KPIs & data
Lean manufacturing

OEE Calculation: Why It’s an Important KPI & How To Calculate It

How do you know if your operations, machines, and workers are performing at the optimal level? Key performance indicators (KPIs) are one way to measure performance over a specific time frame. This period may be a few weeks, a few months, or even years.

By understanding the KPIs behind your production processes, you know whether your operations meet desired capacity levels or if there may be issues impacting productivity. One particularly helpful KPI to consider calculating is overall equipment effectiveness (OEE), which can provide you with great insights into your machinery’s performance. Learn what you need to know below.

The Importance of OEE

To figure out the effectiveness and efficiency of your production line, you can measure overall equipment effectiveness (OEE). OEE measures equipment's current performance and compares it to its ideal performance. This key performance indicator reveals vital information about your equipment, giving insight into whether your equipment, workers, and systems meet operational and industry standards.

OEE also allows you to monitor and track progress so that you can eliminate waste within your manufacturing process and make your operations lean and efficient. Keep in mind that having an OEE score lower than 100% doesn't necessarily mean that your equipment fails to meet the established standards. This KPI is merely a benchmark that may indicate that your operations are still new and that there’s room for improvement.

How Is OEE Calculated?

When calculating OEE, you need equipment or systems productivity data over a specific period of time. There are two main formulas for calculating OEE, which take equipment availability (downtime), speed during operation, and how many quality parts the equipment produces into consideration. Below, we’ll explain how to calculate OEE using each one.

Simple OEE Formula

If you’re new to calculating OEE, or your production processes differ from traditional industry models, then the simple OEE formula could be a good way to determine your OEE score.

OEE performance = (Ideal cycle time x Total number of goods produced) / Run time

Let’s take a closer look at these variables:

  • Total count represents the total number of products made, including any defective pieces.
  • Ideal cycle time means the shortest amount of time to produce one piece (in theory).
  • Run time refers to the length of time that the equipment spends in operation.

So let's assume, for example, that your ideal cycle time for a workstation is three seconds to make a single product. You also know that the equipment makes 6,000 parts during a seven-hour shift. Those seven hours convert to 25,200 seconds. Here’s how this example looks when plugged into the simple OEE formula:

OEE = (3 seconds x 6,000 parts) / 25,200-second shift

OEE = .714

To convert the score to a percentage, multiply by 100. This gives an OEE score of 71.4% in this example.

Advanced OEE Formula 

The advanced OEE calculation provides you with a bit more in-depth information than the simple OEE calculation, as more factors and formulas are involved. The advanced OEE calculation is:

Advanced OEE = Availability x Performance x Quality 

Before you can find your advanced OEE, you need to determine the availability, quality, and performance of your equipment, which each have their own formula. Let’s take a closer look at these variables:

  • Availability refers to the timeframe that machinery runs.
  • Quality refers to the quality of products — and the number of defects.
  • Performance focuses on production process speed and how long equipment maintains that pace, which is the same formula for simple OEE.

Plug your data into the formulas below:

Availability = Run time, or how long production processes run / Planned production time, or the production schedule

Quality = Products without defects / Total number of parts produced, including defects

Performance = (Ideal cycle time x Total number of goods produced) / Run time

If you use the same numbers from the simple OEE example, you already have a performance score of 0.714, or 71.4%. So you only need to calculate the availability and quality.

With availability, you know that your total run time is 25,200 seconds, or the length of the seven-hour shift. However, workers experienced a brief one-hour breakdown, which converts to 3,600 seconds.

In this example, you need to change the run time by subtracting 3,600 from 25,200 for an actual run time of 21,600 seconds. The rest of the formula plugs in as follows:

Availability = 21,600 seconds / 25,200-second shift

Availability = .857, or 85.7%

Next, you want to calculate your quality rate. In our example, your production processes made a total of 6,000 products. Yet, only 5,300 of those were good quality.

Quality = 5,300 good quality products / 6,000 total products

Quality = .883, or 88.3%Now that you have the three components, you can finally calculate your advanced OEE score:

Advanced OEE = .857 x .883 x .714

Advanced OEE = .54, or 54%

Six Big Losses Impacting OEE

Always keep in mind that you use OEE calculations to determine whether your manufacturing operations meet industry production standards and company goals.

While having a high OEE score shows that your equipment is performing well and helping you meet production goals, you should perform these calculations periodically throughout the life cycle of your equipment. This helps you evaluate your manufacturing operations, so you can identify any possible issues that may need improvements.

Among these possible issues are the Six Big Losses, which can create waste and inefficiencies. Below, we’ll take a closer look at the Six Big Losses and how you can minimize them.

1) Breakdown Losses

Breakdown losses refer to equipment downtimes, when operations stop or machines go idle due to failures and malfunctions. A type of breakdown loss may involve structural damage to the equipment or the building that causes operations to halt for a period of time.

How To Minimize this Loss

  • Forecast possible shutdown scenarios and implement preventive measures.
  • Create a comprehensive preventive maintenance plan.

2) Set-up and Adjustment Losses

When installing new equipment, upgrading equipment, or performing changeovers that cause planned downtimes, these downtimes are considered set-up and adjustment losses. An example of this type of planned stop is when workers shut down a production line to roll out a new piece of equipment.

How To Minimize this Loss

  • Plan production batches to use equipment more efficiently.
  • Use Single-Minute Exchange of Die (SMED) to minimize planned stoppages.

3) Idling and Minor Stoppages

Minor stops and equipment idling may occur when there's a very minor issue that causes a very brief pause. This type of small stop may happen while recalibrating a machine during routine maintenance.

How To Minimize this Loss

  • Implement standardized processes.
  • Have workers fix simple issues in real time to avoid major breakdowns.

4) Startup Losses

Startup losses usually occur during a machine’s “warm up” period. These losses can also occur when a piece of equipment goes through a “learning” stage, until it consistently produces quality parts. You may experience startup losses with equipment when first obtaining special tooling for a specialized product.

How To Minimize this Loss

  • Anticipate startup losses so they have minimal impact on production lines.
  • Train the maintenance team so they become experienced with new equipment.

5) Reduced Speed Losses

Your equipment may begin to falter due to age or worn-out components. These issues cause reduced equipment speeds. Poor maintenance or misuse may also prevent equipment from reaching maximum speed.

How To Minimize this Loss

  • Train machine operators regarding how to maintain and repair equipment properly.
  • Replace worn and damaged equipment quickly.

6) Quality Defects

Products experience quality defects caused by malfunctioning tooling or equipment. Excessive wear and tear along with poor maintenance may lead to these problems.

How To Minimize this Loss

  • Replace old equipment in a timely fashion.
  • Train workers based on the standard operating procedures so they can spot problems quickly.

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