Formula of OEE

What is the formula of OEE calculation ?

OEE, or Overall Equipment Effectiveness, is a brilliant invention that, in a single number, tells you how much waste there is on your shop floor. It is the ratio of what you produced to what you could have produced – the actual output to the theoretical possible output. It tells you how efficiently you are using your equipment and your investment. There is a simple formula of OEE.

What is OEE. OEE calculation formula.

OEE = Availability x Performance x Quality

The components A, P and Q in the formula of OEE can be summed up representing:
1. How much time did the machine run ?
2. How efficiently did it run while it was running ?
3. How many good parts did it produce while it was running ?

Availability: Is the machine operating or not? The ratio of the time that the machine was running, to the time that it could have actually run. The difference is because of idle time caused by breakdowns, setup, shift-change, etc.

Performance: How fast is the machine running? The ratio of the number of parts produced to the number of parts that theoretically could have been produced in the time that the machine was running. The difference could be because of inspection, insert changes, tool breakage, etc. between the start and end of a cycle. On a CNC machine, the difference could be due to using the feed rate or spindle speed override.

Quality: How many good parts were made? The ratio of the number of parts that pass quality inspection to the total number of parts made. The difference is the number of parts rejected. OEE allows you to measure and reduce waste (of available time, machine capacity, raw material) on the shop floor. It is a single number that you can communicate to, and is understood by, everybody from the machine operator to the President. It can be tracked month-on-month, improved upon.

Type of lossMeaningExamples
Not scheduled for productionTime when the machine is not planned to runNon-working shifts, holidays, lunch breaks, tea breaks
Failure, Idle timeTime when the machine is planned to run, but is not running. This includes all events that stop production long enough where it makes sense to track a reason for the downtime (typically several minutes).Setup, machine breakdown, inspection, accident, no raw material, power shutdown, part unloading and loading.
Minor stops, Speed lossMachine running at lower than normal production rate, and downtimes of duration so small that it does not make sense to track the reason for the downtime.Part unload/load time that is longer than the standard unload/load time, cycle times that are longer than the standard cycle time, rework.
ScrapNumber of rejected parts.Rejection quantity

A = 100 x (Running time / Available time)

P = 100 x (Real production / Theoretical production)

If you are running a single part,
P = No of parts produced / No. of parts that could have been produced
P = (No. of parts produced x Std. cycle time of part) / Running time

If you are running multiple parts,
P = Σ(No. of parts produced x Std. cycle time of part) / Running time

Q = 100 x (No. of OK parts produced / Total parts produced)

OEE: A x P x Q

A shop works 24 hours in 3 shifts of 8 hours each.
There is a break of 30 minutes in each shift (total 1.5 hrs. in a day).

The std. cycle time of the part being produced is 29 minutes. The std. load-unload time is 1 minute – time to unload a finished part and load the next part. Each part therefore takes 30 minutes.
There is a downtime of 4 hours. The downtime is due to a machine breakdown, waiting for raw material and a power shutdown.
35 pieces are made.
1 piece is rejected.

Available time = 22.5 hrs. (24 – 1.5 hrs. breaks)
Running time = 18.5 hrs. (22.5 – 4 hrs downtime)
Availability = 100 x (18.5 / 22.5) = 82.2 %

Theoretical production = 37 pieces (18.5 / 0.5). Running time is 18.5 hrs, and each part takes 30 minutes.
Real production = 35
Performance = 100 x (35 / 37) = 94.6 %

Real production = 35 pieces
Good products = 34 (35 – 1 rejection)
Quality = 34 / 35 = 97.1 %

OEE = 100 x (.822 x .946 x .971) = 75.4 %.

The ‘World class OEE’ trap in manufacturing

Does obsessing about ‘World class OEE’ make sense ? A big mistake a lot of organizations make is to fixate on OEE as an absolute value, and set a ‘Pass or Fail’ number, like in a school exam. They set an arbitrary number and strive desperately to achieve this number manipulating the formula of OEE. The striving desperately will of course involve cooking up numbers to suit the target. Once they achieve the target OEE number, they think their job is done, and sit back and relax.

What is world class OEE ? Should you obsess over it ?

World Class OEE is generally accepted to be 85 %. The roots of this number are in mass production, in the automotive industry. To achieve this, in the formula of OEE you would need these numbers for Availability, Performance and Quality:
A = 90 % (10 % downtime between cycles)
P = 95 % (5 % downtime within cycles)
Q = 99 % (1 % part rejection)

If yours is not a mass production industry, it is going to be very difficult to achieve this number. In mass production the process is set, tooling is fine tuned to a single part, there is no downtime for setup change, and various other downtimes can be minimized by daily analysis and fine tuning of the process and equipment. In small batch production your production batch sizes are small, frequent setup changes add hugely to the downtime, and the process, tooling and machines are not fine tuned to any of the parts that you are making.

In small batch production, OEEs between 50 % and 60 % are typical. Within a single organization itself, multiple plants or cells could be doing different types of parts, some mass production and some small batch production. How then will you set a single OEE target for these widely different types of production ?

Don’t be obsessed with the absolute value of your OEE. Instead, use it as a measure of productivity that needs to be improved, month on month. It could be just 40 % now, but the point is to increase it steadily, by say 2 % every month. Set a target for periodic improvement, not an absolute value.

