OEE Value: How to Calculate the Financial Impact of OEE

Overall Equipment Effectiveness (OEE) is by far one of the well-known manufacturing metrics. When displayed in economic terms, the OEE manufacturing metric can be utilized to describe the potential monetary impact of production optimization, interpreting downtime and sustain investments that will improve efficiency in your facility.

What Exactly is OEE?

OEE is calculated by integrating three various production metrics: 

• Availability, or how effectively the plant’s machines are being utilized. An availability score of 100% points out that none of the machines stopped at all during assigned production hours.
• Performance, or how speedily production occurs. A performance score of 100% specifies that a facility’s machines are operating at maximum cycle time efficiency as well as the speed at all times while they are in operation.
• Quality calculates the total numbers of products passing quality tests compared to total products made. A quality score of 100% specifies that every product the facility makes encounters or measures quality control norms and can safely be delivered to distributors.

So, assume you had no downtime ever (100% availability), products being made at a fast speed as per the manufacturing design (100% performance) and no product rejects (100% quality). So you would then have: 100% x 100% x 100% = 100% OEE.

Increasing Your OEE Value 

Once you understand how valuable OEE increases can be, the next step is to enhance your operations and make those uncertain gains a reality.

An OEE of 85% is observed world-class; most resources will face difficulty to gain this benchmark and vanishingly few will ever excel in it. Setting a rational OEE KPI goal relies on that knowledge is crucial to realizing success. The improvement can be achieved with the right set of tools.

A real-time manufacturing analytics platform is one of the most essential tools among these tools. This technology realizes manufacturers’ real-time OEE along with other production data to handle decision-making and enhance reactivity to impulsive events on the factory floor. The information this technology gives can help you:

• Minimize machine downtime with strategies such as preventive and predictive maintenance routines.
• Assure production cycles stay within standard time parameters.
• Track reject products and scrap to recognize and solve early-stage quality control problems.

These changes can tremendously improve your OEE score and can be performed in surprisingly less time – many services experience a huge difference in productivity in as little as a few weeks.

Quick Cost Arithmetic

Basic math calculation is sufficient for calculating these costs:

• Downtime cost is calculated as hours of downtime multiplied by the hourly cost of downtime (employee time, fixed machine costs, for instance).
• Production slowness cost is given by the extra time required to operate a machine or line to make up a production shortage, multiplied by the hourly cost of operating that specific machine or line.
• Product Reject cost is the total number of rejected products multiplied by the cost of an individual product (the impact of rework is not considered).

Now, add on the figures that apply to your facility. It should be simple to see the relative influence of each of the parameters mentioned above and priorities for improvement. For instance, assume you have a high machine or line operating costs and a huge gap between design-optimal manufacturing speed as well as in actual speed. In this scenario, manufacturing performance improvement could be your top priority for improving OEE.

Advanced Planning, as well as Scheduling (APS), supports planners and managers to save time while providing significant agility in updating ever-changing priorities, production schedules as well as inventory plans. A higher OEE score is your facility’s way towards higher profits. Our real-time Remote Factory Monitoring Solution connects all of your facility’s equipment to a central cloud-based software solution. Both workers, as well as management, can utilize it to access factory production and efficiency data from anywhere at any time.

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