Overall Equipment Effectiveness (OEE) is simply how much your machine is working effectively within a given time frame. It is a best practice to identify the percentage of planned production time that is productive.

There is a lot of confusion out there about the words efficiency and effectiveness. We have to make a clear distinction between these two words to make the picture clear about overall equipment effectiveness. Effectiveness is successful desired result and relation between what theoretically could be produced and what actually came out and efficiency is the ratio of useful work performed by a machine with the ability to avoid wasting material, efforts and time.

If your machine can make 100 quality products in an hour and makes only 80, then it is 80% effective. Now here we have an idea an about effectiveness, but we do not know how efficient it was because we can’t say anything about inputs to get 80% effectiveness. Let’s for example say it is wasting 40% material. If we are running the machine at a setup where it is 60% effective and only lost 10% material, it would mean we are wasting 30% more material to get 20% more effective (from 60% to 80% effective).

To make this example more simple, let suppose you have to make 10 cups of tea and having 10 tea bags and 10 milk bags than your effectiveness is 100%. While if 5 milk bags are expired, and you are not using them then you can only make 5 cups of tea, here you are 50% efficient based on quality.

Formula of Overall Equipment Effectiveness

So our primary objective is how to calculate the overall equipment effectiveness. There are two methods to calculate OEE as outlined below:

  1. OEE Simple/Ordinary
  2. OEE Preferred

Ideally, we use OEE preferred as it is assuming all other factors with the elaboration.

OEE Simple/Ordinary

In simplest terms, OEE is the ratio of actual production time to planned production time which is calculated as follows:

  • OEE = (Good Count*Ideal Cycle Time)/Planned Production Time

Let’s define these terms:

  • Good Count: Products manufactured without any defects
  • Ideal Cycle Time: Ideal fastest possible time to produce each product
  • Planned production Time: Time scheduled for production
  • Fully Productive Time: Production of good product with no stop time

It is the entirely valid calculation of OEE, but it does not provide us information about rest factors like Availability, Performance, and Quality. To measure these factors we used the preferred method.

OEE Preferred

OEE Preferred based on Availability, Performance and Quality factors and its formula is:

  • OEE = A*P*Q

In simple terms, Availability is the machine is operating or not, Performance is how fast machine is running, and Quality is how many products are final and meeting all specs.

How do we measure


Availability take into account the actual total time of machine operating and calculated as the ratio of run time to panned production time.

  • Availability = Runtime/Planned Production Time

Runtime came after deducting stop time from planned production time.


The performance takes into account anything that affects the manufacturing process. The manufacturing process is typically affected by slow cycles and small stops.

  • Performance= (Ideal Cycle Time*Total Count)/Runtime

Performance should never be more than 100%. If it is, then it indicates ideal time set incorrectly.


Quality takes into account manufactured products that do not meet quality standards. Make sure quality is measured without any rework on the product.

  • Quality = Good Count/Total Count

OEE Benchmarks

OEE benchmarks can vary from industry to industry. It will be set at the end of the year after getting the performance of every company in the industry. Usually, 100% is perfect which means manufactured only good products, as fast as possible, with no stop time. 85% considered as world class, and set for long-term goals. 60% is fairly typical but there is substantial room for improvement, and 40% is low which means companies are either coming on track or not working effectively.

Overall Equipment Effectiveness Metrics

OEE is an excellent tool for manufacturing and production department as managers get estimations of the final production. Workers of these units will perform best when there are estimates which are real-time, quickly interpreted and motivational. These departments have set their metrics which is TAED:

  • Target (Real-time target driven by the planned rate of production)
  • Actual (Real-time production count)
  • Efficiency (Ratio of target to actual)
  • Down Time (Stop time for the shift updating)