The concept of Overall Equipment Effectiveness (OEE) was created by Seiichi Nakajima, a Japanese manufacturing pioneer. In the 1970’s, Nakajima analyzed the automotive industry of Japan and defined 85% to be the OEE percentage that companies should strive for. As we know, the world is no longer in the 1970’s and consists of many more industries and countries than the automotive industry in Japan. However, due to the extensive knowledge Nakajima possessed and the numerous industries that have now followed his discipline, 85% is considered by many to be the ‘world-class OEE’ percentage. But is this true?
Because of this history, a lot of manufacturers set 85% to be their OEE goal. 85% can be considered your target, but it can be a long road of improving processes and implementing quality control systems to reach that number. That's because, in today’s world, 60% is the actual worldwide average OEE percentage among manufacturers. Your score for OEE, of course, will depend on your industry type, the number of years you've been in business improving your operations and your attention to other manufacturing metrics that are related to OEE.
Many manufacturers are disappointed to find that there OEE is around 40% when they first start to measure it. Scores even lower than 40% are very much observable in many industries too. There is good news if you find yourself in this situation!. The lower your score, the easier it is to have a (relatively) quick improvement. This is because a very low score can likely be attributed to bad manufacturing practices that are more easily recognizable and fixable. As your OEE score increases, the means of improving your OEE score can get more complex.
Before you start measuring your OEE, you must understand your manufacturing processes and each individual machine. An old and slow machine and a new and fast one should not be given the same OEE goal. They should be analyzed and weighted differently. A machine that produces multiple products a day, versus one that only runs one product line, may present different reliabilities, and this should be considered when calculating their ideal throughput, running time and performance.
Once you understand your process, and set ideal metrics and goals for each of your machines, you are off to an honest and reasonable start. It is important to analyze each machine individually and calculate what is their current OEE as well as how much variance and flexibility their OEE score can have. Can the OEE score go up when demand is higher, or does it become even worse? This will give you insight into your machine and its performance. Once you assess each machine and take actions to improve their efficiency and other KPI’s, OEE will naturally rise. It is worth saying that OEE is a metric that gives you insight into your overall plant’s efficiency, but it is not the ultimate goal and should not be treated as such.
Now you are ready to start calculating your OEE and benchmark yourself among other manufacturers who have already started tracking and improving their production efficiency by monitoring this important metric. Here are some interesting facts from different studies related to OEE around world manufacturers that will help you gain insight into the current situation of world industries and compare your production plant to others:
From an OEE Benchmark study consisting of 100 worldwide companies conducted by Epicor and Sage Clarity:
- Best-in-Class manufacturers (Top 25%) show an average OEE of 82.5%
- Average manufacturers (Mid 50%) show an average OEE of 66.4%
- Laggard manufacturers (Bottom 25%) show an average OEE of 31.2%
- Some manufacturers, considered the Best-of-the-Best, had OEEs up to 96.9%
- 0.5% of downtime causes were unknown to Best-in-Class manufacturers, compared to 15.7% for Laggard manufacturers.
- An average production line stops 20,000 times per year. The poorest performing operations exhibit 6x more minor stops per year than the best operations.
From an OEE study conducted by The Wall Street Journal:
- $56B is the annual cost for unplanned manufacturing downtime.
- 42% of unplanned downtime is caused by asset failure.
From a survey conducted by Packworld on the different types of industries and their respective measurements of OEE:
- 2 of 3 food processing operations measure OEE.
- Less than ½ of pharmaceutical manufacturers measure OEE.
From a study conducted by Sage Clarity on OEE losses:
- 3.2 hours is the average time lost to minor downtime per day
- .98 hours is the time spent in changeover per day
- 2.6 hours are lost daily to Equipment Failures
- Less than 1 hour is spent daily on Preventive Maintenance.
OEE and Equipment Availability are key metrics that should be used as performance indicators to assess the efficiency of your manufacturing plant. Calculation of OEE will vary on your machinery and type of industry, but as many industries worldwide realize the importance of this metric, it is crucial to start taking actions to improve it and improve the quality and productivity of your own operations.
Interested in benchmarking your own OEE and get on track to becoming a world class manufacturer? See a demo below!