Utilisation and Overall Equipment Effectiveness

I remember preparing the “Machine Utilisation File” in the 1980s for every new machine commissioned by me as a manufacturing engineer. My job was to track the utilisation of this newly commissioned machine till it achieved 75% of 24 hours. The formula was very simple – Planned Cycle Time multiplied with Good Quantity Produced divided by 24 hours. In order to achieve the 75% utilisation target, I had developed a template to note down the stoppages and every day I had to analyse the reasons for these interruptions and take corrective and preventive actions to eliminate them.

Apart from producing the component, our goal was always to produce efficiently. The 75% machine utilisation target in the 80s became 85% in the 90s, as I managed the CAPEX budget of close to a billion Deutsche Mark for the global business division. The calculation always was very simple. Plan-CT x Output / 24 hours, the assumption that the constraint machine never needed a break was integral to our DNA.

Our firm ≥ 85% utilisation goal drove us to always ensure the availability of sufficient incoming materials, trained manpower with standby springers, measuring equipment at the workplace or a system for assigning top priority at standards room (or metrology lab), tried and tested method, ready tools and consumables next to machine for immediate replacement, temporary teams for external setup and specialised teams for internal setup like in a pitstop. Our constraints, even with multiple setup changes during a shift could run at 87-92% utilisation based on 24 hours. The benefits were multiple:

  1. Thorough preventive quality assurance for 100% First-Time-Right and Every-Time-Right.
  2. Continual reduction of the actual cycle time with focused Kaizen on Fixtures and Tools.
  3. Highly accurate prediction of the shift output based on the hourly output monitoring.
  4. Fact based decision making in all areas with “Go and See” or “Genchi Gembutsu” culture.
  5. Deep rooted planning mindset for preparing to achieve 100% utilisation every hour.
  6. Globally lowest cost per piece, despite manufacturing in a high labour cost location.

Overall Equipment Effectiveness or OEE, the more common metric used today for the same purpose, is sometimes ambiguous. Let me explain why. The planned loss, which was a part of the utilisation, is not considered in the OEE calculation. This leads to a situation where the OEE can even be more than 100%, depending on the planned stoppages considered, but not actually stopped due to production urgency. An operator being absent can also be considered as the planned loss, thus not effecting the OEE. Due to this, I am used to getting my clients calculate the OEE as well as the planning, apart from the availability, performance and quality.

Many a times due to the premise of considering lesser than 24 hours for calculating OEE, there is a strong motivation to consider many regular necessary but non-value adding stoppages such as shift meeting, autonomous maintenance (Jishu Hosen), new product development trials, etc. as planned losses. This thought process combined with the statements of many experts that 85% OEE is the best possible, creates complacency in the team and impacts in not utilising the installed capacity to the fullest extent possible.

How is the 24h utilisation of your constraint in comparison to the OEE?

Happy reading!

4 thoughts on “Utilisation and Overall Equipment Effectiveness”

  1. Hello Sir, I am in process of ordering machine for my new plant. I enter following comment in order “On delivery and assembly/installation of technical industrial-grade equipment and machines, designed for three-shift operation and for 95% availability, ” I have 3-4 setups in a day
    What else can be done to ensure at this time of ordering machine to make sure that OEE is max (excluding operational efficiency issues)

    1. Dear Abhishek, in my opinion with today’s robustness in machine tools, 95% availability is rather low. I would target 98% availability. In order to achieve a good OEE, the possibility of maximising external set-up while minimising internal set-up needs to be considered while ordering. Also the loading/unloading concept with least machine stoppage needs to be planned.

  2. In my understanding, utilization percentage gives an idea of available capacity for the marketing person to look for additional load and OEE is about utlization of the equipment for the load available. I agree that in OEE, tendency may be there to add many factors in planned losses to show higher OEE

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