The Continuous Improvement Blog

Are you using OEE correctly?

Written by Colin McArdle on 19 Jan 2018


The manufacturing industry, like many others, constantly faces demand volatility, material price increases, and increased operating costs. This forces stakeholders to assess production processes to identify new low-cost ways to increase productivity. Increasing the return on investment of capital equipment and production performance has now become a high priority.

The manufacturing process is complex, and without guidelines and correct metrics, it’s easy to think you are doing well, when in fact you could do a lot better.

Metrics like OEE (Overall Equipment Effectiveness) are a good way for managers to monitor productivity. In the case of OEE, the focus is on monitoring the efficiency of equipment in the production process.

But what exactly is OEE? Why is it important? And how is it calculated?

Are you using it correctly?

What is OEE?

OEE is the measure of the percentage of time a piece of equipment is producing quality product at the designated throughput rate.

Put simply, it indicates how truly productive a piece of equipment is.

Some manufacturing organisations focus on measuring the efficiency of the overall production process, or only measure equipment with the slowest throughput rate, known as the bottleneck equipment. But in fact, we see great benefits when you measure the OEE of each piece of equipment. 

This way managers can track the efficiency of each piece of equipment, identify waste at a more granular level, and take action to improve production efficiency.  

Measuring OEE is a crucial element of Total Productive Maintenance (TPM), a lean technique we discussed in a previous post. Over the last two decades, TPM has increasingly been used by manufacturers taking a ‘from the ground up’ approach to improving productivity.

How does it work?

OEE takes into account the various factors of the manufacturing process - Availability, Performance and Quality.

OEE highlights the six major ‘losses’ associated with these factors, as explained below.


This takes into account ‘availability loss’ - all events that stop production, as a result of:

  1. Breakdowns - any unplanned downtime resulting from equipment failure;
  2. Setup and adjustments - any planned downtime due to a changeover or other equipment adjustment


This takes into account ‘performance loss’ - the percentage of the actual operational speed or number of parts produced in a given timeframe, compared to the maximum possible speed (ideal cycle time). Performance loss is caused by:

  1. Idling and minor stoppages - any time where equipment stops for a short period (typically a minute or two), e.g. misfeeds, material jams, incorrect settings
  2. Reduced speed - any time where equipment runs slower than the ideal cycle time, e.g. due to old equipment, operator inexperience, substandard materials


This takes into account ‘quality loss’, which factors out:

  1. Defects - any defective parts produced during steady-state production
  2. Setup scrap - any defective parts produced from startup until steady-state production is reached

These factors impact the production time where the losses are measured and defined as productive loss time as shown below;

productive loss time

Why is it important?

Measuring OEE allows you to set goals for improving the availability, performance and quality rates of equipment to make it more efficient.

OEE can be used as both a benchmark and a baseline. As a benchmark, it can be used to compare the performance of a piece of equipment against its maximum speed, industry standards, other equipment or across different shifts and time periods of its use. As a baseline, OEE can be used for daily monitoring of equipment performance.

OEE is seen to be particularly useful in the automotive industry where tight delivery times and thin margins are typical. But it is also used widely across many batch, discrete, process, life sciences, food/beverage and consumer packaged goods manufacturers.

How to calculate OEE

OEE is calculated by multiplying the three OEE factors:

Availability level (AL) x Performance level (PL) x Quality level (QL) = OEE

If none of the six losses are present, then production performance is 100%.

But a piece of equipment that has 90% availability, performs at 90% and has a good-product quality rate of 90%, will have an OEE of 72.9%.

The image below illustrates the full calculation.


OEE is a great tool for managers wanting a simple way to consistently measure the effectiveness of equipment and use this as benchmark or baseline for improving productivity. The true value comes from using OEE to understanding the six losses and taking action to improve them.

A case study

A Marconi Company introduced OEE on the telephone production line through role-based training and an OEE reporting system.  Root cause analysis process improvement workshops were conducted by maintenance and production staff, through observing the process, running innovation workshops and testing solutions for sustained improvement.  

The outcomes:

  • Downtime was reduced by 50% by production and maintenance teams working collaboratively to fix problems. Improved communications, awareness and a common understanding were beneficial to sustaining improved ways of working.
  • Operators and managers realised the disruptive impact of forcing equipment to work harder and longer.  
  • OEE was implemented on bottleneck telephone test equipment leading to improved test quality and reduced time to test, through test routine sequence changes. Prior to OEE driven collaborative problem solving, some assemblies were rejected and reworked at a cost of £150k per year.


Companies using OEE as a metric have found success when combining it with other lean manufacturing initiatives, and also as part of TPM systems. If you want to learn more about TPM, download the eBook below.

TPM eBook

Topics: TPM, lean

Colin McArdle

Written by Colin McArdle

Colin McArdle, the Founder and Managing Director of Kaizen Kulture is a Lean and Six Sigma Master Black Belt who has over 30 years industry experience. Kaizen Kulture's mission is to be true to the ethos of continuous improvement.