Overall Equipment Effectiveness (OEE)

Overall Equipment Effectiveness (OEE) is a composite KPI that summarises the productivity of a production asset as the product of three components: OEE = Availability × Performance × Quality. The concept was developed by Seiichi Nakajima within the Total Productive Maintenance (TPM) framework and formalised in 'Introduction to TPM' (1988); the ISO 22400-2 standard adopts OEE as an official performance indicator. The three components capture: (1) Availability = (planned run time − downtime) / planned run time — measuring losses from failures, setups, and shift changes; (2) Performance = (actual units × ideal cycle time) / actual run time — measuring speed loss, minor stoppages, and slow running; (3) Quality = good parts / total parts — penalising defective and reworked parts. The trio mathematically mirrors Nakajima's 'Six Big Losses' taxonomy. OEE benchmarks: 85% is considered world-class (Nakajima, JIPM), 60% is typical manufacturing, 40% is poor. The multiplicative structure is critical: individual components at 90% still yield OEE = 0.9³ = 72.9; low OEE often hides one dominant component. SMB application: at least one month of measurement via paper log or MES data, then focus on the bottleneck machine. Preventive maintenance, job-shop scheduling, assembly line balancing, and quality-control problems all map directly to OEE components. References: Nakajima 'Introduction to TPM' (1988); Nakajima 'TPM Development Program' (1989); ISO 22400-2:2014.