Quantifying Productivity and Performance: OEE (Overall Equipment Effectiveness)

09/02/2026 by IMS

Assessing performance levels and the potential for productivity improvement is an essential part of any efficiently run business, department, process, activity, or piece of equipment. Typically used in manufacturing productivity, OEE can also be applied to service industries.

Effective performance or productivity measure can be quantified by assessing three key factors.

  • Method – How effective would you consider the method, activity, or process?
  • Utilisation – How much of a normal day/shift is actually spent working productively?
  • Effort – How would you estimate the vigour and dexterity of the operator or equipment when working?

A fourth factor, Quality, can be additionally measured in.

A percentage is established for each factor, by estimating or by direct measurement, although the method% is more subjective

Calculation Example –

  • Utilisation 70%
  • Method 80%
  • Effort 80%

The overall ‘Effective Performance’ is calculated by multiplying the Utilisation factors by the percentages for the other factors – eg 70 x 80 x 80 = 44.8EP

In a quality sensitive environment, a 4th factor Quality would reduce the EP further.

What does this mean?

Separately, each factor in this example appears to be achieving a reasonable level of productivity. However, when the real effectiveness is calculated a different picture emerges. Only 44.8% of capacity, hours, activity, equipment time, or costs is effective.

 

What level is achievable?

Achieving 100% is impossible, local circumstances will influence the maximum achievable levels. This is often well below 100%, over 75EP or higher is exceptional. But small changes across Utilisation and Method can make a significant improvement even without an increase in Effort.

Improving EP Example

  • Increase Utilisation to 80% and Method to 85%
  • 80 x 85 x 80 = 54.4 EP (21.4% increase)
  • 6% cost reduction without an increase in Effort

The example figures are higher then is often seen but the important thing is to concentrate on improving relative figures. Better utilisation is the starting point, then even bigger changes may be possible.

What influences each key factor?

Utilisation is about keeping people, processes, and equipment occupied. Many issues on different levels have an impact on utilisation:

Managerial/ Supervisory

  • Equipment breakdown
  • Faulty Material
  • Awaiting instruction or materials
  • Inadequate training
  • Poor flexibility: culture grading, skills
  • Out of balance process or operation
  • Space congestion or low problem
  • Overmanning or insufficient work
  • Ensuring adherence to break times

Individual

  • Extended breaks and rest
  • Late start – early finish
  • Failing to see problems in advance

Method is more effective and efficient processes, layouts, equipment and materials.

Managerial/supervisory

  • Good equipment, properly maintained
  • Minimising personal movement
  • Minimising material handling
  • Effective operator workplace
  • Sufficient training
  • Avoiding Rework
  • Gaining operator input and ideas
  • Materials/clear info at workplace

Individual

  • Recognising waste- all types
  • Communicating with people
  • Suggesting better ways
  • Working as teams
  • Flexible, progressive attitude

Effort is largely about the vigour and dexterity with which humans apply themselves to the proper task. Also applies to indirect and support functions.

Managerial/supervisory

  • Providing continuity of work
  • Setting targets and monitoring
  • Motivation
  • Incentive/reward/recognition
  • Communication
  • Working conditions/ergonomics

Individual

  • Motivation
  • Dexterity
  • Rhythm
  • Concentration
  • Energy

By measuring OEE and the underlying losses, you will gain important insights on how to systematically improve your processes. OEE is the single best metric for identifying losses, benchmarking progress, and improving the productivity of equipment