Why OEE Is One of the Most Important Production Metrics
Time and cost pressures are obliging more and more companies to manufacture high-quality products more efficiently and economically. To achieve this, their manufacturing processes should waste as little as possible. In addition, it’s essential for them to minimize throughput times and machine downtimes while keeping warehouse inventories and quality problems as low as possible. The ultimate goal, of course, should be to maximize the profitability of production.
OEE (Overall Equipment Effectiveness) is an important metric on the way to achieving more profitable production. It measures the overall effectiveness of a manufacturing operation by combining these three essential parameters:
OEE is the most valuable key performance indicator (KPI) that your company’s production team can leverage for optimizing overall performance. In-depth monitoring and loss analyses used to be quite time-consuming activities and were therefore typically only carried out from time to time in the form of spot checks. Today, however, new technologies make it quick, easy, and efficient to capture, compare, and manage OEE and other production metrics.
OEE metrics reveal hidden ways in which resources are wasted
The OEE factor of availability expresses the ratio between how much of the time a machine could be running and how much it actually is. Every machine typically stands still at least part of the time due to unplanned stops. If you identify the reasons for these pauses in as much detail as possible and capture their duration, you’ll be able to draw useful conclusions and take action to improve the situation.
The OEE factor of performance focuses on the number of units that need to be produced. Even when a machine is available and running, it can operate at different speeds. This affects the number of parts manufactured. The ratio of how many parts could be produced in a given amount of time to how many actually are is the machine’s performance.
The OEE factor of quality reflects the importance of avoiding reworked and rejected products. It doesn’t just matter how many units are produced in absolute terms, but also what share of them can be used as is, i.e. without any rework. The ratio of these two values – good products to total products – indicates the quality of production.
OEE metrics are the basis for continually improving production. OEE provides a better way to calculate the output of a machine or group of machines. OEE sheds light on which aspects of a machine or system should be improved. The focus is on increasing productivity, reducing waste, and improving product quality. Appropriate measures can lead to cost reductions and greater competitiveness at companies. But how do individual corporate activities benefit from OEE?
Optimizing production by improving shopfloor management
It’s advantageous to integrate OEE into shopfloor management. This way it becomes a fixed part of activities on the shopfloor. Management also stays informed of the status quo and can make appropriate decisions as required.
The goal of shopfloor management is to optimize the performance of all tasks in a manufacturing operation. Managers and staff need to work together closely right where value is created. Managers also need to inform and motivate workers and make sure that they have the required skills.
The relevance of OEE metrics
Professional shopfloor management leads to lasting improvements and optimal results. The greatest potential for optimizing production is in addressing parameters such as transparency, monitoring, metrics, and OEE in real time.
It’s important to keep in mind that a manufacturing company involves a variety of roles. OEE metrics need to be applied differently depending on what they do and their relative importance. Each area of responsibility has a different perspective.
Continuous improvement and lean production
Objective, trustworthy data are the basis for successfully implementing a process of continual improvement. In lean production, the focus is on automatically capturing metrics in real time, accurately identifying opportunities, initiating the right measures, and ensuring their effectiveness.
A plant naturally has to operate profitably. It’s therefore essential to keep production costs down, meet deadlines, stay flexible, and ensure quality. The ultimate aim is to remain competitive. Objective real-time metrics enable plant managers to consistently stay on top of things by, for example, responding nimbly to critical situations.
A manufacturing facility’s managers are largely responsible for how and how well it operates. Production quotas and quality goals “somehow” have to be achieved day after day. Any deviations from targets need to be quickly detected so appropriate corrective action can be taken. All this calls for the right metrics.
Immediately noticing stops is essential for preventing major production shortfalls. Notifications, MTBF, and MTTR are crucial metrics for maintenance. They make it possible to analyze the scope and frequency of stops and whether or not the situation is improving.
Work preparation, logistics, and procurement
Real-time transparency is essential for determining whether production is on track. Up-to-the-minute data are needed for organizing the supply of inputs and coordinating the dispatch of finished products. They allow a company to pare its costs by enabling it to stick to an efficient manufacturing schedule.
High-performance, problem-free production is important – but in the final analysis, the quality also has to be right. Quality managers keep the entire value creation process in view, applying appropriate metrics to detect any quality problems and nip them in the bud.
Auditors monitor the financial side of manufacturing. They are responsible for keeping tabs on machine operating times, staff-minutes per component, throughput times, all sorts of comparisons – also between sites – and much more. Armed with the right KPIs, they can take a bird’s-eye view for improving cost-effectiveness.
Benefits for production managers in detail
A production manager wields OEE as a tool for capturing the status of production. This concerns the entire manufacturing operation, i.e. every single machine. On this basis, the production manager is able to make sound decisions. OEE reports constitute the basis for regular constructive meetings – with working groups, production heads, and ideally also high-level management.
Benefits for management
Industry 4.0 paved the way for OEE, which has meanwhile also been widely adopted as an invaluable management tool. Proper and detailed capture of data – especially on the causes of problems – used to be a very work-intensive, complex chore. Now OEE is mandated by management and typically applied across an entire corporate group.
The uses of OEE by management include:
- Comparison of individual manufacturing operations
- Early detection of changes in productivity (e.g. by comparing weeks, months, or years)
- Increasing competitiveness by boosting productivity
General benefits of overall equipment effectiveness (OEE)
OEE metrics can be used to capture, document, and evaluate the causes of losses in a structured, holistic manner. When OEE-based management is sensitively adapted to a company’s structure, it delivers significant benefits: downtimes and production losses can be reliably identified and tailored measures derived for countering them.
Targeted analysis in real time is the prerequisite for developing measures to optimize production systems. OEE can be used to evaluate the effectiveness of all measures taken to improve machine performance. Comparisons can be made between similarly structured machines or facilities, manufacturers, and production methods.
It’s important to calculate and compare the OEE of machines before and after changing operating times, operating or production modes, or equipment. Interdepartmental cooperation plays a major role in the success of these measures. It should be encouraged so that everyone works together as a team to achieve the goal of maximizing OEE.
Depending on your role in the company, production metrics, OEE, and especially the individual OEE factors will have different focuses and weights. Metrics – and especially OEE – provide opportunities to make changes in real time while taking a structured approach with the ultimate goal of ensuring profitable production.
Whether you’re a lean production expert, a member of a continual improvement process (CIP) team, or a production or plant manager, having a tool for objectively capturing and analyzing metrics has become an important factor driving competitiveness in the context of the digitalization of manufacturing.
Take advantage of this opportunity to get support from our experts. They’ll get you into the OEE fast lane so you’ll quickly see improvements. We’re happy to help you in every way we can!