Overall equipment effectiveness

Overall equipment effectiveness (OEE) is a term coined by Seiichi Nakajima[1] in the 1960s to evaluate how effectively a manufacturing operation is utilized. It is based on the Harrington Emerson way of thinking regarding labor efficiency.[citation needed] The results are stated in a generic form which allows comparison between manufacturing units in differing industries. It is not however an absolute measure and is best used to identify scope for process performance improvement, and how to get the improvement.[2] If for example the cycle time is reduced, the OEE will increase i.e. more product is produced for less resource. Another example is if one enterprise serves a high volume, low variety market, and another enterprise serves a low volume, high variety market. More changeovers (set-ups) will lower the OEE in comparison, but if the product is sold at a premium, there could be more margin with a lower OEE.

OEE measurement is also commonly used as a key performance indicator (KPI) in conjunction with lean manufacturing efforts to provide an indicator of success. OEE can be illustrated by a brief discussion of the six metrics that comprise the system. The hierarchy consists of two top-level measures and four underlying measures.

Top-level metrics

Overall equipment effectiveness (OEE) and total effective equipment performance (TEEP) are two closely related metrics that report the overall utilization of facilities, time and material for manufacturing operations. These top view metrics directly indicate the gap between actual and ideal performance.

  • Overall equipment effectiveness (OEE) quantifies how well a manufacturing unit performs relative to its designed capacity, during the periods when it is scheduled to run.
  • Total effective equipment performance (TEEP) measures OEE against calendar hours, i.e.: 24 hours per day, 365 days per year.