Understanding the Difference Between OEE and GOE to Optimize Your Production

Introduction

The manufacturing industry is a sector that must continually renew and optimize itself to remain competitive, especially in North American markets. You often hear about OEE and GOE as measures to quantify factory optimization or production planning. In an environment of labor shortage and productivity deficits compared to various Canadian and American markets, mastering these Key Performance Indicators (KPIs) is essential for business survival.

This article aims to deconstruct the mechanisms and rationale behind these KPIs. Not just in their mathematical notation, but also in their operational and strategic aspects. We will analyze and explain the conceptual distinctions and financial implications of these metrics.

Conceptual Distinctions Between OEE and GOE

OEE (Overall Equipment Effectiveness) can be defined as the indicator of operational purity. It's an indicator based on the time during which the company decides to operate its equipment. We analyze the execution of the planning strategy and not the strategy itself.

OEE works as a series of three successive sieves that filter operational losses at each stage.

The formula for the first sieve, (A)vailability, reads as follows: A = Operating time / Required time.

With this formula, we analyze machine availability. Breakdowns, excessively long setups, and material shortages during production will all negatively impact the efficiency rate. We analyze machine availability outside of planned shutdowns.

The formula for the second sieve, (P)erformance, reads as follows: P = Actual production / Theoretical production.

With this formula, we analyze machine performance. Micro-stops, slowdowns, idle operation, and under-speed compared to theoretical values will all negatively impact the efficiency rate.

The formula for the third sieve, (Q)uality, reads as follows: Q = Number of good parts / Total number of parts produced.

With this formula, we analyze product quality. Rejected parts, parts that need rework, and startup scrap will all negatively impact the efficiency rate.

The OEE formula therefore reads: OEE = Availability rate × Performance rate × Quality rate.

In summary, you can have excellent OEE while producing very little if the planned volume was low to begin with.

One of the most overlooked data points in this calculation is performance. Without access to reliable production data, it's difficult to calculate. For example, if equipment operates at 80% of its speed or suffers from micro-stops that are not (or poorly) recorded, the rate won't be affected, which will skew the OEE calculation.

GOE: A Broader Perspective

GOE (Global Operating Effectiveness), also known as OOE in some contexts, is a broader KPI than OEE. It's somewhat like viewing OEE with a panoramic perspective.

In the calculation, we integrate the planned downtime periods along with unplanned shutdowns. This indicator therefore judges not only the execution of planning but the planning itself. If an 8-hour shift includes 1 hour for lunch and 1 hour for preventive maintenance, its required time becomes 6 hours. With OEE, you could be at 100% in this scenario; with GOE, however, it would only be at 75%.

It's with this KPI that you justify implementing SMED (Single Minute Exchange of Die) projects to drastically reduce changeover time between production runs.

The Ultimate Indicator: ROA (Return on Assets)

The avalanche of acronyms wouldn't be as interesting if we didn't add at least one more: ROA (Return on Assets in manufacturing context, or TRE in French). ROA is the ultimate indicator of how a factory utilizes its assets.

We no longer just calculate indicators based on production and operating hours, but on a complete annual calendar. This KPI measures the hidden capacities of factories and is often called the "ghost factory indicator."

For example, a factory operating on a single 8-hour shift per day, 5 days a week, with 100% OEE would only achieve 23.8% ROA. This means that more than 76% of the factory's theoretical capacity remains untapped. This indicator generally interests CFOs, investors, and decision-makers in subsidy allocation.

In Summary

In summary, OEE is based on required time (as planned by management) and includes losses such as breakdowns, slowdowns, and defects.

The question to ask: Are we producing well when we decide to produce?

GOE is based on factory operating time, including all shifts. It includes all OEE losses plus preventive maintenance, setups, and breaks.

The question to ask: Are we optimizing our production during operating hours?

ROA is based on the entire calendar (24/7, 365 days a year). It includes all previous losses plus closed hours, holidays, and vacation days.

The question to ask: Are we maximizing the returns on our fixed assets?

In a future article, we will explore lost and hypothetical potential, as well as strategies for optimizing these KPIs.