Overall equipment effectiveness (OEE)
Overall equipment effectiveness (OEE) measures how much good output equipment delivers against its theoretical potential, computed as availability x performance x quality. A machine up 90% of scheduled time, running at 95% of rated speed, producing 99% good parts scores 84.6%. OEE's value is in the decomposition: it shows whether capacity is being lost to downtime, slow cycles, or defects.
Examples
The decomposition: A press is scheduled for 480 minutes and loses 60 to a die change: availability 87.5%. Ideal cycle time says 840 parts in the remaining 420 minutes; it makes 756: performance 90%. Of those, 23 are scrapped: quality 97%. OEE is 76.4%, and the die change is the biggest single lever.
Gaming the denominator: A plant "improves" OEE from 68% to 74% by reclassifying changeovers as unscheduled time. Weekly output is unchanged. The metric moved; the factory did not.
Capacity reality check: A supplier claims 1.2 million units of annual capacity. At its demonstrated 65% OEE the realistic number is 780,000, and the buyer's program needs 800,000, so the award includes a funded bottleneck improvement instead of a hope.
Definition
OEE comes out of the total productive maintenance tradition and is built to expose the six big losses: breakdowns and changeovers (availability), minor stops and reduced speed (performance), startup and production rejects (quality). The headline number matters less than which factor is eating output; two machines can both score 76% for completely different reasons, with completely different fixes.
An OEE of 85% is the figure usually quoted as excellent for discrete manufacturing, and most plants measure well below it the first time they look. The metric is also easy to abuse. Scheduling less time shrinks the denominator and flatters availability. Comparing OEE across unlike processes rewards whoever defined rated speed most conservatively. And maximizing OEE on non-bottleneck machines simply manufactures inventory, which lean manufacturing counts as the worst waste. OEE is a diagnostic for improvement, not a scoreboard for ranking plants.
For procurement, OEE turns supplier capacity claims into arithmetic. A supplier quoting capacity at 100% uptime is quoting fiction; capacity planning should price awarded volume at demonstrated OEE, and the quality factor connects directly to the yield and scrap rate assumptions baked into the piece price.
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