How to measure production efficiency? Monika 2023-01-19

How to measure production efficiency?


One of the goals of every company is to systematically increase its income. The more money the company makes, the more it can develop, e.g. increase the competences of employees by sending them to training or invest in new and more advanced devices. The real challenge, however, is to achieve the goal.

In the case of manufacturing companies, one of the ways is to take action with the aim of increasing production efficiency. The question is how to achieve it. Among other things, by optimizing the work organization of employees and machines, by building the organizational culture and by improving communication and information flow in the company.

All of the above-mentioned elements are crucial, but it is equally important to skillfully measure progress in situations where it is possible. One of the production efficiency indicators is the OEE (Overall Equipment Effectiveness) factor. From the entry below you will learn what exactly it is and how the introduction of this factor will contribute to the development of your company.

OEE factor - calculation formula

One of the best tools used for measuring the effectiveness of production processes which include machines operation is the OEE factor, i.e. the indicator of the efficiency of their use. OEE is considered by many specialists to be a key indicator of production efficiency in plants.

OEE is calculated by multiplying three factors expressed as a percentage. The following factors are:

  • Availability (AV) – determines the extent to which the planned production time has been used;
  • Productivity (PF) – measures the speed of the process, which is used to determine whether the production is in accordance with the assumed time;
  • Quality (Q) – shows the ratio of the effective time spent on everyday tasks with the rejection of time of “poor quality” (e.g. waste and complaints).

The formula for calculating OEE is:

OEE = AV x PF x Q x 100%.

How to collect data to determine OEE?

You already know how to calculate the OEE factor. But how to collect the necessary data? The first solution consists in manually filling in the sheets, and then calculating the data, followed by drawing up appropriate charts. Unfortunately, with this approach you run a high risk of unreliability and it addition one or more people are required to do this regularly.

Data collection programs can come in handy. The employee’s role is limited to entering figures into the tool, which then processes the obtained information. This is definitely a better method than manually collecting data, however there still exists a risk of entering incorrect data. In some plants, situations occur where employees forget to regularly collect data or deliberately enter incorrect values with a view to improve the overall result.

The most reliable and accurate method of collecting data to calculate OEE is full automation. The IPLAS system is a perfect solution that is tailored to the individual needs of the company. With our solution, you can keep track of current values or use advanced analytical models, including historical data, limit values, and even enabling predictive analysis.

How to interpret OEE results?

The OEE (Overall Equipment Effectiveness) indicator, expressed as a percentage, represents the extent to which machines are being efficiently utilized in a company’s production process. Interpreting the obtained figures allows for a better understanding of the current performance and areas for improvement. Here’s a breakdown of what these percentages signify:

100% OEE: This exceptional result implies that the manufactured products are of the highest quality and produced at an incredibly rapid pace. Achieving this level of efficiency indicates near-perfect production processes and minimal waste.

85% OEE: Often referred to as “world-class,” this value is achieved by only a handful of the world’s top-performing manufacturing facilities. For many companies, attaining this level of efficiency serves as an ambitious long-term objective.

60% OEE: A percentage commonly observed among numerous enterprises, indicating that there is significant room for improvement across various factors affecting the product effectiveness index. Companies with this result should focus on enhancing their processes and addressing inefficiencies.

40% OEE: Typically seen in companies just beginning to monitor and enhance their performance, this low value suggests the need for immediate attention and improvement. By implementing basic measures, such as analyzing the causes of downtime in the production process, companies can substantially increase their OEE.

By understanding these OEE values and their implications, businesses can better assess their current performance, identify areas for improvement, and set realistic targets to optimize their production processes and overall efficiency.

What difficulties related to OEE can manufacturing companies encounter? 

The OEE indicator is a useful tool that can support optimization and improvement of production process efficiency. However, it comes with several issues that pose significant challenges for companies implementing OEE. What obstacles can manufacturing companies using OEE face?

Determining the performance indicator

One of the common problems associated with OEE is correctly defining the standard machine speed, which we want to measure the efficiency of. Below, we present two basic approaches to dealing with this challenge.

