Overall Equipment Effectiveness (OEE) measures how effectively time is utilized to manufacture a product, or products, using a piece of equipment.  It can also be expanded to measure how effectively time is utilized in your entire operation. OEE is comprised of three (3) basic factors expressed as a percentage:  Availability, Performance, and Quality.
OEE = Availability X Performance X Quality

Availability:  measures the uptime of the machine during the course of the production run.
Performance:  measures the cycle time of the machine or process against the ideal or standard cycle time.
Quality:  measures the time required to make good parts against the time required to make all parts
OEE is simple and practical. It takes the most common and important sources of manufacturing productivity loss, and places them into three primary categories and distils them into metrics that provide an excellent gauge for measuring where you are – and how you can improve!

Why use it: Overall Equipment Effectiveness (OEE) can be used to save companies from making inappropriate purchases, and help them focus on improving the performance of machinery and plant equipment they already own. OEE is used to find the greatest areas of improvement so you start with the area that will provide the greatest return on asset. The OEE formula will show how improvements in changeovers, quality, machine reliability improvements, working through breaks and more, will affect your bottom line.

Where to use it: Through the use of the OEE measurement we will be able to identify those areas of lost capacity.

When to use it: OEE is an essential measurement for determining the effectiveness of your equipment and beginning to understand where up-time improvements are possible.

How to use it: Implementing the Overall Equipment Effectiveness formula in your facility can take on many different forms. It can be used as an analysis and benchmarking tool for either reliability, equipment utilization, or both.