Overall Equipment Effectiveness (OEE) - Is 100% the perfect number?

by Kiran Prabakaran, April 16, 2018

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Leading automotive manufacturers such as Toyota and Honda emphasize their suppliers  track and improve Overall Equipment Effectiveness (OEE).

OEE is a measure of Performance, Availability and Quality. It identifies the percentage of planned production time that is truly productive. An OEE score of 100% represents manufacturing only good parts (Quality), as fast as possible (Performance) and with no down time (Availability).

OEE = Performance X Availability X Quality

Higher the OEE, the higher is the production output from a machine. A high OEE without adequate customer demand will lead to overproduction. Overproduction in turn will lead to higher inventory levels which impacts the cash flow. At the same time, a company having 100% OEE but failing to meet customer demands makes it less profitable. So, OEE of 100% is not always good.

OEE improvement should go hand in hand with lean manufacturing, waste reduction, downtime reduction and On Time In Full delivery.

"Produce only what is needed, when it is needed and in the amount needed"
-Taiichi Ohno, Father of Toyota Production System.