Archive | October 2015

OEE part 2: OEE calculations

OEE is an industrial standard metric used to track performance and find improvement opportunities (click here to read the OEE part 1 post for an introduction to OEE). OEE is basically a comparison between the Net Operation Time (ideal time needed to do a task) and the Real Operation Time (real time needed to do a task). In other words:


However, OEE is not normally calculated as NOT / ROT, but using the more familiar formula:

OEE = (Loading) x Availability x Throughput x Quality.

Here is a short description of each term:

  • (Loading): Scheduled Time (TST) / Calendar Time (TCT). Not always included in the OEE calculation. It is sometimes included as part of the availability component.
  • Availability: Running Time (RT) / Scheduled Time (TST)
  • Throughput: Total Parts / (Running Time (RT) * Cycle Time)
  • Quality: Good parts / Total Parts

OEE part2_1If we look at the formula carefully, we can see that OEE only depends on 3 terms:

  • Good parts: How many good parts have been produced
  • Available time: How long the equipment has been ready to use
  • Cycle time: The maximum possible manufacturing speed

This means that there are only 3 ways to increase equipment efficiency: a) Do more good parts in the same time, b) Use less time to do the same amount of good parts or c) Increase machine speed. The following picture shows why:

OEE2-1We still divide OEE in the 3 typical components (A x T x Q) because it helps analyze where we are having the most important problems. Let’s see those terms in detail.

The availability component shows effectiveness losses related with equipment downtime. This includes non productive time (e.g. weekends), unscheduled time (e.g. unassigned shifts), planned downtime (e.g. preventive maintenance, training, cleaning, change over and set-ups) and unplanned downtime (e.g. breakdowns)

OEE2-3The throughput component shows effectiveness losses related with low speed. This includes running at a lower-than-the-standard speed (e.g we need to run at low speed due to problems with one of the raw materials), short breakdowns (typically less than 5 minutes) and speed limitations due to regulations or machine specifications.

OEE2-4The quality component shows effectiveness losses related with defects. This includes irreparable bad parts and reprocessing time.

OEE2-5Does it make sense to use any type of aggregated OEE number? It depends. It is tempting to have a general number that shows how the site is performing, but in many cases an aggregated OEE loses the physical meaning of the metric and, consequently, it loses its primary function: be a metric that finds problems and drives action. In case you decide to use an aggregated OEE, please keep this in mind:

  • Never use standard averages with OEE. Use weighted averages based on time instead.
  • Always aggregate similar work centers. Never lose the physical meaning of OEE
  • Use OEE to show problems and find improvement actions, not to compare sites and make rankings

The aggregated OEE can be calculated this way:

OEE2-2OEE calculations may look complicated, but they are easy to master with some time and practice. We’ll see an example in the following post!

Lean principle #4: Improvement is a cycle

“The company is starting a global Lean manufacturing project”. It is easy to hear statements like that because many people believe that Lean is something that starts, moves on and finally ends. In other words, they think Lean is a project. This probably happens because the first contact with Lean for most people is at kaizen events that end up with a new Lean tool in place, but without any further explanation about why the tool is important and how it fits in the cultural and methodological transformation of the company. It is easy to assume that Lean is a set of fancy tools. Well, Lean is not a project or a set of tools. Yes, you will do projects and use tools as part of a Lean transformation (in fact you will do many projects and use many tools), but the point here is that:

  • Lean work is cyclic. It is a series of experiments based on Plan-Do-Check-Act. Lean is not a line, it is a circle.
  • Lean work never ends. There is a starting point but no end point. Once you are Lean, you are Lean forever.

Improvement is a cycle

It takes some time to assume the idea, but operational excellence is a journey without end. Please, don’t confuse “without end” with “without goal” because Lean goal is very clear: maximize customer value. And this goal is the main reason that makes Lean endless:

  • The definition of “value” changes over time. What is acceptable today may be unacceptable tomorrow. What is a delighter today may be just a satisfier tomorrow and a dissatisfier in the near future. Think in features like air conditioning in cars or internet access in mobile phones. The Kano model is one of the available theories to explain customer satisfaction and innovation (picture from “Kano Model, Wikipedia“)


  • Operation systems are not perfect and eliminating waste completely is probably impossible.
  • The environment is complex and difficult to model. That’s why trial and error is the most effective way to test solutions and find improvement actions. Trial and error, however, produce wrong results many times that must be analyzed and corrected

Lean transforms organizations to make them most value oriented and create a learning culture. Lean is a never-ending improvement cycle.

Lean principle #3: Product or problems


One of the biggest differences between Lean management and classical management is the way they define success. Classical management focuses on results. Its motto is “do whatever it takes to hit the numbers”. The only acceptable outcome from a process is the product or service it is supposed to provide. This is apparently ok (who likes failure?), but hides a great problem: if you only care about results, you will only get results. This is worse than you think. First, nobody will perform over the standard (if you want 1000 parts/ hour, why should I give you more?) and second, everybody will do anything possible to get the results, which includes cheating and hiding problems.

Lean manufacturing accepts 2 types of outcomes from the process: product or problems. “Product” has a more strict meaning than in classical management: it’s not only about the number, but also about how you get it. You must follow the standard and comply with Morale, Health, Quality, Delivery and Cost targets. Any deviation from any of them is a “problem” that must be understood and solved. “Problems” are not only accepted but welcome.

Lean vs Clasical management

Does this mean that Lean does not care about profit or results? Absolutely not. Lean is probably the most result-oriented management system ever designed. However, Lean practitioners know this: it is ok to sacrifice the short-term to protect the long-term. It is ok to spend time and money finding problems to be more competitive in the future. It is ok to stop production and put in place improvement solutions to be more effective tomorrow. Lean is, fundamentally, a learning system.