Column Lean Manufacturing Management

OEE Provides ROI to Management

Klaus M. Blache | March 19, 2018

When you try to justify any reliability/maintainability implementation, your management is always going to ask for some kind of return on investment (ROI).

If you know what 1% of OEE (Overall Equipment Effectiveness) or TEEP (Total Equipment Effective Performance) is worth and can explain how you plan to attain it, then you have a much better chance of receiving project approval.

What is it that you most need to accomplish? Is it implementing predictive maintenance, raising machine reliability, getting more operator involvement, eliminating downtime, increasing machine performance (to enable production at or near design capacity), improving bottleneck operations to increase overall production line throughput? Improving OEE can help you achieve all of those goals because it is designed to improve operation efficiency and effectiveness. This is accomplished by addressing the Six Big Losses in an ongoing quest to eliminate waste.

This table defines the losses that apply to the three factors used to determine OEE. Understanding and addressing these losses can play a major role in improving OEE and, ultimately, TEEP.

This table defines the losses that apply to the three factors used to determine OEE. Understanding and addressing these losses can play a major role in improving OEE and, ultimately, TEEP.

To calculate OEE, multiply availability x quality x performance. These three categories account for downtime losses (availability), defect losses (quality) and speed losses (performance). If you have no losses of any kind , then your OEE is 100%. Multiply OEE by utilization and the result is TEEP, which is simply the ratio of fully productive time to total time. If your OEE is 100% and utilization is 71.4% (running 5 of 7 days each week), your TEEP is 71.4%.

Let’s assume that you did this calculation and your actual TEEP is 50%. If your plant produces $20 million of product revenue each week (in 40 hr.), then each percentage of TEEP is worth $400,000. Similarly, each hour of uptime is worth $500,000, assuming there is product demand.

Establish an OEE baseline, if you’ve not done so already, then calculate your TEEP. Once you know where you stand, work on the Six Big Losses because they’ll put money on your company’s bottom line and give you concrete numbers to justify additional reliability improvements.

The nuts and bolts of OEE are discussed in the March 2018 “On the Floor” article. EP

Based in Knoxville, Klaus M. Blache is director of the Reliability & Maintainability Center at the Univ. of Tennessee, and a research professor in the College of Engineering. Contact him at kblache@utk.edu.

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