What Is Overall Equipment Effectiveness?

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  • Written By: Jo Dunaway
  • Edited By: S. Pike
  • Last Modified Date: 10 October 2019
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Overall Equipment Effectiveness (OEE) is an analytic method, developed by the Japan Institute for Plant Maintenance (JIPM), producing transparency to possible losses in manufacturing production in three categories: availability, performance rates, and quality rates. As a tool, OEE delivers data on losses and also points to improvement opportunities that reduce loss in a lean manufacturing style to improve operating margins, optimize the competitive performance measures that increase the business’s reputation, and produce quality of product that makes good return on investment. Using metrics that indicate manufacturing effectiveness, it can deliver comparison values across differing manufacturing types and products to process not only what improvements should be made, but also how much the improvements will aid the bottom line.

Measuring and analyzing common machinery and processes, OEE points out the maximum effective use of an operation’s current equipment in use and can advise against investment in more machinery. Making changes to how the current equipment is used can remove bottlenecks, put excess capacity to use, and forestall downtime losses. Overall equipment effectiveness analysis is valuable in reducing seemingly complex production problems to simple, informative presentations of options to improve every process in operation. It effectively puts into the hands of management the measurements they need to manage and, together with other lean manufacturing programs, can reduce waste in many areas and produce higher quality product as a result.


The first of the three categories, availability, is the reliable availability of scheduled production 24 hours a day, seven days a week and 365 days per year. This metric is the uptime, taking into account downtime loss, and its formula is availability equals operating time divided by planned production time. Starting on obvious bottleneck positions in the line or bottleneck machinery, overall equipment effectiveness can detect metrics there with which to compare to identical or similar machinery and examining their maintenance records, apply more support system to the machine or increase its frequency of overhauls.

The second of the categories is performance rates. This factor represents the running speed of a production work center as a percentage of its designed speed. It takes into account speed losses, and its formula is calculated as performance equals pieces produced multiplied by ideal cycle time divided by available time. In this calculation, ideal cycle time is a minimum cycle of time that a process can be expected to achieve, and performance is capped at a full 100 percent. If scheduled breaks by operators leave machinery idle, a recommendation might be that breaks could be staggered and employees shuffled so that no machine is ever idle.

The third and final of the three categories of overall equipment effectiveness is quality rates, the number of good units produced out of the total units started into production. This is a process yield, and here sensibility analysis may point out measures of advised changes. Quality of product can be an opportunity for greatest return on asset, so improving the proportion of good units and reducing rejects can improve the company’s bottom line and reputation.


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