• Projected savings identified by our clients from our recent 

workshops, kaizens, and onsite efforts are well over $80 

million. 




Questions? 

… or looking for help 

to get started? 


Contact Abidian today. You can reach us 

at 843-536-0942 or info@abidian.com. 

Abidian, a recognized leader in productivity improvement, 

provides hands-on training in Lean, Six Sigma, Maintenance 

Excellence, Theory of Constraints, and Total Productive 

Maintenance/Manufacturing. 

Learn more about us at abidian.com.

OEE: Overall Equipment (Service) Effectiveness - ABIDIAN Business ...

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