OEE seems to be the most commonly used non-financial performance measurement on packaging lines

today. *1+

To be considered best in class OEE is calculated by = (Availability x Performance x Quality)

OEE Factor World Class:
Availability 90.0%
Performance 95.0%
Quality 99.9%
Overall OEE 85.0%

That means to be consider as entering into the realm of a world class manufacturing organization, your
OEE should be at least 85.0%. The class range and values below breakdown how the OEE are classified:

<65% Unacceptable
65% <75% Fair
75% <85% Acceptable
85% <95% Good
95% Excellence (World Class Values. Excellent competitiveness)

This why the statement above this seems rather strange to me because OEE is directly related to any
manufacturing companys overall financial performance. In manufacturing organization, including
packing; profit and loss (P&L) is directly related to the number of units produced at the Marginal Cost,
which is based on an accepted OEE. Basic economic theory states that a companys total profit reaches
its maximum point where the marginal revenue equals marginal cost and both are above the Average
Total Cost or where:

(MR = MC) > ATC

However, one of the biggest assumption in manufacturing is that equipment is and will always be
available. That means OEE is assumed to be 100%. Yet, as Manufacturing IT professionals, we know this
not to be true. In fact, unscheduled downtime is the single most cause of loss in manufacturing output
which is directly related to profits because when we factor in OEE, as a percentage, we can begin to see
what happens to the profit maximizing situation:

When OEE decrease or *MR = MC X OEE()+
If MR > MC x <65% (Unacceptable in class)

(a) As OEE approaches <65%, then the output will drop by nearly 65% and the Marginal Cost will be cut
by some factor as well. With that big of a drop in quantity, the Marginal Cost is now much below the
Average Cost. Since MR > MC, profits decrease because the companys Marginal Cost are below its
Average Costs, relative to the Marginal Revenue. All that means is that, it is costing your organization
more money to make each unit than what they can sell them for in the market. In other words, your
company is not making any profits on the units sold and is loosing money.

When OEE increases or *MR = MC X OEE()+
If MR = MC X 95% (Excellence World Class Values. Excellent competitiveness))

(b) As OEE approaches 95%, both MR and MC are approaching each other, which is the point at which a
manufacturing organization maximize their profit. This is why the OEE range was created. It gives a
manufacturing organization factors by which to understand how this effect the financial standing of the
manufacturing organization.