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How high should the OEE be?
Q: I have been reading in different sources about the OEE measurement and I have not been able to find any concrete agreement about what the value for OEE should be. Could you please give me any references?
I have read that there is no common agreement but that it is generally suggested that bellow 65% should be considered unacceptable, since it represents a very low competitiveness and a great number of economic losses. A value between 65 and 75% is considered as regular, only acceptable if it is being improved. A value between 75 and 85 % means an acceptable level with slight economic losses and which can be easily improved to World Class levels. A value between 85 and 95 percent is considered as good and equals World Class values; it represents a high level of competitiveness. And finally, a value above 95% is considered as excellence; an excellent competitiveness and World Class values.
Arno Koch • There are many angles to approach this question. Let me try to elaborate a bit on it.
What number are we looking at?
First of all there is no such thing as ‘an OEE number’ that could be referenced to, simply because it could be defined in a thousand different ways.
Would you like to see an OEE of 85%? Well I’ll get it for you tomorrow on your machine! It is just a matter of changing some of the definitions; lower the maximum speed, exclude some waiting-times like breaks and maintenance, stretch the specifications of good product etc. Do not laugh! I have heard about consultants who earn money in this way.
What is the criterion for “good”?
So 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?
Let’s take the first machine, running just one product all day, feeding a line. Is 95% now OK? We’ll not if the downstream equipment would only process the volume of 65%.
Now would 65% be a good OEE? No, not necessarily! Why not?
If the machine jumps fort and back between 45% and 95%, with an average of 65% OEE, it still would cause a lot of 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%!
We’ll lets go on: Now it is stable at 65% with a quality-rate of 100%. Now OK? 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 with your beautiful machine!
So you see, it just does not makes sense to focus on the number as such. This is a typical western style of thinking that many managers suffer from. Deming repeatedly referred to this as the lack of profound systemic knowledge. In other words: Instead of looking at a number, one should understand really what is going on.
Some important questions with regard to the OEE number could be:
- Is there an OEE level we can run the machine stable and reliable? I.e. can we run continuously between 40 and 44%? I would call that already a hunch of ‘World Class’ since 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; I.e. could we run any desired OEE between 20 and 50% on demand for days. (Wow, ever seen that?)
- What OEE is desired to fulfill 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, following demand flawlessly?
To go short; instead of focusing on the height of the number, start to focus on those components that may be indicators for an understood- and controlled process. As a result, the number will go up, costs will go down, etc.
How high are OEE numbers normally?
In my experience, measuring over 2000 machines in all kind of branches and continents, most machines will not exceed 35 to 45% of OEE (assuming OEE Industry Standard definitions being applied). In some branches (like pharma) the typical machine runs far less, while in others (like –some- automotive) it can be higher. Some particular types of machines (like extrusion-machines) tend to have higher OEE’s by the 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 (again very generalized) may grow in the 60’s or even 70’s which (as a number…) is really good.
What about the economic losses?
Let’s take my statement about the average machine in the average factory running 35-45% OEE. Are they running economic losses? Most of them earn quite some money. Even worse: The conversion cost (if we may believe the controllers, which you should be very careful with) is mostly just a small part of the total cost. This explains why such low OEE’s are commonly accepted (otherwise they would not be there…)
The real economic loss is not in the height of the OEE, it is in the lack of flexibility and reliability of it. Think about 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….