Overall equipment effectiveness is a measure of manufacturing operations performance and productivity, expressed in a percentage. OEE indicates the degree to which a manufacturing plant is truly productive, and serves as a general and inclusive measurement of how well a company's manufacturing operations are performing.
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In the simplest terms, OEE = availability x performance x quality.
- Availability is the percentage of time that a machine or other physical asset is expected to be available for production. Equipment breakdowns, unavailable materials or other unplanned downtime reduces availability.
- Performance is 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 is the percentage of defect-free parts or products produced.
As one 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%.
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.
Overall equipment effectiveness is both inclusive and relatively clear-cut, which makes it both valuable and easy to understand, and OEE enables simple overall performance comparisons between companies with very different situations and processes. Even more helpful to companies, since OEE serves as a general measure of manufacturing operations performance, it can also be used to measure changes and general success of improvement initiatives such as those related to processes, quality efforts and lean manufacturing.
It's important to note that because OEE is a general measure, it is a big-picture indicator rather than a specific management tool.