The Time Hierarchy gives every lost hour a cause and a value in pounds
Every hour your factory loses has a cause and a cost. This framework makes both visible, measured at the bottleneck.
A single OEE percentage hides the size, cause and value of each loss
Textbook OEE (Overall Equipment Effectiveness) multiplies Availability × Performance × Quality into one percentage. That causes four problems.
- It hides magnitude. A line at 65% OEE could have a 30% downtime problem and almost no quality losses. It could also have moderate losses in all three. The number alone cannot tell you which.
- It double-counts. Speed losses on waste units count in both Performance and Quality. Multiplying the three makes this unavoidable.
- It cannot be valued in pounds. A percentage does not tell you what an improvement is worth. Time does: every lost hour has a value that depends on your constraint.
- It cannot be added up across products. OEE percentages from different SKU runs do not sum to a meaningful total. Time does, as long as each SKU has its own bottleneck speed.
We express every loss as a duration instead. Durations do not overlap, so you can compare them, add them up across products and turn them into pounds.
Everything between Calendar Time and Potential Time is a loss
Calendar Time is all the time that exists. We take away Non-working Time, Schedule Loss, Planned Downtime, Unplanned Downtime, speed losses and quality losses in turn.
What is left is Potential Time: the shortest time it could take to make your actual Good Output at full bottleneck speed.
The hierarchy puts every loss into one category only. Nothing is counted twice, and every loss can be valued.
Key principle: we measure the hierarchy at the bottleneck, the process step that limits throughput. Other steps have spare capacity, so they are not the constraint.
The right measure depends on whether you could sell more if you made more
Before you choose a measure, decide your constraint. If you could sell more, you are production-constrained. If you could not, you are sales-constrained.
Each measure below widens the time it divides by one level up the hierarchy. PT is Potential Time.
| Audience | Measure | Formula | Losses in scope |
|---|---|---|---|
| Shop floor | Operating Efficiency | PT ÷ Operating Time | UPDT, LTSR, LTMW |
| Operations | OEE | PT ÷ PPT | Adds PDT |
| Management | OOE, or Machine Efficiency | PT ÷ Shift Time | Adds Schedule Loss |
| Strategic | TEEP | PT ÷ Calendar Time | Adds Non-working Time |
| Strategic | Output per Labour Hour | Good Output ÷ Labour Hours | Sales-constrained sites only |
Machine Efficiency and OOE (Overall Operations Effectiveness) use the same formula. The name changes with the strategic intent.
We define OEE as Potential Time divided by Planned Production Time. It is the additive equivalent of textbook Availability × Performance × Quality, without double-counting speed losses on waste.
The acronyms, formulas and full derivations are on best practice for calculating efficiency.
Each measure is Potential Time divided by a wider window
Choose “Show me” to mark the numerator and the denominator on the diagram below.
Operating Efficiency = PT ÷ Operating Time
The shop floor measure. Unplanned Downtime, Lost Time Slow Running and Lost Time Making Waste are in scope. Schedule Loss and Planned Downtime are not, because they are planning decisions.
OEE = PT ÷ PPT
The operations measure. It adds Planned Downtime, so the team answers for how efficiently it runs changeovers and planned maintenance.
Potential Time is Good Output divided by bottleneck speed. So OEE also equals Good Output divided by Potential Output.
OOE, or Machine Efficiency = PT ÷ Shift Time
The management measure. It adds Schedule Loss, so it shows how well the operation uses all the shift hours available.
We call it Machine Efficiency on sales-constrained sites and OOE on production-constrained sites.
TEEP = PT ÷ Calendar Time
The strategic measure for production-constrained sites. It counts non-working time too, so it shows how much of the factory’s theoretical capacity you use.
Output per Labour Hour = Good Output ÷ Total Labour Hours
The strategic measure for sales-constrained sites. A better OOE or a better crew size both raise it, which lowers the cost of each unit.
Seven levels take Calendar Time down to Potential Time
Every level is shown. Select a block to read its definition. The round buttons hide or show the levels below a block.
- Time remaining
- Set aside, still a loss in wider measures
- Loss
- Show me: numerator, solid ring
- Show me: denominator, dashed outline
Swipe sideways to see the whole hierarchy.
Taken out of Calendar Time to give Shift Time. It is still a loss in TEEP (Total Effective Equipment Performance), on production-constrained sites only.
- Weekends
- Nights, if the site does not run them
- Holidays
Taken out of Shift Time to give Planned Production Time. It is still a loss in Machine Efficiency, also called OOE (Overall Operations Effectiveness).
- Paid breaks and meal periods
- Longer planned maintenance shutdowns
- No customer demand
Taken out of Planned Production Time to give Operating Time. It is still a loss in OEE (Overall Equipment Effectiveness).
We count it at its planned length. Any overrun is Unplanned Downtime.
- Changeovers
- In-shift maintenance on the line
- Start-of-shift checks
Stops longer than the classification threshold, plus overruns of Planned Downtime and Schedule Loss.
Shorter stops stay in Up Time and show up as Lost Time Slow Running.
Time lost running below bottleneck speed while making Good Output.
Stops under the threshold (Lost Time Short Stops) land here too.
Time spent making defective, rejected or unusable output, at actual speed.
Good Output divided by bottleneck speed. The only truly value-adding time in the hierarchy.
The same lost hour can be worth 66 times more on a production-constrained site
This is the payoff of measuring in time: every lost hour has a value in pounds.
Production-constrained
Lost Time × bottleneck speed × Unit Marginal Profit = opportunity value.
Every hour you recover makes more output you can sell.
Sales-constrained
Labour hours saved × fully loaded labour cost = opportunity value.
Recovered time lets fewer people, or fewer hours, make the same output.
Getting the constraint right is not optional. The same 2.5 hours of Unplanned Downtime a day can be worth £5.4m a year on a production-constrained site, valued at throughput margin.
On a sales-constrained site, valued at labour cost saved, it is worth £82k a year. That is a 66 times difference.
Every level of the hierarchy, defined
The same definitions as the diagram, in one place. The terms are as written in the majaco Glossary.
| Level | What it is |
|---|---|
| Calendar Time | All the time that exists: 8,760 hours a year. |
| Non-working Time | Weekends, nights and holidays the site is shut. Calendar Time minus Non-working Time gives Shift Time. |
| Shift Time | The site is open and shifts are rostered. Also called Available Time. |
| Schedule Loss | Rostered but not planned to produce: paid breaks, longer planned shutdowns, no customer demand. |
| Planned Production Time (PPT) | Planned to produce, with the crew on. Shift Time minus Schedule Loss. |
| Planned Downtime (PDT) | Changeovers, in-shift line maintenance and start-of-shift checks, counted at their planned length. |
| Operating Time | Planned: the time to make the planned good units. Actual: the time the line tried to run. |
| Unplanned Downtime (UPDT) | Stops longer than the classification threshold, including overruns of planned stops. |
| Up Time | The bottleneck is running. Actual Operating Time minus Unplanned Downtime. |
| Lost Time Slow Running (LTSR) | Time lost running below bottleneck speed while making Good Output, including short stops under the threshold. |
| Lost Time Making Waste (LTMW) | Time spent making defective, rejected or unusable output, at actual speed. |
| Potential Time (PT) | Good Output divided by bottleneck speed: the only truly value-adding time. |
Every formula, acronym and the OEE equivalence proof are on best practice for calculating efficiency.