OEE: Overall Equipment (Service) Effectiveness

Mike Chambers chambers@abidian.com 843.536.0943 ASQ Section 1124 Presentation Copyright 2007- Abidian, Inc. All Rights Reserved

Weve learned about

Goals for Tonight

Learn about OEE and how to use it to improve our overall efficiency, throughput, and quality in a plant, office, or service environment Gain an understanding of the financial opportunities available Learn how to use OEE to 1) 2) 3) 4) Improve real-time efficiencies Ensure compliance to budget Evaluate capital expenditures Compare one operation to another
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Imagine a new car

Ideally
We want our systems to operate 100% of the time 100% at 100% of our best demonstrated speed producing 100% good quality product/services
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Reality is
Our systems are not ideal its unreasonable to expect to operate all the time at best ever speeds producing nothing but good product/services
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Soooo Why is OEE so important?

Companies make money by adding value to materials and services to make products customers want As most companies use machines, people, and production lines to add value to their products, its important they perform efficiently Overall Equipment/Service Effectiveness (OEE) is a metric used in Lean and Six Sigma to indicate how efficiently business systems are performing OEE promotes openness in information sharing and a no-blame approach in handling system-related issues.
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The Dollars: Overall Equipment Effectiveness (OEE)

Software simulations can help vividly illustrate the value of increasing the OEE components of Performance, Availability, and Yield In this example, improving OEE one (1) percentage point from 28.1% is worth $120,000 per year note this is about a $30M business and the profit per piece is only $10 Similarly, improving the current sigma value of 3.27 by 1 is worth over $1.1M per year!
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Overall Equipment Effectiveness (OEE)

OEE helps us to maximize 1. Performance speed and/or utilization 2. Availability uptime 3. Yield quality On a real-time and budgeting basis Allows us to compare processes across plants, divisions, offices, and companies
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Availability (Uptime)
Availability: A comparison of the potential operating time and the time in which the system is actually making products or providing services
Time Available (24/7/365)
AVAILABILITY
Availability Losses

(1) Breakdowns, minor stops, offline PMs, meetings, no sales (2) Changeovers & adjustments

Time Avail-Downtime Time Available

x 100%

Time Operating
Time running

For Example We operate Example: 7 hours during an 8 hour shift our Availability would be 7 divided by 8 or 87.5%
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Yield (Quality)

Yield: A comparison of the raw materials (or occurrences) put in to the process and the number of products/services that meet the customers specifications
Amount Produced/Served
(5) Quality defects in process, rework, callbacks, returns, (6) Start up and Transition losses YIELD
Actual output - Defects x 100% Actual input

YIELD

Good Material/ Services

Time running

Quality Losses

For Example: We input 100 parts of which 3 are bad at output our yield is 100 minus 3 divided by 100 or 97%
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Performance (Utilization or Speed)

Performance: A comparison of the speed/actual output with what the system could be consistently producing in the same timeframe
Utilization

PERFORMANCE

Time operating at maximum rate

Performance losses

(3) Idling, Breaks, Minor Stops

Actual Output x 100%

(4) Rate Losses (including ramp up)

Max output in time running

Speed

For Example: We produce 80 units versus a best ever of 100 our Performance would be 80 divided by 100 or 80%

or

Actual Speed x 100% Best Demonstrated Speed

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Overall Equipment/Service Effectiveness (OEE)

Time Available (24/7/365)

6 Big Losses
Availability
(1) Breakdowns, Minor Stops, Offline PMs, Meetings, No Sales (2) Set Ups, Changeovers & Adjustments
Time Avail-Downtime Time Available x 100%

Time Operating

Availability Losses

x Performance
Time Operating at mance Maximum Rate losses
Perfor(3) Idling, Breaks & Minor Stops
Actual Output x 100%

(4) Rate Losses (including ramp up)

Max Output in Time Running

Time Operating at Quality Maximum Rate Losses and Good Quality

(5) Quality defects in process, rework, callbacks, returns, (6) Start up and Transition losses

x Yield
Actual Output - Defects x 100% Actual Input

OEE for World Class Batch Manufacturers is 80+ %

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OEE: How its Calculated

OEE is the product of Three Components:
1. PERFORMANCE (Speed/Utilization) = Percentage of the output (# of parts or occurrences) that the process actually produced, while it was running or the actual speed vs. the best demonstrated speed for a given product, product family, service, or transaction

2. AVAILABILITY (Uptime) = Percentage of the total available time that the process/equipment was actually operating vs. 7/24/365

X
3. YIELD = Percentage of the total parts/services produced that were good

OEE = Performance x Availability x Yield

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OEE: How its Calculated (Cont.)

Lets look at an example:
We have a good plant. It averages 90% uptime on a 7/24 basis. Production for the last month was 12,500 pallets versus a best ever month of 14,000 pallets. Scrap ran about 1.5%.
OEE = Overall Equipment Effectiveness = Performance x Availability x Yield

What is our OEE?

