How do you use OEE for capacity planning?

A customer wants to increase their order volume. Does the factory need more shifts, a new machine, or fewer losses in the equipment already in place? OEE can provide the basis for the decision, provided the metric is linked to parts, cycle times, planned production time, and demand.

Start with demand per part and period and calculate the required time on each machine. It is then possible to assess whether the volume fits within existing shifts and what capacity changes or reduced losses are needed.

Capacity planning across different time horizons

A factory reviews its capacity continuously, often monthly or quarterly. Capital investments and major capacity changes often require a 6–24 month lead time. Staffing and shift patterns are typically planned 1–6 months in advance. The time horizon needs to be adapted to equipment delivery times, recruitment, and skills development, among other factors.

This article focuses on sizing capacity across these horizons. The concrete production plan, where orders are scheduled onto machines and shifts days to weeks in advance, must then fit within the capacity that is actually available.

Why does the capacity plan need to change?

Three common reasons prompt the factory to revise the plan:

1. Changes in demand or product mix. More or fewer orders, changed delivery dates, or a different mix of parts alter the time required on machines and lines. The same number of units may require more hours if the proportion of slower parts or the number of changeovers increases.

2. Production does not go according to plan. Machine breakdowns, lower speed, quality issues, or longer changeovers mean that the approved volume ends up lower than estimated.

3. Shortage of personnel or materials. Sick leave, skills shortages, or delayed material deliveries prevent planned hours from being utilised as intended.

Five parameters for adapting capacity

Capacity can be increased or decreased by altering available production time, staffing, equipment, or how effectively production time is utilised. The options differ in cost, lead time, and permanence.

Calculate the options per machine and part. An additional shift increases available time, while higher OEE allows more approved products to fit within the same timeframe. Staffing and materials must be in place for the calculated capacity to be utilised.

What does OEE say about capacity?

OEE describes the proportion of theoretical production during planned production time that results in approved products. For a part on a machine, with an unchanged ideal cycle time, you can use the relationship:

Approved volume = planned production time × ideal production rate × OEE.

Production time and rate must be specified in the same unit of time. OEE is stated as a decimal: 65 per cent becomes 0.65. The ideal production rate is the number of units the machine can technically produce per unit of time for the part in question. It should not already include a deduction for stops and other OEE losses.

If you want to review the metric itself first, read what OEE is and how it is calculated.

Calculation example: same time, different OEE

The following is an illustrative example, not a customer result. A machine has 160 planned production hours during a month. The ideal cycle time for the part is 10 seconds, which corresponds to 360 units per hour.

• At 65 per cent OEE: 160 × 360 × 0.65 = 37,440 approved units.

• At 70 per cent OEE: 160 × 360 × 0.70 = 40,320 approved units.

• At 75 per cent OEE: 160 × 360 × 0.75 = 43,200 approved units.

An increase from 65 to 75 per cent OEE corresponds to 5,760 more approved units within the same planned time. That represents 10 percentage points higher OEE and approximately 15.4 per cent greater volume. The calculation assumes the same part, ideal cycle time, and definition of production time.

How do you calculate from demand to hours?

You can also invert the calculation:

Required production hours = demanded approved volume ÷ (ideal production rate × planned OEE).

If the customer requires 40,000 units, the requirement is approximately 171 hours at 65 per cent OEE, but approximately 148 hours at 75 per cent. With 160 available hours, the order fits within the latter scenario. This does not mean the improvement has already been achieved. The plan needs to show which losses are to be reduced, who is responsible, and when the effect can be utilised in delivery scheduling.

Build the capacity plan in five steps

1. Break down demand by part and period. Start from forecasts and order volumes for the horizon you are planning. Review both the total requirement and how the load fluctuates between periods.

2. Check cycle times and measurement rules. Use part- and machine-specific values. Ensure that changeovers and maintenance are handled consistently.

3. Base plans on sustainably achieved OEE. Use representative periods and compare similar operating conditions. The best shift is rarely a sustainable planning baseline.

4. Calculate each resource and verify the flow. Sum the required time for the parts on each respective machine. Also examine bottlenecks, materials, staffing, and downstream process steps.

5. Follow up on actual outcomes and update the plan. Compare approved volume, hours used, and losses against assumptions. Adjust when reality shifts.

Avoid counting the same loss twice

If changeovers and planned maintenance are included in the OEE baseline, their expected impact should be reflected in the OEE figure used. Do not also deduct the same time before the calculation. Conversely, if certain time falls outside planned production time according to your OEE policy, it must be handled in the schedule. Use a model that remains consistent from time definitions through to volume.

For a mixed product mix, parts must be calculated separately. A simple average of cycle times and OEE can mask the fact that a larger proportion of slower parts demands more hours.

Increase capacity where the flow is restricted

The bottleneck is the machine or process step that limits how much the factory can deliver for the planned product mix. Start there when seeking to increase capacity. Higher OEE on another machine does not automatically yield more finished products and may instead increase work-in-progress waiting between process steps.

Raising OEE at the bottleneck is often the most cost-effective way to increase capacity, as more approved volume can be produced with existing equipment and planned production time. Begin by assessing which stops, changeovers, speed losses, and quality losses can be reduced. Compare the cost and time to impact of these measures against extra shifts, overtime, and capital investments.

At the same time, verify that materials, staffing, and downstream process steps can handle the increased volume. When a bottleneck is improved, the constraint may shift to another step. Which machine constitutes the bottleneck can also change when the product mix alters.

What should the freed-up capacity be used for?

Additional capacity can be utilised for higher delivery volumes, reduced overtime, more room for maintenance, or shorter planned production time. Which alternative offers the greatest value depends on demand and which costs can actually be influenced. Fewer calculated hours do not automatically mean an entire shift can be eliminated.

Consider presenting three scenarios: today's stable baseline, a verified improvement, and a more conservative outcome. This allows leadership to see both the opportunity and how sensitive the plan is to recurring disruptions.

How can the Good Solutions platform help?

The Good Solutions platform connects production tracking to orders and parts. Cycle time analysis, loss analysis, and trends provide the basis for evaluating which planning assumptions hold and which losses need to be addressed. The scope of features depends on the plan and configuration.

Read more about the OEE system in the Good Solutions platform and production tracking reports, or book a demo based on your capacity questions.

Frequently asked questions

Can OEE be used to plan the number of shifts?
Yes. OEE can be used to calculate how many production hours a given volume requires. The number of shifts must then be assessed based on staffing, bottlenecks, materials, and scheduling.

Which OEE figure should we use in the capacity plan?
Base it on sustainably achieved OEE for the corresponding part, machine, and conditions. Place planned improvements into a separate scenario until the effect has been verified.

Should changeover time be deducted before the calculation?
That depends on your OEE policy. If changeovers are already included as losses in the OEE you use, the same time should not be deducted twice.

Does ten percentage points higher OEE yield ten per cent more production?
Not in general. With unchanged production time and ideal cycle time, the relative volume increase is calculated as the new OEE divided by the previous OEE, minus one. Moving from 65 to 75 per cent results in an increase of approximately 15.4 per cent.