As with any metric, overall equipment effectiveness (OEE)—the powerful core metric used in Total Productive Maintenance (TPM)—can be misunderstood and misused. In fact, we see it grossly misused at times.

Pointing out the potential for misuse is not sacrilegious; it’s necessary. So, rather than label it a “bad metric” (and throw the proverbial baby out with its muddy bathwater), let’s check the facts and the misunderstandings about OEE and see how it can truly help you.

Put simply, OEE assigns numerical value to improvement opportunity. It factors in the availability, performance and quality of output of a given piece of equipment and tells you this:

How much right-first-time product did this machine produce
compared to what it should have produced
in the allocated time?

In other words, is a piece of equipment effective within its value stream? Does it let you meet present or future customer demand? If not (and this is critical), OEE helps you analyze the reasons why so you can address them systematically.

How OEE Works

The OEE calculation rolls the “6 big losses” of TPM into one number that represents the effective operating rate for a piece of equipment or synchronized line—in other words, the percent of time the equipment or line is operating effectively, or its valuable operating time. That translates to the percentage of product produced compared to what could have been produced in the scheduled time.

The 6 Big Losses

Availability (downtime) 1. Equipment failure (breakdowns)
  2. Setup and adjustment
Performance (speed) 3. Idling and minor stoppages
  4. Reduced speed of operation
Quality (defects) 5. Process defects (scrap, repairs)
  6. Reduced yield (from startup to stable production)

It’s calculated like this:

OEE (%) = Availability rate × Performance rate × Quality rate

  • Availability rate (percentage of time the machine is ready to produce, working properly, and not in the midst of changeovers or adjustments) = Available time (scheduled operating time − downtime) ÷ Scheduled operating time.
    • TIP: Note that we normally use scheduled operating time (or “planned time”), not total time, because we might only plan to run a machine for half a shift to meet customer demand. This distinguishes efficiency from effectiveness. Effectiveness relates to customer demand. Focusing solely on the efficiency of individual pieces of equipment can lead to overproduction and excess inventory.
    • TIP: Scheduled operating time usually does not include time set aside for planned maintenance or breaks. Other downtime is considered loss, including setup, adjustment, and breakdowns.


  • Performance rate (ratio of output produced compared to a standard) = Actual output ÷ Standard output.
    • TIP: The rule of thumb for standard output is to use the best output rate known to be produced on the machine, regardless of whether that is above or below design speed. If a machine consistently outperforms its design spec, your performance rate will exceed 100% and potentially mask availability problems. On the other hand, if the machine has never been able to achieve its design spec, it’s usually not helpful to use that as the standard.
    • TIP: Any losses due to minor stoppages, idling, or slowdowns show up in the performance rate.


  • Quality rate (ratio of good output compared to actual output)= Right-first-time output ÷ Actual output.
    • TIP: Any defective output, including output that needs rework or repair or is scrapped during adjustment, is not counted as quality output.




    . Gross available time = 8 hours, or 480 minutes
    . Planned downtime = 20 minutes
    . Breaks = 0 minutes (all breaks are covered)
    Scheduled Time = 480 – 20 = 460 minutes

    . Breakdowns = 20 minutes
    . Setups and adjustments = 20 minutes
    . Minor stoppages = 20 minutes
    Downtime = 60 minutes

    Available time = Scheduled time – Downtime = 460 – 60 = 400 minutes

    Availability rate = Available time ÷ Scheduled time
    = 400 minutes ÷ 460 minutes = 87%



    . Standard (ideal) output (@ 0.5 parts per minute ideal cycle time) = 800 parts
    . Actual output produced (including good and bad parts) = 400 parts

    Performance rate = Actual output ÷ Standard (ideal) output
    = 400 parts ÷ 800 parts = 50%



    . Actual output produced (including good and bad parts) = 400 parts
    . Defective parts, rejects, and scrap = 8 parts; Good parts = 400 – 8 = 392 parts

    Quality Rate = Right-first-time output ÷ Total actual output
    = 392 good parts ÷ 400 actual parts produced = 98%


    OEE = 87% Availability × 50% Performance × 98% Quality = 42.6%


    OEE is Not TPM (and Other Misunderstandings)

    OEE is the measure most closely associated with TPM, but OEE is not equivalent to TPM. At its heart, TPM is not about complex metrics; it’s about developing the capabilities of people. Everyone is involved in pursuing the dual goals of zero breakdowns and zero defects. Production, maintenance, and engineering form an efficient partnership, and operators share “ownership” in equipment. The new attitudes and behaviors result in a cultural shift that improves morale, drives continuous improvement, targets total asset reliability, and supports lean initiatives.

    TPM is fundamental to achieving lean flow, because flow can’t happen without reliable equipment and processes. In turn, a good understanding of OEE fosters an effective TPM effort.

    Because OEE packs a lot of information into one number, it’s powerful. But that can also make it difficult to calculate and confusing to interpret. People commonly get into trouble when they try to:

    • Use OEE primarily as a high-level KPI (key performance indicator)
    • View OEE as an external measure that has meaning to customers
    • Multiply OEE across several machines in a department or plant
    • Calculate OEE on every piece of equipment
    • Gauge themselves against a “world-class” OEE measure
    • Focus on the number for its own sake instead of the improvement context
    • Use OEE as a club rather than a yardstick

    Let’s take a look at four key ways that OEE can be used effectively to really help you.