## OEE: what is it for and how to calculate?

11 Mar 2022

Increasingly used in different segments of the industry, OEE is an excellent resource to measure the __performance level__ of your equipment and applications. Working together with the philosophy of **lean manufacturing**, the index is directly related to practices and actions to improve processes. In the next paragraphs, you will be able to understand what it is for and how to calculate OEE indicators for your operation.

## What is OEE?

Acronym for Overall Equipment Effectiveness, OEE is a concept developed by Japanese author Seiichi Nakajima, considered the creator of TPM (Total Productive Maintenance). The methodology is used to calculate the difference between the production capacity of an equipment and the index of activity that it actually delivers. In other words, it calculates how many items with the quality desired by the operator the equipment has produced in a given period of time, compared to its total production capacity.

With this information it is possible to determinate how much of the available time was effectively spent in the manufacture of the parts. This estimation helps to translate the business performance index, measuring its production capacity. The feature also helps to reduce waste and increase the performance of the machine, improving operation.

### Who are the OEE indicators?

The objective of the OEE methodology is to __increase the productivity__ of an industry and __reduce maintenance costs and investments__ through the calculation of the operation`s performance. To reach the expected result, this calculation is based on three main indicators: availability, quality and performance.

**Availability**

This indicator corresponds to the amount of working time of an equipment and the period that it was available. Outages must be considered and can be due to two aspects:

- Planned downtime – downtime scheduled and performed in advance, like predictive maintenance, cleaning, or inactive days, such as weekends and holidays;
- Unplanned downtime – downtime due to unforeseen events, such as parts breakage, raw material shortages, power outages or the absence of an operator.

**Performance**

This indicator is directly associated to the production rate of the machine or equipment. It has information about the manufacturing speed of a certain item compared to the expected level of activity. Shorter production cycles and process variations can make measurement difficult. Thus, the calculations must be precise, so that the determination of the production cost is exact.

**Quality**

The quality indicator is used to measure the quantity of items produced in compliance with the expected standard and the defected ones that cannot be delivered to the customer. This is an essential control indicator in processes that demand uninterrupted operation. The high volume of items outside the expected quality standard is a sign that something needs to be corrected.

### How to calculate the OEE index?

The calculation to determinate the OEE index is relatively simple. Let`s understand through a practical example using the three indices:

- Availability% = (Producing time / Scheduled time to produce) * 100%
- Performance% = (Actual Production Quantity / Theoretical Production Quantity) * 100%
- Quality% = (Quantity of Standard Items / Total Quantity Produced) * 100%
- OEE% = Availability% * Performance% * Quality%

Suppose that a company operates in a regime of three sequential shifts of 8 hours a day and that, at each shift, one of its machines operates 7 hours and is out of operation for 1 hours, totaling 21 hours of operation per day.

Now, imagine that, on a given day, this machine worked for only 16 hours due to unscheduled stops, such as a power outage. We can calculate the Availability indicator by making the relationship between the time produced (16h) and the time programmed to produce (21h) of the machine. Availability Indicator: 16h/21h = 76%.

To continue with the example, let`s assume that during these 16 hours of operation the same machine has the capacity to produce 100 items. However, due to its low processing speed, it ends up producing only 80 items, a volume that corresponds to 13 hours of work. With this new information, we can calculate the Performance indicator by making the relationship between the actual production quantity (13h) and the theoretical production quantity of the machine (16h). Performance indicator: 13h\16h = 81%.

At the end of the production time, it was found that eight out of the 80 items produced in this period ended up failing the quality tests, which corresponds to 1h of work. With this data in hand, we can calculate the machine`s Quality indicator, establishing the relationship between the time spent in the production of the total of good items (12h) and the time spent on the total quantity produced (13h). Quality indicator: 12h\13h = 92%.

Considering the values of the three indicators, we can calculate the OEE Index by multiplying the three of them. Machine OEE Index: 76% x 81% x 92% = 57%.

### Optimize the performance of your machines and processes

To conclude, we can say that OEE indicators are an increasingly important KPI to improve the productivity and overall efficiency of an industry. Through them it is possible to verify a series of measures that can be taken to improve the productivity of the company as a whole.

If you want to apply the methodology in your processes to improve your business performance, we can help you. Fill in the form below to inform your interest so one of our specialists can contact you.