If you're reading this, you've probably heard that Overall Equipment Effectiveness calculations, or OEE calculations for short, are all the rage in measuring your equipment performance and production. But how useful are those calculations really?

Just like your buddies at the gym, many decision-makers in the industry choose to put a number on their performance. And if you've been at the gym, you know that you can never trust the number a lifter tells you he can lift.

Your assets aren't any different. Measuring production and potential performance is all fine and dandy, but you want to understand the use cases for the OEE formula to know the wheels are actually turning. Otherwise, it'll be all sweat and no muscle.

So let's discuss how you calculate your equipment's OEE performance, look at examples and see where the equation helps you improve quality standards, and where you might want to use another tool instead.

Put your equipment to the ultimate strength test

When we think of manufacturing or industrial settings, we often imagine workers at the production line being trained to handle technical equipment.

In the first few weeks of onboarding, the shift supervisor visits the rookie every now and then. Think of him as a trainer benchmarking the new guy's reps and weights against the routine handles of his veteran team.

Now, we puny humans may celebrate a round of pushups. But if you consider the workload we put on industrial machines, it's no wonder we apply the same logic to test their effectiveness over time. And the most common performance metric used in manufacturing and industrial settings is the OEE calculation.

The factors going into an OEE calculation

Since we're benchmarking machines, we can be a bit more rigid with our parameters than with the human co-worker – at least until the robot revolution. OEE considers three main factors to calculate an asset's performance:

1. Availability: No piece of equipment runs 24/7. So this factors in planned downtime, either because of scheduled maintenance or the potential availability loss due to breakdowns and changeovers.
2. Performance: Since we can compare assets and parts more easily than humans, we consider their expected maximum potential. Don't think of hidden potential; this is your net run time. We're talking actual production time, cycle times, speed loss and outages.
3. Quality: Just because a machine is running non-stop, that doesn't help your overall equipment effectiveness. After all, you could be throwing out every other product. So as a final step, we measure the quality loss in output, considering defects, quality rate or rework.

Think of yourself as the general manager in Moneyball trying to assemble a winning team, except you're assembling a smart factory. Still, you're boiling down otherwise complex decision-making to one number, striving for total productive maintenance – a world without downtime, outages or reworks.

You're doing this to max out equipment performance and effectiveness, to identify otherwise unnoticed quality loss and to continuously improve your manufacturing performance. It also helps you to cut costs and benchmark your OEE value against stronger competitors.

Potential disadvantages of relying on OEE calculations

That said, reducing complicated business decisions to the OEE metric alone can have its disadvantages. Its simplicity is both a curse and a blessing.

It shows you gaps in equipment performance, but it doesn't provide you with the underlying reasons, for instance, if a worker lacks the training to operate it. Also, it treats your production shop as a vacuum. No supply chain disruption, scheduling issue or customer complaint is factored into that equation.

So it's certainly useful for evaluating productivity, but it's worth noting that you shouldn't rely on OEE alone to judge your machinery's performance. Let's take a look at an example to see where it might provide value.

The OEE calculation = availability x performance x quality

Usually, you multiply all factors to receive a percentage value for your OEE calculation. Now, don't sweat it. We'll coach you through this.

Let's say you've lost an hour of run time on a machine that keeps overheating. Until now, your machine runs 16 hours a day and produces 5,000 units an hour, 15 of which need to be redone. You've reserved 2 hours for maintenance so far, but you plan to increase that by 30 minutes.

To see how exactly your plan works out, you only need to plug the numbers into the formula:

Availability: 15 hours - 2.5 hours / 15 hours = 83.33%
Performance: 5,000 units/hour = 100%
Quality: 4,985 good units/hour / 5,000 units/hour = 99.7%
OEE = 83.01%

While this is a strongly simplified example, you can see how it aids you in making informed decisions. Based on this formula, you'll be able to judge whether increasing maintenance time is more helpful than reducing the overall output of units — even slight increases in rework could affect your bottom line.

Depending on your niche, you may need to calculate work output differently. For some industries, product quantity is the way to go. Others rely on service completion, work hours or even generated value.

Remember that this is just one arrow in your quiver. While it helps to adjust the formula to your specific needs, endlessly adjusting it to reflect all details of your real-world scenario misses its purpose.

How to improve asset performance with your results

While an OEE calculation can help you make judgment calls and fine-tune your planned production time, it doesn't factor in a range of real-world factors, from vendor delays and power outages to shift changes and product mix variations.

So tracking your OEE is certainly valuable, but, just like at the gym, you don't want to track numbers solely for the sake of it. Even though raising scores has something satisfying about it, a too-narrow focus can actually hurt your business. And you want your business to be jacked, don't you?

Thankfully, there are more comprehensive solutions to help you manage your assets and keep track of equipment life cycles, like our enterprise asset management (EAM) platform. Start your free trial today!

We can show you how it works and how you can use it to level up, not just on your OEE score but on overall productivity and efficiency as well.

Book a demo with one of our MicroMain experts today, and we'll help you crunch the numbers!