Is OEE the Magic Number?

Is OEE Magic?

OEE (Overall Equipment Efficiency) is a measure of performance, availability and quality in a single number.  Using this number operators and managers can quickly see how a machine or cell is performing. Many people believe that OEE is a magic number and when implemented properly your operations magically improve. In this post we discuss the how OEE can help and what to watch out for. I will leave it to you to decide if it is magic.
Is OEE the Magic Number

How OEE Helps Manufacturers

As I mentioned above Overall Equipment Effectiveness has three components Availability, Performance and Quality. Below is a definition of each and how they create critical visibility into a machine or cell.


Availability is single number representing how much time a machine can run. This metric takes into account planned and unplanned maintenance, waiting, change overs and lack of supply. Using reason codes to track downtime companies can determine root causes and develop corrective actions to stop these issues from occurring in the future.

Performance (Speed)

The performance portion of the calculation is a measure of the actual parts produced against the standard. The standard is the ideal number of parts a machine can produce in a certain about of time. Because most machines are scheduled using the standard this is an important measure. If the machine is producing too far below the standard the schedule won’t be met. If it is producing above the standard, you may have excess capacity.


The quality metric is the simplest of the three, it is the ratio of good parts to bad parts. Most organizations will track reason codes with the scrap to understand how to reduce scrap in the future.

6 Big Losses

Using the three metrics above companies can use OEE to help uncover The 6 Big Losses. These losses are the most common reasons for reduced efficiency and capacity in a plant.

Category Examples
Breakdowns Unplanned maintenance, tool failures, other breakdown
Setup & Adjustments Material shortage, change overs, setup, minor adjustments
Start-up Quality of first articles, scrap & rework
Minor Stoppage Obstructions, mis-feeds, jams, adjustments
Reduced Speed Operator inefficiency, equipment wear, rough running
Defects & Rework Scrap, rework, in-process damage, in-process expiration


Tracking OEE and discovering when, where and under what circumstances The Big 6 are occurring can be a huge help for a manufacturing company. But there are some things to watch out for when using OEE.

OEE Can Be Misleading

Because of the formula Availability x Quality x Performance any of these factors can vary and produce the same OEE number. For example:

Availability Performance Quality OEE
Monday 75% 80% 90% 54%
Tuesday 90% 70% 85% 54%


As a manager if you saw only the OEE numbers above you would assume things are going well. In reality the daily fluctuations are not what you want to see. As a manager you need to focus on the trends.

Operators, on the other hand, have a better understanding of what is happening with the machine and what is causing certain numbers. Because of this, the real time numbers are very useful to an operator. It helps them understand how they are performing against the standards and where they can improve.

OEE Trends


As a manager would you rather have a machine that is running at a steady 54% O.E.E. with planned downtime or a machine that one day runs at 75% the next at 45% and has a lot of unplanned maintenance? By looking at the trends and diving into the details management can make more informed decisions about what is right for their business and define a strategy for improvement.

OEE is Missing an Important Ingredient, Cost!

Measuring OEE is a great thing and the visibility it creates can help improve equipment efficiency across the plant. But the calculation is missing one critical element, cost. It is not a measure of profitability of a machine. In certain situations, you may have a very low number of 30% but the machine is profitable, the converse may be true as well a machine may run at 80% OEE but not be profitable.

Unfortunately, most companies don’t have unlimited funds to create the ideal manufacturing environment. Companies have to make a tradeoff between being efficient and being cost effective. For example, the most efficient way to run a certain part with multiple operations is through a cell. But if that part is only run every other week the company cannot justify setting up a dedicated cell. So the machines that run this part will have a lower OEE because of setup, change over and startup time but will still be profitable.

So, is OEE the Magic Number?

The answer is: it is one of the magic numbers but not the only number that should be tracked. The visibility it creates will help the company drive improvement and measure its success. OEE should be used to follow trends and as a starting point to analyze performance, availability and quality issues. Companies that deploy OEE must have tools to analyze the metrics that make up the overall calculation.

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