What is the cost of production equipment downtime? There are many different perspectives on the cost of shop floor downtime that depend on various factors. Let’s look at it from the perspective of a manufacturer that requires the use of capital-intensive machinery to manufacture its products.
The first part of this discussion is to understand the operating cost, on an hourly basis, for the equipment. Here are a couple of the basic elements.
- Equipment Depreciation or Lease Price: This is the monthly depreciation for the equipment or your monthly lease rate factored into an hourly rate. A common approach to deriving the hourly rate would be to divide your monthly cost by the available run hours per month. Some consider a utilization factor to accommodate for planned maintenance and other business rules.
- Facility Overhead: This is your rent, utilities, manufacturing infrastructure equipment costs, and shop overhead personnel. There are various methods to allocate the facility overhead costs to a single machine. Still, one that we have seen used in the past is to apply a factor based on the ratio of the machine’s square footage to the facility’s operating area square footage. Since the number usually comes out as a monthly cost, you need to convert it to an hourly rate.
With all this pulled together, you can determine what a run hour on a specific piece of equipment will cost you. This will be the minimum cost for downtime. Some consider the machine being down as a lost opportunity to sell more products. If this is the case, you may want to consider your machine charge or quote rate as your cost for downtime.
Once your hourly cost is determined, the next step is to categorize the downtime. Simply put, there are two options: Planned and unplanned downtime. Planned downtime can include job set up, job tear down, scheduled preventative maintenance, planned facility shutdowns due to holidays, weekends or physical inventories, or lack of work. Some examples of unplanned downtime include no operator, no material, tool or die damage, unplanned maintenance, power outage, or infrastructure equipment down.
Now that we have our costs and a way to categorize downtime, we should look at how to record or monitor the downtime. Most modern capital equipment comes with a controller that can track run time and downtime. This information can be recorded by the operator and then entered into a database for tracking and analysis. Manufacturing Execution System (MES) tools from DELMIAWorks can connect to the equipment and wirelessly transmit downtime information to a central system. This data can be displayed in real-time to prompt personnel to take immediate corrective action to head off lost machine time, with the added benefit of storing data for a deep dive of data analysis by the operations team at a later time.
With the number of hours, categorization, and costs all available, facility personnel can take action to reduce the biggest contributors to downtime. Understanding your downtime costs and having the information available to reduce downtime can lead to increased equipment utilization. If the impact is large enough, it may allow you to defer procuring additional equipment to handle an increase in business. With the benefits of increased equipment utilization and possible future cost avoidance, a project to begin monitoring, analyzing, and reducing downtime is a worthwhile investment.