Want FREE Templates on Organization, Change, & Culture? Download our FREE compilation of 50+ slides. This is an exclusive promotion being run on LinkedIn.


As Sunil Bharitkar, co-founder of Intrasonics and a leading expert in Data Science and AI once said, "In the domain of manufacturing, optimizing Overall Equipment Effectiveness (OEE) is a keystone to operational success." So, what exactly is OEE, and how can organizations harness its capacity to drive improvements in their manufacturing operations? More importantly, how does one go about making sense of OEE in the current digital age?

Ironing Out the Fundamentals

Overall Equipment Effectiveness, a term coined as a part of Lean Manufacturing methodologies, is essentially a standard for measuring productivity. It scrutinizes three critical operational parameters: Availability, Performance, and Quality representing uptime, speed, and the rate of defect-free products respectively. Leaders must comprehend that a high OEE score does not guarantee productivity, but it provides invaluable insights for Performance Management and spots potential areas for improvement.

Machinery and Human Resources—Two Sides of the Same Coin

Effectively managing Overall Equipment Effectiveness extends beyond machinery. It also involves the efficient utilization of teams working on the manufacturing floor. Some relevant questions executives should ask are: Are machine failures a result of human error or vice versa? Are there training opportunities that could decrease downtime and boost quality?

Digital Transformation and Overall Equipment Effectiveness

The information age has bestowed upon the manufacturing industry the tools to improve OEE significantly. However, successful execution depends on management's comprehension of Digital Transformation in the context of OEE. The advent of IoT and big data analytics allows organizations to harness data from equipment on a granular level, leading to Operational Excellence.

Addressing OEE within Strategic Planning Sessions

It is essential for the C-suite to incorporate OEE considerations into broader organizational Strategic Planning. The ripple effects of OEE reach beyond the walls of the factory floor, impacting supply chain dynamics, customer relations, and even the broader competitive landscape. Therefore, executives should position OEE as a pivotal driver in the organization's strategic decisions.

Risks of Relying Solely on OEE

While on the surface, OEE may seem like the quintessential metric for manufacturing operations, overreliance on OEE could inadvertently result in Risk Management oversight. Executives need to be clear that OEE is a measure of perfect production (only good parts, as quickly as possible, without stop time). However, assessment moments should balance OEE scores with other operational and business metrics to build a more holistic view of the organizational performance.

The OEE as an Enabler of Continuous Improvement

OEE optimization is also a stepping-stone towards Continuous Improvement (CI), a principle at the heart of Lean Manufacturing. A strong CI culture ensures that teams are continually seeking ways to improve operations. This, in turn, safeguards the organization's competitiveness and paves the way for more robust growth trajectories. Therefore, the journey doesn't stop at achieving a high OEE—it’s part of an ongoing journey towards operational perfection.

Wrapping Up

Implementing OEE as a monitoring system is not complex. However, understanding its implications in an interconnected world that is rapidly being reshaped by technology can be a daunting task. Careful calibration with employee training, incorporated within Strategic Planning, and balanced by Risk Management helps organizations achieve success. Turning the lens of OEE onto operations is not an end goal, but a means to achieving Operational Excellence.


Since 2012, we have provided best practices to over 10,000 businesses and organizations of all sizes across the world—in over 130 countries. Below is just a very small sample of our customer base.

Did you know?
The average daily rate of a McKinsey consultant is $6,625 (not including expenses). The average price of a Flevy document is $65.

Browse our Business Toolkits
to quickly find the documents you need.
Each business toolkit is a collection of documents around a common management topic.


  Show all available toolkits.

Download our FREE Strategy & Transformation Framework Templates

Download our free compilation of 50+ Strategy & Transformation slides and templates. Frameworks include McKinsey 7-S Strategy Model, Balanced Scorecard, Disruptive Innovation, BCG Experience Curve, and many more.