What is the cost of downtime and how can we tackle it?
Manufacturing technical personnel and management often see asset downtime as an inevitable process. They do not provide counter actions, problem analysis, and problem solving instruments. As is known, every asset has its own life cycle within which downtime will occur.
“…what can I do? Should I check any single bold?” “Hire an assistant for me…” Such perceptions are logical from a technician’s viewpoint but they do not make sense with regard to profit and manufacture.
Since we consider asset downtime a normal process, we distance ourselves psychologically from the reasons of downtime and the means of its elimination. Nevertheless, every company has to pay much attention to downtime because in a long-term perspective outage time and interruptions lead to financial losses.
How should a company act in this case when it wants to utilize its resources efficiently? Before we answer this question, we need to determine the types and costs of downtime, and the reasons why machinery stop working.
Machinery Downtime – Theory and Practice
Downtime is a forced inactivity caused by internal and external reasons, such as imperfect repair and operation, lack of materials for repair and their quality, delayed deliveries of raw materials from suppliers, power outage, labour strike, etc.
Downtime reduces a company’s expected profit. How significant are business losses due to downtime?
Reduced productivity – it refers first and foremost to production output.
Drop in financial indicator – enterprises lose their credit rating and investment attraction and they pay salaries even during downtime in manufacturing.
Loss of reputation – the restoration of relationships with suppliers, customers, and financial markets will be expensive and time-consuming.
Reduction of profitability – apart from the resources used (electricity, raws, and materials) during downtime in manufacturing, there are also other costs including compensations and investment losses.
Other costs – there are temporary technical service costs such as rent for additional equipment, overtime compensation, and costs for repair materials.
Many companies do not envisage the losses connected with asset downtime during failures and in many cases they do not even evaluate/analyze their financial damage.
How can we reduce downtime?
In order to determine downtime reduction, you should collect comprehensive data on asset operation and downtime duration. The next stage is to make financial estimates of short and long-term losses. You need to calculate a profit index per time unit made by an asset. Finally, you should make a decision for downtime reduction and prevention.
Toyota’s example shows that the features of regular downtime can be understood only after analyzing all data on equipment performance. The company arrived at the conclusion that the analysis of any asset operation has to be carried out on a real time basis. For that, the company used technologies and took care of its assets (preventive maintenance). By applying these methods, Toyota has reduced its costs and emergency/unplanned downtime. As a result, downtime duration has been reduced by 30%.
It is obvious that the structured and analyzed data are vital for efficient management of assets. Bringing all indicators together into a single system, you will be able to see the full picture of operation and downtime. Only after this process, it will be possible to find right solutions and save finances, respectively.