Overall equipment effectiveness (OEE)

Overall equipment effectiveness combines three separate dimensions of manufacturing performance into a single score: whether the equipment was running when it should have been, whether it ran at its intended speed while running, and whether what it produced was actually good. A machine can look busy and still have poor OEE if it is running slowly or producing defects.

The formula is OEE = availability × performance × quality, where availability is actual run time divided by scheduled run time, performance is actual output rate divided by the ideal rate, and quality is first-pass yield, good units divided by total units produced. Because the three factors multiply rather than add, a moderate shortfall in each one compounds into a much lower overall score than intuition suggests; three factors each at 90% produce an OEE of about 73%, not 90%.

OEE is the standard benchmark in lean manufacturing for identifying where losses are occurring, downtime, slow cycles, or defects, and for tracking improvement over time, often alongside mean time between failures and predictive maintenance programs aimed at raising the availability component. A perfect score of 100% is theoretical; a widely cited "world class" benchmark is around 85%, though the achievable figure varies significantly by industry and process, and comparing raw OEE numbers across very different types of equipment without that context is a common pitfall, one that Six Sigma programs try to avoid by tracking each component separately.