What does OEE mean? Calculate productivity in manufacturing including Excel template.

For manufacturing companies, it is important to achieve as much throughput and high product quality as possible with efficient production processes and effective plants. However, many different factors play a role in the complex manufacturing process.

The OEE metric provides an overview of how effectively the machines and plants in production are working. This article explores what the OEE metric means, where it comes from, and how it differs from other manufacturing metrics.

It also discusses how to calculate the OEE value (more on that here) and what special considerations in continuous production should be taken into account.

What Does OEE Mean? Definition and Significance

With the Overall Equipment Effectiveness (OEE) metric, the effectiveness of industrial plants and machines in manufacturing can be measured. It takes into account the availability of the plant, its performance, and the quality of the produced parts. You will learn how the exact calculation is done later.

Efficiency vs. Effectiveness vs. Productivity

The effectiveness of a plant describes its actual output in relation to the theoretically possible. In contrast, the efficiency of a plant refers to the amount of resources that must be used to achieve a specific result. Together, the effectiveness and efficiency of a plant provide information about its productivity.

The OEE is considered the gold standard for manufacturing companies to evaluate the effectiveness of their shop floor.

To accurately determine the OEE value, the right data foundation is important. The relevant production data can be collected automatically, for example, with the appropriate software. Once the metric is determined, companies can continuously monitor the OEE and thus obtain valuable information about productivity. This, in turn, forms the basis for optimization processes that can further improve overall equipment effectiveness. The goal of optimization based on OEE is to reduce the so-called Six Big Losses, which are the six most significant efficiency losses on the shop floor. Moreover, the OEE also provides a pathway to more sustainability.

Where Does the OEE Metric Come From?

The OEE metric originated in the 1980s. It was developed by the Japanese engineer Seiichi Nakajima for the unit production at the automotive manufacturer Toyota. The concept of OEE and Total Productive Maintenance (TPM) gained significance especially during the 1990s, as Lean Management became increasingly important.

How is the OEE Metric Calculated?

The OEE metric is calculated from the product of the three factors availability (A), which gives information about machine downtime, performance (P) or manufacturing speed, and quality (Q), which refers to the amount of produced scrap. 

You will find out how to determine these three factors in our detailed blog article on the calculation of the OEE metric.

Theoretically, an OEE value of 100 percent would be ideal. This would mean that the plant operates without downtime, at maximum speed, and without scrap. In practice, however, achieving an OEE of 100% is unrealistic, as it is a theoretical maximum.