World-class OEE is a myth, 85% was a number pulled out of the sky. The overall OEE number will be different for every manufacturer and different machines will have different OEEs on the floor.
We talked about OEE being a flawed metric, but let’s take an even deeper dive into the world of OEE, specifically the notion of world-class OEE.
What is Considered World-Class OEE?
World-class OEE of 85% is considered a benchmark, “best practice”. Yet, this “world-class” number was seemingly pulled out of nowhere hence why world-class OEE is a myth. Achieving this number is considered the peak of success, but what happens when that world-class metric is nothing more than an arbitrary number hiding inconsistencies, flaws, and areas for improvement? How world-class OEE is evaluated is misunderstood and can mean very different things.
The “World-Class OEE” term is credited to Seiichi Nakajima, author of “Introduction to TPM: Total Productive Maintenance”. In that book, he explains how to implement TPM and OEE, and since 1984 when the term was coined, manufacturers across the globe have clung to the world-class OEE benchmark as a guiding principle. While, it is good to have guiding metrics, basing your company’s success off one, flawed metric can be detrimental.
Even 100% OEE Can Be a Bad Thing for Manufacturers
It’s no surprise that a lot of our blog content comes from talking with customers, prospects, and other people in the manufacturing industry. We recently 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 he said this was interesting because it goes against conventional thinking. Most people only dream of accomplishing world-class OEE, let alone succeeding in accomplishing 100%, but this executive wanted nothing to do with this pipe dream. 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 a 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 flexibility, focus on Quality and Availability,” he said.
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. These efforts shouldn’t be focused on achieving an arbitrary number.
Cost of Quality
Another aspect to consider is the cost of quality, closely aligned with the overall cost of OEE in manufacturing. There are situations where it is not possible or not cost-effective to reach 100% quality. By quality, I mean ensuring every part produced is perfect and shippable. I’m not suggesting you ship defective parts, that would be detrimental to your customer’s happiness.
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.
OEE is Arbitrary
Each company must find the OEE number that works for them and not rely on a flawed metric or a pre-determined “world-class” number. OEE should only be used to measure a single cell or machine and not applied across the factory because it can largely differ from line to line or machine to machine.
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 the 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.
World-Class OEE, Unsurprisingly, Falls Short in Determining “World-Class”
There is one fundamental problem with using OEE across your company – whether that be products, machines, lines, or departments – unless all of the conditions are the exact same, the numbers cannot be used for comparison, as we touched on in the paragraph above. The odds of every single line producing the same product under the same conditions are extremely small. Different factors contribute to different numbers. So, then why use world-class OEE as a universal benchmark?
Considering that OEE is different for the reason mentioned above, it is also different for each company, industry, and country. For a metric that was established in Japan in the automotive industry, it could have different weights in a plastics manufacturer in Canada.
You’re probably now wondering, yeah, I get what you’re saying, but do you have examples to back it up? Yes, yes we do.
If your performance is 100%, availability is 100%, but the quality of the product produced is 85%, are you considered world-class? What if you are not capacity constrained and don’t have to produce every minute of every day so technically, your plant is down, are you not world-class?
What if you’re running at 85% availability yet never doing never preventive maintenance on the machines to get to that “world-class” metric of 85%, are you considered world-class then?
As you can see, world-class OEE is really problematic. Manufacturers are led to believe 85% is the ultimate goal, regardless of the reason why. It compels companies to further manipulate OEE to reach that holy grail of a metric (think of world-class OEE as the leprechaun of manufacturing – it doesn’t really exist) without really trying to solve problems and improve the process.
We could go on and on with examples but for the sake of time, we’ll end there and assume you get the point that world-class OEE is a myth. The whole idea is that manufacturers need to go beyond OEE and measure the right metrics for their particular goals. Then, set the right targets based on those goals.
How Can a Manufacturer Use OEE Effectively?
Don’t look at OEE as the end number. Look at it as a way to improve individual metrics that contribute to the final result. When you’re focusing on OEE as the end number, you’re only focusing on what is working, and not what can be improved, a potentially costly mistake. While something is working in the present, it doesn’t mean that it can’t be improved to become even better.
And, try not to put too much emphasis on wanting to measure OEE across the plant. Remember, too much data can be just as, or even more overwhelming than collecting no data at all. When in doubt, think about YAGNI – You Aren’t Going to Need It.
OEE is a broad concept. Experts agree that it’s truly a flawed metric at its core. We’ve said this time and time again, without context and understanding, OEE is pointless, but the same argument can be applied to virtually any metric, too.