The topic of standardized metrics gets much attention because organizations would like to be able to benchmark against peers in the same industry. OEE (Overall Equipment Effectiveness) is one of the metrics considered for such
benchmarking. Nevertheless, one metric or one definition of OEE does not necessarily work well across different types of manufacturing.
OEE is a measure of how well equipment are utilized in relation to their full potential. OEE is defined as OEE =
Availability x Performance x Quality. It was conceived to quickly identify areas affected by big productivity losses including breakdowns, long setups, frequent stops, and rejects.
OEE is a good operations performance metric for industries where the production process revolves around a few expensive pieces of equipment and where revenue is closely tied to maximizing output from a fixed high investment in equipment.
The principles behind OEE can be applied to multiple industries and types of manufacturing, but one OEE definition would not work as well for everyone. The sub-metrics of OEE should be defined differently for different types of manufacturing. OEE is only as good as how we define its components: “equipment”, “availability”, “performance, “quality”.
OEE or ORE?
Personally, I do not like the use of the emphasis on equipment in this metric. I propose that we have a more robust way to measure the effectiveness of our resources and that we use the term “resource” instead of “equipment”. In other words, I think Overall Resource Efficiency is a metric applicable to a broader range of industries since equipment is not the primary critical resource for every type of manufacturing. Of course, we can just leave the word equipment in there to avoid creating yet another new term, but think “resource” when you see the word “equipment”. Yet sometimes it is easier to come up with another term if we have a different definition.
Are we interested in every piece of equipment or every resource in this metric? I would say, No. We should only be looking at critical resources―resources that are critical because they are very expensive (big investment) or because they are potential constraints in the manufacturing process. Otherwise we are diluting focus from where it should be. It may be that in your industry some specialized labor skills are the most important resources. In that case, you might actually consider changing the term, because some people might not like the idea of being considered “equipment”.
Components of OEE or ORE
Each one of the components of OEE provides valuable information and should be looked at individually in addition to OEE. Several different metric definitions could feed into the components of OEE depending on the industry. A few examples are listed below.
OEE = Availability x Performance x Quality
• Availability
• Machine uptime / Available Calendar Time
• Ratio of Operating Time to Planned Production Time
• Percent of calendar hours that equipment was available for production or equipment up-time
• Percent of calendar hours product is not held idle by constraints like availability of parts, skilled resources, or equipment
• Performance
• (Ideal Cycle Time x Total Pieces) / Operating Time
• (Total Units / Operating Time) / Ideal Run Rate
• Standard Labor Hours / Actual Labor Hours
• Quality
• (Total Units Produced - Defective Units) / Total Units Produced
• (Actual Labor Hours – Rework Labor Hours) / Actual Labor Hours
Note that all these metrics are constructed so the elusive target is 100%. But don’t feel bad if your result is 70% or 80% instead of 95%. Since OEE can be defined slightly different according to the industry it is hard to use general benchmarks. Plus most companies are tracking all equipment as part of the overall OEE measure and that is just puffing up the number to make them feel better. Industry benchmarks are nice but not required; a company can simply monitor each of their own metrics and make good decisions based on their own improvement goals over their own past
performance.