Overall Equipment Effectiveness (OEE)

What is OEE?

OEE stands for “Overall Equipment Effectiveness.” OEE is a key performance indicator (KPI) that compares your system’s ideal performance to its real performance. 

It is a quantifiable (i.e., uses numbers) way to find out how well your equipment, people, and processes do their job by measuring:

• Available time/uptime (availability)
• Production speed and consistency (performance)
• Number of defects (quality)

OEE uses this performance data to find the percentage of good production time on an asset. That means each system or piece of equipment gets its own OEE score. 

While scoring each machine may sound time-consuming, it is worth the effort because it is a metric that takes operators and processes into account. Machines aren’t always the source of inefficiency. Staff and processes are just as likely to lower productivity, and OEE is a great way to see the whole picture.

The Concept of Perfect Production

Your new machines are in top working order and never break. Your staff is well-trained, never late, and never requires breaks. You only produce one kind of product on all shifts, ever. Once a process is set, it is followed 100% of the time. 

That kind of perfection is impossible. There will be changeovers, defects, breakdowns, and missed steps. A hot and humid day will make something – or someone – overheat. And those are just the minor issues.

OEE exists to answer some of the most confounding questions about production efficiency. 

• How do you know when you’re doing enough to be as efficient as you can be? 
• How much deviation from that ideal level of productivity is OK? 
• And when you stray too far from your ideal productivity, how do you even begin to find the root cause so that you may address it?

Table of Contents

What performance data do I need for OEE?
Origins of OEE in manufacturing
Implementing OEE at your organization
OEE implementation best practices
You;re in the Major Leagues now

What performance data do I need for OEE?

If you are reading this post and brushing up on a concept like OEE, chances are you already do some reporting. If not, consider this a sign to start collecting equipment performance and maintenance data. 

Below is a list of metrics needed for finding an asset’s OEE. The numbers you need will fall into two main categories: parts and time. 

Measuring the number of parts you have produced

• Good count – the number of good parts (that meet quality standards the first time) made during a set period.
• Total count – the number of all parts (including defects) made during a set period.
• Defective count – The number of defective parts (rejected because they do not meet quality standards) made during a set period.

Measuring production time

• Planned production time – total time a piece of equipment is expected and scheduled to run.
• Run time – the amount of time a process is running. Run time does not include downtime but does include small stops, slowed production, or time spent addressing rejected parts. 
• Stop time – the total time production was stopped due to both unplanned (equipment failures, material shortages) and planned stops (changeovers, make-ready events).

Factors involved in an OEE score

The above data will eventually come together to represent three productivity factors. 

• Availability – the amount of time your equipment is running as it should, as a percentage of planned operating time that is spent running.
• Performance – the speed of production and its consistency, represented by the percentage of how close your run time was to the ideal.

Quality –  the quality of parts and frequency of defects, represented by the percentage of all parts made that met quality standards.

OEE calculation formulas

In order to find and use OEE measures, you must re-familiarize yourself with a little math. Each of the data points are entered into formulas to calculate Availability, Performance, and Quality. Then, those three factors are combined to find an overall OEE Score.

• Availability = Run Time / Planned Production Time 
• Performance = (Ideal Cycle Time x Total Count) / Run Time
• Quality = Good Parts / Total Parts
• OEE = Availability x Performance x Quality

If math isn’t your strong suit, or even if it is, take a deeper dive into using OEE formulas to calculate these three factors along with useful examples as you get started.

Origins of OEE in manufacturing

Overall Equipment Effectiveness is a measurement used in Total Productive Maintenance (TPM) programs. It is also a common feature of lean manufacturing, which is all about being as efficient as possible with your resources.

Since we know that 100% manufacturing productivity is unreachable, OEE measures were created as a way to not only assess how close your process is to the ideal, but to also give you direction on how to improve.

1. It helps you break down where issues happen so that you can fix them more easily. 
2. It is a diagnostic tool for your manufacturing process.
3. It quickly uncovers losses as well as highly productive areas.
4. It helps nudge you ever closer to your highest level of productivity.

OEE is also an instrument that helps you identify which of the six big losses in manufacturing may be impacting your business the most.

Implementing OEE at your organization

It is always a good idea to pilot any major process changes. Pilots help you find and fix problems before they cause problems all over the place. They also help you understand how these changes will impact your organization. OEE is no different.

• Define the scope of your pilot. Select a production area, piece of equipment, or team that is eager to improve. This will be your pilot group.
• Determine the timeframe for your pilot. It is essential to collect enough pilot data – and the right data – to develop an accurate OEE score. Follow the definitions of each metric closely.
• Analyze and improve. Perform your OEE analysis, pinpoint the scores that can be improved, and choose one or two to implement improvements.
• Analyze again. After you have put changes in place, continue your data collection. Recalculate your OEE and see how it has changed.

Once your pilot is over, apply learnings and then implement it broadly. Remember that data collection is constant, and continuous improvement is never done.

For that reason, your data collection processes must be automated or built-in to day-to-day functions. Software and tools like a CMMS that automatically calculate OEE and display them real-time in shareable dashboards can help keep efficiency front-of-mind.

OEE implementation best practices

When getting started with OEE, there are a few best practices you should follow to ensure success.

• Start with a solid foundation that includes SOPs (standardized operating procedures), good data practices, a well-oiled preventive maintenance program, and good working relationships with production teams.
• Play the long-game by working toward small improvements that will add up over time, rather than quick wins. 
• Track all the variables including operator details, costs, and defects to get the most broad and accurate picture of your overall productivity.
• Train your team on OEE and track its results over time to evaluate adoption of improvement initiatives. 

For a deeper dive to make sure you get it right, read more about best practices for implementing and using OEE at your organization. 

OEE benchmarks and industry standards

It is important to understand what your OEE score really means in the context of your operation. Distinguishing a good versus a bad OEE will depend on two things: your own internal baseline, and industry benchmarks. 

First baseline

Your first OEE outcome will serve as your baseline. It will be the benchmark to which you compare all future scores to measure the effectiveness of improvements. 

As you make those improvements and compare scores over time, keep two key questions in mind. 

• How much data did you include in this baseline? Measurement over a longer period gives a more accurate score.
• What part of the production process was included? Consider comparing OEE scores of different shifts or machines.

What the number itself means

OEE scores are always percentages no matter what they are measuring. They were designed this way so that they are easier to compare. This helps you know how your OEE stacks up to others – both inside and outside your company.

While you should always evaluate your score based on internal goals and criteria, here is a widely accepted rule of thumb:

• An OEE at 85% is world-class
• A score of 60% is very common and implies that there is room for substantial improvement
• An OEE at 40% is typical for those just starting on their continuous improvement journey. 

The key takeaway here is that any OEE score can be good or bad depending on where your organization is at in their journey toward efficiency. And getting your first OEE score is just the beginning. Your OEE is a KPI that can not only tell you where you stand, but it can also tell you what direction to go in to improve.