= (12,500/14,000) x (0.90) x (.985) = (0.893)(0.90)(.985) = 0.792

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OEE: How its Calculated (Cont.)

Lets look at an example:
We have This is a good plant, yet the OEE90% uptime on a a good plant. It averages calculation gives us insight that even 7/24 basis. Production for the last month was 12,500 better results might be achieved by attacking performance and availability 14,000 pallets versus a best ever month of issues pallets. Scrap ran about 1.5%.
OEE = Overall Equipment Effectiveness = Performance x Availability x Yield

What is our OEE?

= (12,500/14,000) x (0.90) x (.985) = (0.893)(0.90)(.985) = 0.792

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OEE: How its Calculated (Cont.)

Lets look at service/transactional example:
An Accounts Payable Department for a Fortune 100 company operates 2 8-hour shifts Monday through Friday. For a given month they processed 256,126 invoices versus a best ever of 278,309. During the 28-day month they had 12,004 invoices paid after the due date, 58,732 paid 5 or more business days before the due date, and 38 that were missed/paid incorrectly.

OEE

What is the OEE?

= Overall Equip (Service) Effectiveness = Performance x Availability x Yield = (256,126/278,309) x ((16 x 5) / (24 x 7)) x (256,126 - 12,004 - 58,732 - 38) / 256,126 = (0.92)(0.48)(.72) = 0.318
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Overall Equipment Effectiveness (OEE)

The last example is consistent with most businesses having an opportunity to increase capacity and/or productivity by 25 to over 100%!!
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To compare OEE
For comparison purposes everyone should use 24/7/365 as the basis for their availability and best demonstrated (versus plan or design) performance (speeds/ utilization)
Counting unscheduled time will encourage creative ideas for reducing the time!

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Budgeted Production Efficiency (BPE)

Its not fair to a business thats is limited by sales to take a hit for not being able to run 24/7 for this reason a Budgeted Production Efficiency (BPE) should be calculated to compare the business to budgeted/planned production schedules, line speeds, etc.
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Capital Appropriations

Before expanding a business or adding a line, we should ensure weve maximized current production; i.e., performance, availability and yield!
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Realtime Production Effectiveness (RPE)

For comparison and trending purposes, OEE should be based on at least a weeks worth of data, and ideally, a month or more for realtime trending, calculate instead a Realtime Production Efficiency (RPE) using available performance, availability, and yield information
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Real-time Work Area Scoreboard

95.6 00:22:29 97.5 89.0 SPEED DOWNTIME YIELD EFFICIENCY
AVAILABILITY: Track in seconds to create a sense of urgency PERFORMANCE: Compare current operations against best ever

RPE: Realtime Prod Efficiency reset each shift/day

YIELD: Ideally weighed/counted ... Might have to estimate include everything!

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Improving OEE
We use OEE to monitor the condition of our equipment similar to the way a nurse takes your temperature to see whether youre health has improved The point of using OEE is to drive system improvement Some improvement will occur from awareness when you start to measure OEE Sustained improvement requires a dedicated approach
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Improving OEE
Your approach should incorporate quantitative expectations, milestones, and a firm schedule for improvement A proven, effective way of quickly improving OEE is through a kaizen improvement event the kaizen is also a great way to also increase worker/supervisor buy-in

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Summary
OEE helps maximize throughput efficiency It focuses on Performance, Availability, and Yield OEE should be based on data for at least a week, and ideally, a month to wipe out the effects of product mix Use Realtime Production Efficiency (RPE) to maximize realtime/current operations Before capital expansions, check your OEE! To account for circumstances beyond your control i.e., dont have enough sales to run 24/7 calculate a Budgeted Production Efficiency (BPE) to compare your business to budget/plan
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Questions Comments??
Thanks for your time and consideration!

Mike Chambers Abidian, Inc. Sr. Principal chambers@abidian.com 843.536.0943

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ABIDIAN: Business-Speak for Excellent Change

Abidian, a recognized leader in productivity improvement, provides hands-on training in Lean, Six Sigma, Maintenance Excellence, and Total Productive Maintenance/Manufacturing. Learn more about us at abidian.com.

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ABIDIAN: Business-Speak for Excellent Change

Over 6000 individuals from North America, Europe, and Asia have attended our workshops, presentations, and improvement events

Recognized Leadership in Productivity Improvement

Partners with ASQ 1124, Florence Darlington Technical College and the new Southeastern Institute of Manufacturing and Technology

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The Numbers
97% of the attendees at Abidian's workshops rated the knowledge of their workshop facilitator as excellent 94% of all workshop attendees rated the hands-on exercises and practicality of the illustrations provided as very good or better 100% of our attendees have given their kaizen improvement event or workshop an overall rating of very good or excellent Projected savings identified by our customers from our 2006 workshops, kaizens, and in-plant efforts ranged up to $20 million
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