Manufacturing, autos and logistics
OEE (overall equipment effectiveness)
Availability x performance x quality: how much truly good output a machine makes versus its potential.
Facts checked against sources onWhat does OEE (overall equipment effectiveness) mean?
Overall equipment effectiveness measures how productive a machine or line is compared with its full potential. OEE = availability (share of planned time it actually runs) x performance (speed compared with its ideal speed) x quality (share of output that is good). It comes from the total productive maintenance approach set out by Seiichi Nakajima. Example: a line running 90 percent of planned time, at 85 percent of ideal speed, with 98 percent good parts has OEE of 0.90 x 0.85 x 0.98 = about 75 percent. Breaking OEE into its three parts shows whether to attack breakdowns, slow running or defects first.
Where does it come up in case interview prep?
- Productivity and utilization: how much you get from what you haveLesson in Making operations better, and planning for what can go wrong
- Using this in a case: operations and cost casesLesson in Making operations better, and planning for what can go wrong
- How industrial companies make money: equipment, aftermarket and backlogLesson in Industrial manufacturing, machinery and aerospace
- Industrial economics and operations: installed base, OEE and make or buyLesson in Industrial manufacturing, machinery and aerospace
- Industrial and aerospace players, trends 2024 to 2026, and how to crack the casesLesson in Industrial manufacturing, machinery and aerospace
Related terms
- Capacity utilizationActual output as a share of the most that could be produced.
- BottleneckThe slowest step, which limits the output of the whole process.
- Yield (manufacturing)The share of units made that come out good enough to sell.
- OEM (original equipment manufacturer)In autos and machinery, the company that designs, assembles and brands the final product.
- Tier 1 supplierA supplier that sells complete parts or systems directly to the carmaker.
- Vehicle platformA shared set of engineering underpinnings used for many car models.
- Battery pack costThe cost of an electric vehicle's battery pack, usually quoted per kWh of capacity.
- Installed baseThe number of a company's machines or systems currently in use at customers.
Learn it in context
See OEE (overall equipment effectiveness) at work in a lesson from Making operations better, and planning for what can go wrong, with checks as you go.
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