Overall Equipment Effectiveness (OEE) is probably the most widespread and well-known among KPIs in industry, which does not mean that everyone likes it. OEE rescue is a series of posts that aim to balance the love-hate comments about this KPI as well as debunking some myths and misconceptions.
In this post: OEE is composite and does not tell much per se
Yes, OEE is composite. OEE is expressed in a single dimensionless value. It’s a ratio, a multiplication of 3 other ratios (availability, performance and quality).
Not familiar with OEE? Follow this link
What I immediately liked when I discovered OEE is the fact that multiplying 3 fractions leaves the result smaller than the smallest fraction, meaning it is a very aggressive and challenging KPI.
Any worsening of one of the 3 constituent will amplify the worsening of OEE, which in turn should trigger quick countermeasures to stop the KPI to plunge.
I do not agree OEE per se doesn’t tell much. The original intent, I assume, was to provide management with a single value in order to get an instant feeling about how the overall performance stands, as well as a convenient benchmark when comparing machines, lines, workshops or factories. And it does the job well..
This advantage of being synthetic is also a drawback as it is necessary to “disassemble” OEE to its components in order to understand which of the availability, performance or quality is the evildoer.
But again, I see here an interesting “constraint” for management: the head of department will review OEEs and get a broad feeling about how well the various lines or cells of his/her realm are doing. When intrigued or alarmed by a poor OEE, he/she will turn to the supervisor or line leader to get more information.
The latter needs to know more precisely what’s going on as it is his/her responsibility to keep OEE at best. This required dialog is, from my point a view, a good way to have management commit to interact in both directions: top-down and bottom-up.
I suspect that the managers not liking OEE struggle to drive and maintain theirs on the expected level. Instead of looking how to boost their OEEs, they probably prefer criticizing the concept.
It is one thing to display a quality rate of 93%, a machine availability of 90% and a performance rate of 95%, which at first glance look good, and another thing to report a OEE of 79.5% which is exactly the same (0.795=0.93×0.90×0.95), except for the perception.
Yes, OEE is humbling.
By the way, there are other KPIs that are composite like the On-Time-In-Full (OTIF). When OTIF is bad, is it the On-Time or the In-Full part that hurts? You don’t know until you dig deeper into the details. Would you dare replying to your furious customer measuring your performance with OTIF that this KPI is composite and does not tell much per se?