Definition

overall equipment effectiveness (OEE)

Contributor(s): Diann Daniel

Overall equipment effectiveness is a measure of manufacturing operations performance and productivity, expressed as a percentage. OEE indicates the degree to which a manufacturing process is truly productive and serves as a general and inclusive measurement of how well a company's manufacturing operations are performing. It's important to note that because OEE is a general measure, its value comes from being a big-picture indicator rather than a specific management tool.

Overall equipment effectiveness is both inclusive and relatively clear-cut, which makes the metric both valuable and easy to understand. OEE enables simple overall performance comparisons between companies with very different situations and processes. Because OEE serves as a general measure of manufacturing operations performance, it can also be used as a key performance indicator (KPI) for measuring the success of improvement initiatives such as those related to quality improvement and lean manufacturing.

How to calculate OEE

In the simplest terms, OEE = availability x performance x quality. For example, a machine that has 90% availability, performs at 95%, and has a good-product quality rate of 98%, will have an OEE of 83.79%.

Availability The percentage of time that a machine or other physical asset is expected to be available for production. 
Performance The percentage of the actual operational speed or the number of units produced in a certain timeframe, compared to the designated or standard speed.
Quality The percentage of defect-free parts or products produced.

Importance of OEE

What's notable about measuring overall equipment effectiveness is that it gives context among the three variables. For example, speeding up production at the expense of quality so that overall operational performance is compromised would not be considered truly productive. In addition, more than simple asset availability or production-line efficiency, overall equipment effectiveness takes into account the viability and quality of the products to be manufactured. OEE is used across manufacturing industries and spans manufacturing types, from process manufacturing to discrete manufacturing to hybrid manufacturing and so on.

This was last updated in April 2019

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