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 result you get having calculated the OEE indicator shows, in percentage terms, the level of effective use of machines in the production process in your company. How exactly do you interpret the figures you receive?

  • 100% OEE – this is an excellent result, which shows that the manufactured products are of the highest quality, while also being manufactured at an extremely fast pace;

  • 85% OEE – this value is referred to as “world class” seeing that only some of the world’s leading manufacturing facilities can boast of it. For many companies, this result will be a great long-term goal;

  • 60% OEE – a percentage that is typical for a large number of enterprises. It indicates that there is room for improvement on many factors that affect the product effectiveness index;

  • 40% OEE – this result is typical for companies that are just starting to track and improve their performance. The value is low, but it can easily be increased by introducing a few basic measures (e.g. analysis of the causes of downtime in the production process).

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;
     • Pareto analysis;
     • statistical analysis;
     • effectiveness analysis using the BoB method.

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.

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