OEE Definition and OEE Disadvantages

One of the things, that you must have noticed is that there is much talk and discussion about the Overall Equipment Effectiveness i.e. OEE as a Key Performance Indicator (KPI) for the manufacturing companies. Through this article, you will come to know about some of the disadvantages of OEE. And, reasons why the OEE is not good a KPI for manufacturing companies to depend on for making business decisions and operation management. OEE in simple words can be described as measure of how nicely a machine or equipment in a factory or plant is utilized with their complete potential.  OEE is also described as a tool, which helps in identifying places where there is huge productivity loss, which includes frequent stops, breakdowns, defective output, and long setups. OEE is also equal to availability x performance x quality and these 3, are solid metrics. Apart from that, the OEE formula is very simple, therefore, companies thought to use OEE as a KPI for business.

Disadvantages of OEE for Manufacturing Companies are as follows –

  1. No Connection of OEE with Companies Business Objectives –

OEE tool metric can be helpful for the business of any company if the company is compensated to make their machines work at full potential all day. For instance, if you have a company that works on electric power or you have a company, which is a chemical processing plant, then you will know that the OEE is related to your company. However, if your company manufactures a detached products where there is a need to fulfill the orders of the consumers and have certain business objectives connected with the factors that influence consumers buying decisions like time, price, cost, and quality, then the KPI of such companies should align with the company’s business objectives and not the OEE.

  1. No Addressing of Real Restrictions to Production –

The most pivotal deliberations in a  manufacturing operations is to keep the machines in the factory running and to lessen the risk of any restrictions that can affect the running of the machine and block the production rate. The focus of OEE is on the local enhancement of every work, but the goal of enhancement is on the entire production system. One of the things that you will know about OEE is that, there is a assumption by the OEE tool user that the objective of the OEE is to keep every manufacturing unit busy and doing the production at 100% with full capacity every time. However, if you take the full production system into picture, then there can be affirmation for having areas of low utilization.

The objective is not to make every manufacturing unit and its machine work and be busy all the time. The main objective or real objective is to get the product in time and that which matches with the need-demand of the customers at a reasonable cost and with premium quality. In any manufacturing units, OEE metrics should be connected with the real objective, which leads to final goal of every manufacturer with higher profits.

Many manufacturers use the theory of constraints to identify their production blockages then work towards it to enhance it and remove the blockages. Not every resource in a manufacturing unit is potential blockage. So, the resources that have become restraint to production should be closely observed and enhanced for the manufacturing unit to attain its real goals. If the business organizations aim at fixing the manufacturing units with low OEE numbers then it might be lowering the overall macro manufacturing process.

  1. OEE is a Cumulative Metric that can Complicate Instead of Making Clarifications in the Areas for Enhancement-

One of the OEE Nachteile, is using cumulative measures like OEE can have the risk of concealing many issues. Each module of OEE including the availability, performance, and quality provides better visualization in any business performance. When the OEE sub metrics are multiplied with each other, the remaining numbers can end up concealing the areas that has the most issues.

OEE hides the fundamental problems and it also confuses when the time comes for identifying the areas of enhancements.

Conclusion –

In addition to the disadvantages listed above, OEE in business against others is not a good decision unless it is compared across the same type of businesses. Businesses having an idea that they can have a standard goal for OEE of 85% across the industry are not sound in nature. The standard goal should be 95% for single type of process and rather 75% for another type of process.