A lot of our blog content comes from talking with customers, prospects and other people in the manufacturing industry. Just before Thanksgiving I had a discussion with a long time manufacturing executive who has used Overall Equipment Effectiveness in a lot of process improvement projects. He said something interesting to me:
100% OEE would be a bad thing for our company.
The discussion around why was interesting. This company has a high product mix, meaning they make many different types of products with a lot of customization. They value flexibility over speed.
At 100% OEE you lose flexibility, if you are a company that has low mix, meaning you make a lot of the same parts, you want a high Quality and Availability number but a lower Performance number. The lower Performance number allows you the flexibility to produce more when needed.
If you need flexibly focus on Quality and Availability.
Manipulation of Availability
No other part of the Overall Equipment Effectiveness calculation gets manipulated more than Availability. Many companies will manipulate planned and unplanned downtime to achieve a high availability number and overall OEE. Companies do this to reach an industry accepted OEE, such as 85%. Rather, each company should pick a methodology that tracks the true availability of the machine. For example, should breaks be planned or unplanned downtime? Can the machine continue to run during the break? If so, it should be unplanned.
Cost of Quality
Another aspect to consider is the cost of Quality. There are situations where it is not possible or not cost effective to reach 100% Quality. Quality I mean ensuring every part produced is perfect and shippable. I’m not suggesting you ship defective parts. In products with high raw material costs and very long cycle times like titanium airplane parts, it makes to ensure 100% Quality. However, if you have low raw material costs a very short cycle times a lower quality number can make sense.
Each company must find the OEE number that works for them. OEE should only be used to measure a single cell or machine and not applied across the factory. Managers and executives must set reasonable OEE targets based on the desired outcome. If your outcome is to produce as many of the same product as possible, at a low cost with a low defect rate then shoot for a high OEE number. If you need flexibility to fit rush orders into your schedule or you have a high mix with a lot of customization determine the OEE number that works best to serve those needs.