# The OEE concept
The basic idea of OEE (Overall Equipment Effectiveness) is simple. OEE indicates, in percentage, the time during which the equipment produced at full productivity.
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An OEE of 100% means that the equipment produced without downtime, at maximum speed, and without any scrap.
{% endhint %}
An OEE of 100% is not achievable in reality because losses always occur. Losses are divided into the following three categories:
1. [**Availability Losses**](/en/concepts/understanding-oee/availability.md): include all equipment downtimes. The availability factor indicates what percentage of the planned time the equipment was actually running.
2. [**Performance Losses**](/en/concepts/understanding-oee/performance.md): arise from reduced production speeds. The performance factor indicates what percentage of time would have been necessary if production had run constantly at maximum speed.
3. [**Quality Losses**](/en/concepts/understanding-oee/quality.md): result from the production of scrap. The quality factor indicates what portion of the production time was used to produce good parts.
## **Calculating OEE**
The OEE calculation starts with the observation period, i.e., the total available production time. From this, the time when no production is planned is subtracted—represented as a gray-hatched area.
Then, the individual types of losses are taken into account step by step:
1. **Availability losses** – due to downtimes
2. **Performance losses** – due to slow operation
3. **Quality losses** – due to scrap
The result is the production time that a **perfectly effective machine** would have needed to produce the same amount of good material.
### **Time-Based OEE Calculation**
The simplest formula for calculating OEE is:
$$
\text{OEE} = \frac{\text{Production time perfectly effective machine}}{\text{Planned operating time}}
$$
So, an OEE of 50% means that a perfectly effective machine would have needed only half the time to produce the same amount of good parts.
### **Loss-Based OEE Calculation**
More transparency into the individual loss types is provided by the classic formula:
$$
\text{OEE} = \text{Availability} \cdot \text{Performance } \cdot \text{Quality}
$$
The major advantage of this representation: all essential types of losses are captured—and it's not possible to compensate for poor quality or frequent downtimes with high speed. A true improvement in OEE requires progress in at least one category without deteriorating in the others.
***
Losses can always be represented from two different perspectives:
* **Absolute**: as concrete time losses (e.g., minutes of downtime)
* **Relative**: as percentage factors (e.g., 90% availability)
If you want to learn more about the three loss categories—availability, performance, and quality—you’ll find further information in our documentation on each respective topic.
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