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Be Very Careful With OEE and Utilization Metrics

October 23, 2021

When evaluating a manufacturing company, it’s easy to lean on metrics tied to machine utilization because they reveal both available capacity and whether a plant might be overstaffed.  Be very careful!

OEE, utilization and similar metrics are sometimes deceiving.  They should measure how many hours in the day a machine is in production generating sales – but they often don’t.  It’s not uncommon for factories to exclude periods of maintenance, “planned downtime” (when a machine has no work on it), machine breakdowns and other measures to make utilization appears significantly better than they should be – a measure of asset utilization.  Be sure to ask for a detailed explanation as to how your target is calculating OEE and/or asset utilization before relying upon it as a relative measure of business output.  If the business generates below-market margins, what you may believe to be a pricing issue may well be an overstatement of machine utilization.