Could you say that below a certain percentage it is better to close the doors of the factory?
No, of course not! Or well, maybe that’s true. Seriously: there is no such thing as ‘an OEE number’, because it could be defined in a thousand different ways. It is generally suggested that a value below 65% should be considered unacceptable. A value between 65 and 75% is considered as regular, between 75 and 85% means acceptable, between 85 and 95 percent is good and a value of above 95% is excellent. But…
Don’t try this at home
First, I will give you an example of how it should not be done. Let’s say, your goal is an OEE of 85%. We change some of the definitions, we lower the maximum speed, exclude some waiting times like breaks and maintenance, stretch the specifications of good product etc. STOP! Of course, it doesn’t work that way. But there are managers (and consultants) out there who earn money in this way.
What is “good”?
Let’s assume we are going to use the OEE industry Standard for all machines. Now, what is a ‘good OEE’ for a machine that continuously runs just one bulk product? And what OEE is ‘good’ for a machine that runs 60 different products a day?
First of all, it makes no sense to focus on the number as such. This is a typical western style of thinking that many managers suffer from. It is a lack of profound systemic knowledge. Instead of looking at a number, you should understand what is really going on.
An example. Let’s take the machine that runs one product all day, feeding a line. Is 95% OK? Not if the downstream equipment would only process the volume of 65%. Would 65% be a good OEE? No, not necessarily! Why not? If the machine jumps back and forth between 45% and 95%, with an average of 65% OEE, it would still cause many problems! Ok, now we have a stable OEE of 65%. Is it now OK? No, not if it runs at a quality rate of 90% (or any other number that is not (near) 100%! What if it is stable at 65% with a quality-rate of 100%? What if we need to make huge and expensive efforts to get this done? Maybe now your costs are so high you are losing money now!
What questions should you ask?
- Is there an OEE level at which the machine runs stable and reliable?
For example, can we run continuously between 40 and 44%? I have rarely seen such machine! It would be an indicator for a process that is – or can be – in control.
- Is there a range of OEE in which we can run a stable OEE?
For example, could we run any desired OEE between 20 and 50% on demand for days? Ever seen that?!
What OEE is desired to fulfil demand, and are we able to run such an OEE on this equipment? Are we able to run the machine without rejects? Are we able to run the machine without any unexpected interruptions? Are we able to swap between one product and the other, the following demand flawlessly? Stop focusing on the height of the number, start focusing on those components that may be indicators for an understood and controlled process. As a result, the number will go up and costs will go down.
Now, this is the reason you may have a need for OEE software that allows you to make exactly such analyses.
How high are OEE numbers normally?
Most machines will not exceed 35 to 45% of OEE (assuming OEE Industry Standard definitions being applied). In some branches, the typical machine runs far less, while in others it can be higher. Some particular types of machines tend to have higher OEE’s by nature and the stage of development of the equipment. After some years of TPM implementations and applying lean principles to prevent the loss of flow, equipment may grow in the 60’s or even 70’s which (as a number) is quite good. But once more: only when at this rate you are fulfilling the demand of the customer! Filling warehouses very effectively mean creating a loss effectively…
What about the economic losses?
Does it mean that the average machine – that is running 35-45% OEE – is running economic losses? Most of them earn quite some money. The conversion cost is not just a small part of the total cost. This explains why such low OEE’s are commonly accepted. The real economic loss is not in the height of the OEE, it is in the lack of flexibility and reliability of it. What would it mean to the cost of the supply chain if every step would respond and follow the demand? Just imagine the economic consequences…