OEE: The Heart of the Matter

Can you be a world-class manufacturing operation without a world-class focus on equipment reliability and performance? It hardly seems so, given the wealth of risks that accompanies poor or missed maintenance. The consequences can range from production losses and customer losses to horrendous safety or environmental mishaps. Not to mention missed opportunities.

And, quite frankly, manufacturers have no margin for error these days. A global economy seemingly in a freefall, worldwide competition for every potential new customer and utter uncertainty about the future make it more imperative than ever that manufacturers make the most of their physical assets (and human, as well).

Many manufacturers are doing just that when it comes to maintenance. Over the past five years, for example, more than three-quarters of IndustryWeek's Best Plants winners and finalists report their machine operators perform routine and preventive maintenance on their equipment. More proactive still are predictive techniques, such as vibration analysis, which seek to prevent unscheduled machinery downtime by collecting and analyzing data on equipment conditions. The analysis is then used to predict time-to-failure, plan maintenance and restore machinery to good operating condition.

At Baldor Electric Co. in Weaverville, N.C. (a 2008 IW Best Plants winner), a maintenance excellence program introduced in 2001 began with an assessment of the plant's current state. As a result of that initial assessment, the facility, which produces mechanical power transmission components, made changes that included a new computerized maintenance management system, technical skills enhancement and the use of predictive tools. And at Harley-Davidson Motor Co., extensive maintenance and reliability activities include a best practices circle for the company's maintenance leaders. The circles hold in-person meetings -- at least that's preferred -- that encourage the sharing of maintenance best practices across the company.

And total productive maintenance (TPM) remains an important practice for many IW Best Plants winners and finalists over the past five years. Indeed, more than 90% report practicing TPM, a comprehensive program to maximize equipment effectiveness. The aim is to involve the entire company in the effort. Similar to the concept of lean, goals of TPM are to eliminate waste, reduce defects, maximize productivity and engage the workforce. Teams are an important component.

A Measure of Focus

Data drives decisions, which begs the question: What performance metrics aid in the effort to improve equipment performance? Overall equipment effectiveness (OEE) frequently earns a mention, given that it is a key measure to gauge the benefits of a TPM program. OEE tells users the percentage of time that equipment, when running or required for production, is producing good-quality products at an acceptable rate. It is the product of three ratios, or submetrics: machine availability rate, performance or run rate, and the quality rate. It is calculated by multiplying availability rate by production rate by first-pass quality rate. In addition to providing an overall measure of productivity, OEE provides insights into where losses are occurring via the three submetrics.

"OEE is a good beginning, and many organizations can use it to help themselves," says Ryan Hale, lead consultant with Stroud Consulting, "but it's only part of the equation. As with anything, it can be applied well or not applied well. The critical thing people have to focus on is how to actually use OEE to drive change in an organization in an effective manner."

Adds Nathaniel Greene, managing director at Stroud Consulting, "OEE can get people focused on results in a way that helps them look at key components of opportunity in a balanced way. And that's the caveat -- that they use it effectively, because it's very easy to undermine."

OEE Measured at Work Cell and Plant Level

Among the companies that use OEE is Rieter Automotive North America, which manufactures automotive carpeting. Indeed, the OEE report has become a driver of continuous improvement activities, explains Melvin Stojakovich, Jr., manager of continuous improvement at the company's Bloomsburg, Pa., manufacturing plant, a 2006 IndustryWeek Best Plants winner.

At Rieter, OEE is calculated at the plant level for each work cell, and is also rolled up into an overall plant OEE. (At the Bloomsburg plant, the OEE measure is collected electronically.) While the overall OEE gives plant leadership an idea about how the plant is doing, the improvements come at the work-cell level, Stojakovich explains. That conversation generally includes the plant manager and front-line supervisors as well as interactions with the associates, he says.

At Rieter Automotive's facility in London, Ontario, Canada (another former IW Best Plants winner), measuring OEE has increased employee awareness of first-time quality.

Vlad Bacalu, product manager at Advanced Technology Services, a maintenance outsourcing firm, suggests that manufacturers should not consider OEE a metric to be driven solely by the maintenance personnel, but instead should be a joint effort between maintenance and production.

Hale takes it a step further, saying it's the leadership team that should drive OEE. "It can't be the maintenance team against the world because the operations group, the sales group and everybody in the organization can take action that will drive OEE in the right way or the wrong way." That said, Hale notes that many leadership teams using OEE overlook improvements in rate and quality to focus on downtime reduction.

Nordson Corp.'s Dawsonville, Ga., plant introduced OEE to the plant's nozzle cell in the late spring of 2008. The cell comprises one work center consisting of four machines, all of which run similar product. At the end of each shift, each machine operator fills out an Excel spreadsheet with a variety of metrics that feed the OEE calculation. Nozzle cell team leader Eric Story says the OEE provides him with a quick snapshot of how the cell is performing, and he's been pleased with its use thus far. He reviews the OEE numbers each day. "If there is some issue I see, I can dig into it," he notes.

Story says he has amended the OEE calculation to address what is important to his business situation. And Stroud's Greene says it's OK to adjust the metric "to suit the behavior," noting that "a lot of people have approached OEE as some religious tenet that you cannot alter. The important thing is to approach it as a helpful tool that you can adapt to your business situation."

Hale points out that financial visibility also has to play a part in the decisions made in response to the OEE calculation. For example, one method to improve the overall OEE measure is to increase the run or production rate, one of the three component metrics of OEE, at which equipment is operating. However, if as a result, "you just fill up your warehouse with WIP or inventory to make your OEE look good, that's not a smart business decision," he says. "It comes down to 'don't use OEE in a vacuum.'"

"At the end of the day, the goal is not to have a high OEE number. The goal is to have the most profitable and successful business you can have for all of your stakeholders," notes Stroud Consulting's Greene.


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