Overall Equipment Effectiveness (OEE)

OEE is a measurement tool used in TPM (or Total Productive Maintenance) to reveal how effectively machines run.

Let’s discuss various factors that form part of the OEE calculation and how losses negatively influence machine effectiveness within the manufacturing environment.

Six Big Losses

In manufacturing operations, we identify six significant categories as the primary sources of waste. These categories collectively constitute the Six Big Losses. These losses, leading to reduced machine efficiency, fall into three broader types. The accompanying diagram visually represents this framework:


An Availability Loss occurs when a machine isn’t actively producing during the designated production period. Typically, this downtime arises from two main factors: breakdowns and waiting.

Breakdown losses result from sudden and unexpected machine failures, causing a stoppage in production. These failures may stem from technical issues, organizational factors, or inadequate maintenance practices.

Waiting losses happen when the machine is in a state of waiting. This category further divides into two types: idle and line restraint.

When a machine is idle, it loses production time because it isn’t actively producing, even without experiencing failures. This scenario often arises during changeovers when the machine temporarily pauses production to adjust tools, dies, or other components.

In contrast, line restraint occurs when the machine stops due to supply or transport issues along the production line. This situation typically occurs when the operator waits for materials from storage or previous machines.


A Performance Loss occurs when the machine operates below its maximum speed, typically for one of two reasons: minor stops and reduced speed.

A minor stoppage loss happens when the machine faces minor disruptions and doesn’t maintain a constant speed, disrupting the smooth flow of production. For example, when a product gets stuck in the conveyor belt. While theoretically considered a time loss, these disruptions may not be recorded as such because they occur in very short periods, usually less than five minutes. However, if these complications happen frequently, they can significantly reduce the machine’s effectiveness.

On the other hand, reduced speed loss occurs when a machine runs at a speed lower than its designed capacity. This can be due to people not realizing that the equipment is designed for a different speed than its current production speed. Another reason may be that the designed speed leads to the production of poor-quality products.


A Quality Loss occurs when the machine’s fails to produce good products first time around, resulting in defects. This problem can be broadly classified into two types: scrap and rework.

In the case of a scrap loss, the machine manufactures a product that doesn’t meet the required quality specifications, making it unusable. In this scenario, the production of scrap signifies a waste of material resources.

Conversely, a rework loss occurs when the product falls below the quality standards, but it can be reprocessed to meet the required specifications. Despite the possibility of salvaging the product, the reworking process still incurs a loss because it requires additional effort for the second processing. This is a wasteful use of resources.

The Six Big Losses are forms of waste. They do not add value to the products.

Addressing and minimizing these Six Big Losses is essential to:

  • minimizing productivity disruptions,
  • optimizing manufacturing processes,
  • improving overall product quality,
  • reducing material waste, and
  • enhancing overall machine effectiveness.

Understanding the OEE Formula

Most manufacturers companies use machines to add value to products, making them more desirable to their customers. This is why it is important that machines operate effectively, with as little waste as possible.

An ideal machine operates continuously (100% of the time), at full capacity (100%), with an output of perfect quality (100%). However, this is not always possible. The objective of OEE is to calculate the losses which occur on machines so you can improve the productivity and effectiveness of those machines.

By performing an OEE calculation. it reveals where the Six Big Losses occurred.

The main areas of the OEE calculation include:

  • The availability rate of the machine (When is it operating and when has it stopped?)
  • The performance rate of the machine (Is the machine operating at maximum speed?)
  • The quality rate of the machine (Is the machine producing good products?)

Availability compares the actual operating time of a machine with its potential operating time.

Performance compares the actual output of a machine with its potential output.

Quality compares the total quantity of products produced by a machine with the quantity of products that meet the customers specifications.

The diagram outlines of the OEE calculation to demonstrate how losses reduce the effectiveness of machinery.

How losses to OEE reduce machine effectiveness

The Total operations time equates to the total amount of time that a machine is available to manufacture products. For instance, during an 8-hour shift, this is 480 minutes.

The Potential production time (A) represents the amount of time available for production, minus unscheduled time. Unscheduled time is time that the machine is not scheduled to produce anything (such as during a strike, or a holiday period).

The Actual production time (B) is the total time that the machine was running and producing products. This is the potential production time, minus downtime (such as breakdowns and waiting periods).

Theoretical output (C) is the quantity of products that are expected to be produced during actual production time. This is based on the machine’s potential maximum speed.

The Actual output (D and E) represents the total quantity of products produced. This will be affected by speed losses which have reduced the amount of products produced during the shift.

Whereas, Good product produced (F) displays the amount of products which were produced that meet the specified standards and are ready for sale. This is the actual output, minus any quality losses from scrapping and reworking.

The grey area on the diagram reveals the total loss of effectiveness. This represents an opportunity to improve good output of the machine.

It is important to note that the purpose of OEE is to monitor the machine or the process that adds value – not the productivity of the operator. Fundamentally, OEE looks at how well the equipment or process is working. This is strictly about improvement and should promote a culture of open information sharing amongst workers.

Practical Example of the OEE Calculation

For practical purposes, this example is as simple as possible. There are other losses and vast amounts of data that need be factored into the calculation in a real-life situation in a factory.

The table below contains hypothetical shift data used to calculate OEE.
Take note that the same units of measurement are consistently used throughout the calculations, in this case, minutes and parts.

To determine the OEE percentage, the following elements need to be calculated: Availability Rate, Performance Rate and Quality Rate.


To calculate the Availability Rate, all time data needs to be considered:

  • Potential Production Time represents the total operating time scheduled for the shift. This is an 8-hour shift of 480 minutes.
  • Production time was lost due to tea breaks (30 minutes), break time (30 minutes) and quality stops (47 minutes). This brings the total downtime of the machine to 107 minutes (= 30 + 30 + 47).
  • Therefore, the duration that the machine was in production and produced parts is 373 minutes (= 480 – 107).