OEE is not a Pass or Fail number. It is a mirror that shows you how efficiently you are using your resources and investment. Just look in the mirror every day, and fix your productivity issues instead of fixing the formula of OEE.

Downtimes in the formula of OEE, and their meaning

This table shows downtimes that can occur between cycles on a machine, and within cycles.

Type of downtimeMeaningExamples
Planned idle timeIdle time that is part of a schedule that is made in advance.Non-working shift.
Lunch break.
Tea break.
Daily morning machine warmup.
Monday morning machine warmup.
Preventive maintenance.
Unscheduled Management lossIdle time that can occur randomly, and is not because of operator efficiency.Setup change.
First part checking.
No load.
Power shutdown.
Machine breakdown.
Process clarification.
Productive downtimeA downtime that is part of the production process itself. This is NOT considered idle time. Part unload-load time that is more than the std. unload-load time.Tool change on CNC machines.
Grinding wheel dressing every N parts.
DowntimeAny time between cycles that is MORE than the std. Load-unload time.Any downtime within cycles that is MORE than time set as ‘small stop loss’, for which there is no specific reason.
Any downtime between cycles for which there is no specific reason.
Rework is always considered as Downtime.

Special considerations in formula of OEE

Time spent on rework is always considered as downtime. This is because when a part is reworked, it has already been produced and you have taken than time into account. The rework is not producing another part. Effectively, the part was rejected the first time that it was made. The rework is done to correct the rejection, not to produce another fresh part.

Load-unload time vs. Excess load-unload time
The total load-unload time comprises 2 parts.: std. load-unload time and excess load-unload time. E.g., if the std. load-unload time is 1 min, and the actual for a part is 5 min.,
– the std. load-unload time of 1 min. is taken as part of the cycle.
– the excess load-unload time of 4 min. is taken as downtime, with the reason ‘load-unload’.

Standard part unload-load time as downtime
Part load-unload can be done in two ways:
1. It is fully automatic, a part of the capability of the machine or an external device connected to it. E.g., CNC machining center with a pallet changer, machine with robot, machine on an automatic conveyor line.
2. Manually done.
In case 1, there is minimal scope for reducing the load-unload time.
In case 2, however, if you consider the std. load-unload time as a part of the cycle time, it never appears as downtime and gets hidden forever. You can choose to consider it as downtime, so keeps appearing and reminding you that it can be reduced sometime in the future. Reduced by better fixturing and faster clamping-unclamping, using a robot for loading-unloading, etc.

Formula of OEE for a collection of machines

Arithmetic average vs. Weighted average OEE
If there are multiple machines in an OEE report, you cannot just calculate the arithmetic average value. You need to calculate the weighted average. This example shows the difference between arithmetic average and weighted average formula of OEE, for a single day.

Formula of OEE for a collection of machines - arithmetic and weighted average.

To simplify the explanation, the Performance and Quality for both machines has been assumed to be 100 %. So OEE is equal to Availability.

Machine1 is only planned to work 1 hour in the day, while Machine2 is planned to work 24 hours.
Machine1 works for the full 1 hour, while Machine2 works only 6 hours out of the planned 24 hours.
Both machines put together have a planned time of 25 hours (24 + 1), but of this, Machine1 accounts for 96 % (24/25) of the planned time. The arithmetic average does not take this into account.

Arithmetic average
Machine1’s OEE is 100 %, and Machine2’s is 25 %.
An arithmetic average gives you 62.5 %: (100 + 25) / 2.

Actual OEE (weighted average)
Total utilized time = 7 hours.
Total planned hours = 25 hours.
Availability = 7 / 25 = 28 %.

The same logic applies to multiple time periods in a report. E.g., days, weeks, etc.


Biryani and Pulao – what’s the difference ?

The word Biryani is derived from the Persian word ‘Birian’. In Persian, Birian means ‘Fried before Cooking’. Meat (or vegetables) is fried in ghee and half-cooked. Separately, rice is fried in Ghee and half-cooked. The rice and meat are layered in a vessel called a Handi. You can see the layers in the vessel, and the different layers are visible and have a different taste when served.

Biryani – in the Handi and on the plate

Pulao is from the Persian word Pilaf. Rice is browned in oil, and separately, meat (or veg) is fried in Ghee and cooked with aromatic spices in water. The rice and this broth are mixed together and cooked. The pulao is a homogenous mixture when cooking, and looks and tastes homogeous when served.

Pulao – vegetarian and meat-based

The difference between biryani and pulao is in the LAYERS. Biryani has layers, while pulao does not. So Biryani is multi-dimensional and more interesting as you eat it.

I first learnt this about this difference about 10 years ago, in a restaurant in Bangalore called Biryani Merchant (no longer in existence, sadly). They served 3 different types of biryani on any given day (out of the 10-odd types in India). India has a large variety of Biryanis: Lucknow, Hyderabadi, Kashmiri, Ambur, Kolkata, Bohri, Calicut, Tahiri (this is a vegetarian biryani). There was a leaflet on each table educating you about biryani. The menu was fixed, and you paid a fixed amount, ate as much as you could.

Way back then, as a young lad of 45 I could put away vast quantities of food. Owners of ‘eat-all-you-can’ establishments used to shiver as I walked in, thinking of the damage I was about to do to their balance sheet.

About his blog from LEANworx: Plug-and-play Industry 4.0 system for MSMEs.

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