Every minute your machines sit idle or run below speed, you’re leaving money on the table. For small and mid-sized manufacturers, where margins are tight and equipment budgets are limited, getting more out of what you already have is the fastest path to profit.
That’s where Overall Equipment Effectiveness (OEE) comes in.
OEE isn’t just another acronym. It’s your clear, no-nonsense way to measure how well your machines are running, and where they’re losing you time, money, and output.
The Three Components of OEE
OEE = Availability × Performance × Quality
- Availability: How much of your scheduled time the machine is actually running (accounts for downtime and breakdowns).
- Performance: How fast it runs compared to its designed speed (captures slow cycles and micro-stops).
- Quality: How many good units come off the line vs. scrap and rework.
Quick Example:
If a machine is available 90% of the time, runs at 95% of its designed speed, and produces 98% good parts:
OEE = 0.90 × 0.95 × 0.98 = 83.7%
Why OEE Matters for Small & Medium Manufacturers
The headline? OEE is a snapshot of your operations.
It is great because it summarizes all types of issues and improvements in a single number. You only need to check its components if you are looking to investigate causes for trends or unusual behaviors.
Specifically, it:
- Reveals Hidden Losses: Even without high-tech tools, OEE shows you where production time is being wasted.
- Creates a Baseline: Once you measure OEE, you know where you stand and where to focus.
- Supports Continuous Improvement: Every small fix, quicker setup, or eliminated stoppage moves the number up.
But OEE also has another, subtle benefit: It’s a great motivator.
For one thing, OEE shows all critical improvements (and issues) in your operations. Every improvement moves the needle, as we already mentioned. That means that every team member can see the impact of their work too. Too often, it can seem like one is just a cog in a machine oneself. Do I really matter?
Ah, but yes! OEE is a figure that everyone up to the CEO follows. If you can improve OEE, you are improving the whole company.
In other words, OEE gives employees and teams a way to stand out.
But in addition, it’s also about teamwork. Yes, individual improvements show up in OEE. But so does everyone’s collective effort. OEE is a joint metric that everyone on the floor and in production groups shares.
It can be easy to focus just on one’s team or shift or colleagues. But in the hands of skilled leaders who know how to rally people, OEE can serve as a unifier too.
(A side note: There is also the similar-sounding acronym “OPE”, Overall Process Effectiveness. OPE expands beyond Equipment to all other factors, such as material flow, workforce productivity, and process design. But let’s stick with equipment for now.)
How to Measure OEE Without Overcomplicating It
Measuring OEE is simple … but not easy. We are all too aware that this simple three-step process can be hard in practices.
But still, let’s talk about the steps before introducing complications.
“All” you need to do is:
- Collect Data: Start simple, manual log sheets or whiteboards work if you don’t have digital systems.
- Calculate Each Factor:
- Availability = Run Time ÷ Planned Production Time
- Performance = (Ideal Cycle Time × Total Count) ÷ Run Time
- Quality = Good Count ÷ Total Count
- Availability = Run Time ÷ Planned Production Time
- Compute OEE: Multiply the three together:
- OEE = Availability × Performance × Quality
- OEE = Availability × Performance × Quality
👉 Tip: Accuracy matters more than fancy systems.
Consistent tracking (manual or digital) that you can do today beats perfect software you don’t have.
How to Improve OEE
So much for simplicity. Let’s get practical too. You have a range of options to measure and improve your OEE. The specifics will differ based on your industry, machinery, and production needs. So consider this more of a list of illustrative examples, rather than a comprehensive one. But overall, the kinds of things you can do to make a difference for your OEE include:
- Reduce Setup & Changeovers: Apply SMED (Single-Minute Exchange of Dies) to cut wasted time.
- Preventive Maintenance: Schedule checks before breakdowns happen or utilize sensors to warn you about potential issues.
- Train Operators: Skilled operators can detect and prevent small stoppages from snowballing.
- Root Cause Analysis: Use “5 Whys” or Pareto charts to fix recurring issues.
- Visual Management: Share OEE metrics openly. Teams improve what they can see.
By the way: If you are now thinking something like “huh, I knew of most of those strategies before”, then yes, we’d agree. That’s how it should be! OEE is not magic. It’s a matter of discipline, tracking, and patient improvement, not a silver bullet.
What’s a “Good” OEE?
If you are first starting out on collecting OEE data, it’s probably not realistic or even necessary. But nonetheless, it’s nice to know how good you might get with sufficient effort.
We do caution you not to over-focus on a single OEE target. There are many nuances that may not make it as obvious a target in reality as it can seem in theory. Ongoing, detailed data trends in particular may help you more day-to-day.
But still, it’s good to know these figures. Without further ado, benchmarks you might aspire to include:
World-Class OEE is 85%+. Mind you, this is rare, often the outcome of major efforts at large plants with robust Lean and Analytics programs. And it may not even make sense in your context. We’ve even seen this goal called an “85% myth”. But as a simple start for your further reading, consider 85% as a possible stretch goal.
High performance with some room to improve is ~70-85%. Yes, this overlaps a bit with the figure we’ll cite next. But remember that these are rough guidelines. So we are leaving in the overlap to point out that they should only serve you as directional guides. Build your own cutoffs that are right for your plant’s reality!
Typical OEE for Small & Medium Manufacturers (SMMs) is closer to 60–75%. That’s not a failure. Even this can take significant effort by all your teams. And if you are aiming for world-class, it’s still a solid starting point. Most SMMs see big wins just by addressing downtime, speed losses, and other issues that let them reach this benchmark.
The Bottom Line
OEE isn’t about chasing a magic number. It’s about understanding where your time is going every day, every shift.
For small & medium manufacturers, it’s at the same time the fastest and the most long-term way to unlock capacity, reduce costs, and squeeze more profit out of the equipment you already own.
You, too, can achieve great OEE: Start measuring. Start improving.
References
Want to learn more? Read on here:
[0] https://en.wikipedia.org/wiki/Overall_equipment_effectiveness: Starting with Wikipedia is never bad. You know you’ll get a good and reasonably unbiased overview. 🙂
[1]: https://www.oee.com/: A service provided by a consultancy that focuses on, you guessed it, OEE improvement. Covers a good balance of introduction and depth for initial orientation.
[2]: https://www.lean.org/lexicon-terms/overall-equipment-effectiveness/: Lean Manufacturing methods have always played a big role in achieving great OEE. The Lean Enterprise Institute focuses on how Lean works and can benefit you
[3]: https://www.qualitymag.com/articles/96001-white-paper-a-roadmap-to-increase-oee-performance: If you prefer magazines as your source for new insights, Quality Magazine has several articles on OEE. This white paper offers a good planful way for activating OEE improvements.
[4]: https://www.leanproduction.com/smed/: There are many ways to apply Lean or other methods to improve OEE. Here we offer SMED (Single-Minute Exchange of Die) as just one example of such techniques. SMED programs aim to improve changeover times dramatically, improving OEE by spending more time producing and less time setting up. (This website is run by the same consultancy as oee.com.)
[5]: https://www.manufacturing.net/home/article/13217570/the-abcs-of-overall-equipment-effectiveness: Among the many articles about OEE, we like this one because it’s old, from 2007. The point that it makes to us is the one with which we started: OEE is simple, not easy. The idea has been around for a long time. Achieving it is your daily challenge!