Equation for calculating OEE: Is there really a standard formula that all OEMs can use?

You've come here looking for an equation to calculate OEE, but is there really a standard formula that all OEMs can agree on with their customers? You see, as the overall team effectiveness is insinuated at every sales opportunity, OEMs know that customers have a certain number in mind that represents their required OEE.

The problem for OEMs is determining how their customers define that number. One company may perceive another company's accepted efficiency differently, as there are many ways to calculate: downtime related to changeovers, in-product and out-of-product, etc. There are also a variety of calculators to determine OEE.

From the point of view of the original equipment manufacturersThere is not yet an accepted industry standard for the OEE calculation.

Many sales managers in industrial companies claim that there are too many variables at play within each line for there to be a standard that can serve as an equation for calculating OEE. For them, the problem with standard calculators is that all the bits and pieces that make up the equation are totally out of their control.

Can an equation be used to calculate standard OEE?

At a granular level, OEE can be calculated as the product of three percentages: availability, rate performance and quality. All losses identified through the data collection process can and should be attributed to one of these three categories to systematically drive change at the appropriate level and magnitude.

• Availability describes the losses resulting from downtime, both planned and unplanned. Some of the most common types of availability losses are the result of maintenance and cleaning activities, line changes, equipment failures, starvation due to lack of upstream input materials, and blockages due to outages in downstream conversion work centres or handling processes.
• The rate performance describes the losses that result from operating the equipment at speeds below the target rate. Speed losses inherently occur during descent and acceleration around machine stops, or from machine configurations that differ from the target speed. The target rate is generally defined as the best demonstrated instantaneous rate that a SKU can run through the production system choke point. A machine can run different SKUs at different speeds, but there should only be one target rate for each SKU for that machine.
• Quality describes losses resulting from defects. These losses must take into account all waste and rework incurred during the identified interval for the given process. Sanitation defects, out-of-specification production, process damage and material misuse are some of the common examples of quality.

Experts in calculating productivity using OEE indicate that OEE's 100% is practically impossible. Even if all three factors were 95%, OEE would calculate slightly less than 86%. The global average OEE rate in manufacturing plants is approximately 60%, with 85% serving as a good to excellent benchmark.

In fact, today that 85% figure is considered a world-class figure. The equation for calculating OEE with that result would probably look like this: 90% availability x 95% throughput x 99.9% quality = 85% OEE.

Of course, actual expected performance and quality figures vary by model and application. For example, for a company that sells packaging machineryThese OEE figures will range from 75% to 89%. Availability is primarily under the control of the end user and is usually the most variable metric.

Knowing your limits as an OEM is important when it comes to promising an equation for calculating OEE. An OEM must know their equipment and accurately assess the likelihood of success given the unique characteristics of each application, so a company or customer that is unrealistic ends up being dangerous.

No one can afford a bad installation, and there are times when, given the conditions, it is better for an OEM to walk away than to take an order and then spend thousands of man-hours and money trying to meet an unrealistic performance guarantee.

That said, he feels that there is generally some level of negotiation with OEE expectations, but timing is everything. When chasing the order, there seems to be no wiggle room and so companies are looking for a number, but after the purchase order is placed, expectations relax a bit when other factors come into play such as plant conditions, operators, environment, materials, etc.

There are companies such as parts distributors that actually seek the impossible. To these types of customers, OEMs must respond with the caveat that what happens on the line before or after their machine is not included. She sees this as the critical part of the equation for OEMs to calculate OEE.

It is at this point in the process that OEMs should either reject parts distributors or avoid the project altogether. Obviously, it helps if you know that your solution is the best or only one that will work for that particular application.

It really helps if the OEM has experience with the product. The main thing they usually do every time they receive an OEE requirement is to have several people read it very carefully. Then they try to negotiate things they can't control and keep their fingers crossed that the parts supplier is realistic.

Several OEMs recommend reminding customers that a machine manufacturer cannot guarantee what an end user's employees will do once they receive the machine. The buyer's poorly trained employees can be a big problem, so those expectations should be negotiated as part of the terms and conditions prior to purchase.

Otherwise, it creates the opportunity for disagreements later on. Some OEMs require their customers' employees to have completed a training programme as a condition of warranty. High employee turnover creates opportunities for customers to change their expectations and not communicate them.

While there are OEMs who shy away from unrealistic expectations, others believe that such situations should be the exception rather than the rule. It is possible to find an equation for calculating OEE or other methods to support all companies in ways that meet their needs and support effective factory and plant acceptance testing, and to provide long-term satisfaction with their systems or products.

The vast majority of the time, OEMs can achieve this by focusing on the factors that make up OEE, where they can have the greatest effect. Indeed, they can confidently commit to high performance and quality figures. Also, availability factors such as changeover time and machine breakdown issues regularly need to be considered separately.

Since you are interested in knowing if there is an equation for calculating OEE, we invite you to learn about the reasons why so many industrial automation projects failas well as to subscribe to our Newslettera newsletter that will keep you up to date with the latest news and information on the recipe management software for food and beverage plants.