A percentage rarely wins a budget discussion. A dollar figure for each loss does, and it also tells you which loss to work on first.
Post 1 followed one packaging line through a day and arrived at an OEE of 73.4%, with availability at 85%, performance at 90% and quality at 96%. This post converts those losses into money.
From hours to dollars
Suppose the line produces $3.0M of sales a year at its current OEE. That revenue comes from the 73.4% of scheduled time that makes good product. If every scheduled hour were productive, the same line could produce:
$3.0M ÷ 0.7344 = $4.08M a year
The difference, about $1.08M, is the sales value of the capacity lost each year. Splitting it by the hours lost to each cause gives the ranking.
Table 3. Annual revenue lost by cause, $3.0M line at 73.4% OEE
| Loss | Hours lost per day | Share of the total loss | Share | Fix this one alone |
|---|---|---|---|---|
| Downtime (availability) | 2.25 | $612,745 | 56% | $529,412 |
| Speed (performance) | 1.28 | $347,222 | 32% | $333,333 |
| Rejects (quality) | 0.46 | $125,000 | 12% | $125,000 |
| Total | 3.98 | $1,084,967 | 100% | $987,745 |
The two dollar columns answer different questions. The share of the total loss prices every lost hour at its full potential, so the three rows add up to the gap. Use it to find and rank your losses. The last column, fix this one alone, is the revenue you gain if that one factor becomes perfect and the other two stay as they are. Use it to judge a single project. It is smaller because recovered hours still run at today's speed and reject rate, which is why the column stops about $97,000 short of the total.
Both columns give the same ranking, and downtime is more than half of the loss. On this line, a maintenance and changeover programme deserves attention before a quality project, even though scrap is usually the most visible problem on the floor.
These are revenue figures. At a 50% contribution margin, the $1.08M of lost revenue is about $542,000 of lost profit a year.
Try it: price your own losses
Enter the line's annual revenue, its three OEE factors and your contribution margin. Large figures are revenue and the line below each one is the profit at your margin.
What one point is worth
On this line, each point of OEE is worth about $40,850 of revenue a year. That single figure is useful for screening ideas. A $15,000 quick-changeover kit that recovers one point pays for itself in months. A $400,000 upgrade that recovers two points needs a much harder look.
Table 4. Revenue value of one percentage point, by factor
| Improve by one point | From → to | Revenue gained per year |
|---|---|---|
| Availability | 85% → 86% | $35,294 |
| Performance | 90% → 91% | $33,333 |
| Quality | 96% → 97% | $31,250 |
Three cautions before you quote these numbers
- Lost revenue only counts if you can sell the output. These figures assume demand for every extra unit. If the line already meets demand, the benefit of higher OEE is cost: fewer overtime hours, a shorter second shift, or a capital purchase you can postpone.
- Revenue is not profit. Extra units still need material and packaging. The profit from recovered capacity is the revenue multiplied by your contribution margin, which is what the margin slider above applies. Post 3 builds this into the business case.
- A rejected unit costs more than its lost time. A unit lost to downtime was never made. A rejected unit consumed material, energy and labour first. Quality losses are therefore worth more per hour than this table suggests, so check your scrap cost separately.
Takeaway. Rank the losses in dollars and start with the largest. Here that is downtime at about $613,000 a year, more than speed and quality losses combined.
The line, its revenue and the project in this series are an illustrative example. The calculators are screening tools and do not replace a full financial analysis.
