Overall Equipment Effectiveness

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Companies that have implemented Total Productive Maintenance (TPM), often do this as a part of an implementation of other manufacturing improvement procedures such as Six Sigma, Lean Manufacturing, and Quick Response Manufacturing. When businesses want to evaluate the relative success of their TPM procedures, they often use a set of measures that are called Overall Equipment Effectiveness (OEE).

The overall equipment effectiveness is a series of metrics that can be used to measure the utilization of a manufacturing operation or piece of equipment. The metrics can be used daily to identify how equipment is performing but also can be used as a goal that a company wishes to achieve.

When a company looks at equipment effectiveness, there are six areas where waste can occur; equipment failures, setup, and adjustments, idling, scrap and rework, reduced speed operation, and startup losses.

Equipment Failures

These are unexpected failures that occur without warning and cause production to be halted. It can seriously affect the production schedule and customer deliveries. If the failure cannot be remedied quickly, a new piece of equipment may need to be purchased which can cause financial hardship to a small or medium-sized company.

Setup and Adjustments

Equipment downtime also occurs when machines are broken down at the end of the production run, and new tools are set up for the next production run. Although this downtime is usually included in the production schedule, any additional time required in the setup due to adjustments may not, and this can delay the production schedule.


A production schedule expects equipment to run at its optimum speed. A machine can have its speed reduced if there are minor issues that can be corrected by the machine’s operator. It is important for an operator to realize when a machine is operating below its optimum level as it can have a detrimental effect on the production schedule.

Scrap and Rework

If a machine is not operating at its optimum level it can produce items that are below the acceptable quality standard and will need to be scrapped or reworked. Not only is this a waste of time and resources, but it can also significantly affect the production schedule and customer delivery dates.

Reduced Speed Operation

The speed of a piece of equipment is defined by the manufacturer and companies expect that the documented speed is the speed that the machine will operate at. However, unless a company calibrates the equipment and verifies that it is operating at the manufacturer’s specification, then there is a possibility that the machine is operating below standard.

Startup Losses

When equipment is set up, there may be some issues with the initial items produced. For example, in chemical manufacturing, initial batches may not be of suitable quality. Although this setup loss may be included in the production schedule, it does mean a loss of time and resources that could be minimized.

There are three factors that are used in the calculation of Overall Equipment Effectiveness. These are the availability rate, the performance rate, and the quality rate.

Availability Rate

The availability rate is the time the equipment is running, versus the time it could have been running. A reduce availability rate is an indication of equipment failures and issues around setup and adjustments.

Performance Rate

The performance rate is the quantity of material produced during the running time, versus the quantity of material that could have been produced when taking into account the manufacturers documented speed of the equipment. A low-performance rate can be seen as a result of idling, minor stoppages, and reduced speed operation.

Quality Rate

The quality rate is the amount of acceptable material versus the total amount of material that is manufactured. A low-quality rate is an indication of startup losses and the amount of scrap material.

When a company first uses OEE metrics, they can see the efficiency of their equipment. They then have the information from which they can set improvement goals for their plant. By improving the availability, performance and quality rates, a company can reduce its expenditure on maintenance and raw materials as well as improve its manufacturing capability and customer delivery times.

Updated by Gary Marion, Logistics and Supply Chain Expert.