Manufacturing equipment is one of the most expensive costs for any manufacturer. These machines have long lifespans, and companies strive to achieve the shortest ROI to justify their expenses. Once a machine is in place, how it’s utilized, operated, and maintained will drive production output.

One powerful tool for managing equipment utilization is overall equipment effectiveness (OEE). With the proper calculation and data driving an OEE score, companies can achieve faster ROI while meeting production goals.

What is Overall Equipment Effectiveness?

OEE is a formula-driven calculation that measures the amount of planned production time that is actually productive.

It uses the product of three essential calculations to measure the real production rate of a machine against the theoretical rate. Those calculations are availability, performance, and quality.

Based on the score and the values of these three calculations, managers can develop process improvement strategies, undergo continuous improvement initiatives, and identify bottlenecks and other barriers to higher efficiency.

How Do You Calculate OEE?

The high-level calculation of OEE is:

OEE = (Good Count x Ideal Cycle Time) / Planned Production Time

But the score is obtained by multiplying the value of the calculations for availability, performance, and quality:

Quality = Good Count / Total Count

Performance = (Ideal Cycle Time x Total Count Produced) / Run Time

Availability = Run Time / Planned Production Time

By breaking OEE into these three categories, teams can identify problems within each one to target improvement. For performance, the team may focus on minor stops and reduced speed. For quality, the target may be process defects and reduced yield. And for availability, the focus may be on equipment failure and setups.

OEE in Real World Manufacturing

All these formulas offer great insights. And when done correctly, they can yield insights that increase efficiency, productivity, ROI, and more. But it all comes down to where a company begins its journey and the data quality and analysis that drives the numbers.

The first step is a sober assessment of where they currently sit, but most manufacturers don’t have a firm grasp on where their OEE is. A world-class OEE score is 85%, and a score of 60% means there is room for improvement.

And for those just beginning to track OEE, 40% isn’t unusual.

But there is a disconnect in perception for most companies. When asked what their OEE is, many managers may assume it’s as much as 20-40% higher. Once tracking begins, they’re surprised at the low number. So, why the disconnect?

The answer lies in the quality of data and analysis. Because of traditional manual data collection, tracking, and analysis systems, calculations are prone to errors, bias, and omissions. They depend on team members to write down the data that drives the formulas.

But manual tracking and disparate siloed software systems make it difficult to get an accurate OEE score that leads to the correct action. This means reaching the world-class OEE of 85% may be out of reach.

A smart manufacturing platform changes this dramatically. Error, bias, and omission are eliminated by using at or near real-time data. The cloud-based platform can store and manage the volume of data required to deliver a complete and accurate picture of OEE.

Such a platform also uses advanced analytics and machine learning algorithms to analyze data at a speed and depth beyond human capability. This analysis delivers actionable insights and reveals trends that teams can use as a basis for change and process improvement.

A Rising Tide Lifts All Boats

A good question to ask is, “Why spend valuable investment dollars on equipment that is underutilized?” But a better question is, “Why spend those dollars and then bind your team’s performance and success to manual data inputs and analysis?”

The power of OEE is in its ability to show you where to look for process improvements, proactive maintenance strategies, and more. A smart manufacturing platform can be a fast, accurate, and data-driven solution that empowers your OEE to reach its true potential as a tool for your factory.

To see how one company boosted their operational efficiency by adopting the right smart manufacturing platform, click here for the success story.