  • One approach is to set a goal that may initially seem unattainable. For example, you can assume a standard speed of 1000 units per hour, while the current maximum speed is only 550 units per hour. What does this assumption give? It allows maintaining a constant goal and a clear signal of how much more is needed to achieve it. However, it is important to remember that the parameter should not be modified. Unfortunately, many organizations abandon this approach because they focus more on a good result than on the trend and analysis of causes.
  • An alternative method is to revise goals in small steps and modify assumptions after reaching a certain level. This, however, leads to a problem – the results in the long term become incomparable.

One standard machine speed

Often, companies decide to define a single standard speed for a given machine, even though they produce products with varied technological characteristics on one line. This means that machine speeds can vary, e.g., between 300 and 600 units per hour. Although at first glance, this simplifies management, it prevents result analysis, and some of them exceed 100%. Then you should ask yourself – where is our goal since we have already exceeded 100%? Accepting such results or striving to achieve them is an unfavorable practice that makes it difficult for an organization to develop.

Relying on external benchmarks

To effectively use the tool, such as OEE, we must remember that each business is different and each production line may be different. Caution should be exercised when uncritically adopting both industry benchmarks and the World Class standard, according to which OEE should be at least 85%.

A much better approach is internal benchmarking, which can be divided into two categories. The first should take place between lines within one plant or a group of plants within one organization. It is important to take into account the product structure and the size of production batches, which can disrupt comparability. The second solution is the BoB, or Best-of-Best, method. It is based on identifying the organization’s achievements in the past. This allows analyzing actual results for a given production line over the last 52 weeks. During the analysis, focus on the efficiency of the best 10% of weeks – with limited data, you can analyze up to 20% of them – for each of the OEE components. Then determine the average for each OEE element, i.e., Availability, Performance, and Quality. The OEE calculated based on these results becomes a reference value.

Lack of implementation of Industry 4.0 solutions

Relying on subjective reporting by operators exposes the organization to high risk. Industry 4.0 offers companies many tools that enable efficient optimization of this area. As the Entra Group, we have been cooperating with technological partners for three years, who offer sensors that enable simple and non-invasive verification of machine efficiency. What benefits do such innovative solutions offer? We encourage you to watch the video in which, together with our Client, we talk more about how to improve production efficiency and how to use technology to monitor it.

How to perform an analysis of the reasons for losses and waste?

The obtained OEE ratio is an indicator of the current situation and the feasible goal that the company can strive for. Having determined the goal, you can perform an analysis of the reasons for losses and waste. In this way, the most important problems that affect the level of efficiency of the production process will be identified. Below, you will find analytics tools that facilitate the analysis:


Waterfall Analysis: This analytical tool helps in visualizing and identifying the incremental impact of various factors on a given performance metric. It breaks down the differences between an initial and final value, allowing better understanding of the underlying reasons for changes in performance.

Pareto Analysis: Also known as the 80/20 rule, Pareto Analysis is a technique used to prioritize issues by identifying the most significant factors contributing to a problem. It is based on the principle that a small number of causes are responsible for a large percentage of the effects, enabling the focus on resolving the most critical issues for maximum impact.

Statistical Analysis: This involves the collection, interpretation, and presentation of quantitative data to make informed decisions. By employing various statistical methods and models, it helps identify patterns, trends, and relationships within the data, enabling better understanding and prediction of future performance.

Effectiveness Analysis using the Best of the Best (BoB) method: This approach involves comparing the performance of an organization or process against the best-performing entities in the same industry or field. By analyzing the practices and strategies of top performers, organizations can identify improvement opportunities and develop action plans to achieve higher levels of efficiency and effectiveness.

A thorough analysis of the causes of problems which influence the low value of the OEE factor will allow you to set a priority list of tasks to be performed by the company. Some of these tasks can be implemented immediately, while other solutions might take time to be implemented effectively. Some examples of activities which lead to the increase of he value of the production efficiency index are internal training and standardization of the process.

Do you have any questions?
Would you like to see What is IPLAS?

Call or write to us and tell us about your problems and the needs of your company!