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The Real Cost of Unplanned Downtime—How to Avoid the Risks

The Real Cost of Unplanned Downtime—How to Avoid the Risks


Jun 28, 2017
Manufacturing and Distribution

Cost of Unplanned Downtime 

Each year, companies plan their budgets, sales projections, product launches, and growth opportunities. What manufacturers don’t plan is unscheduled downtime, which can bring even the most efficient operation to a standstill. When a machine breaks down, it can significantly impact production. In today’s highly technical manufacturing landscape, all that equipment and hardware is tied to software, making it critical for operations and IT departments to work together to minimize downtime and the associated costs.

What Areas are Impacted by Downtime?
The tangible costs of downtime go way beyond the salaries of employees who sit idle while waiting for equipment to get back up and running. Reduced production—and potential sales as a result of delayed orders—can easily exceed labor costs and dramatically affect profitability. If damage to equipment occurs, the costs to repair or replace it need to be factored in as well, along with any specialized technical support.

An area that’s difficult to measure is the resulting stress and diminished morale of employees who need to deal with the issues and scramble to catch up on production schedules. And, of course, when customers’ orders are late, a company’s reputation can be damaged, potentially placing that next project or reorder in jeopardy.  

What Are the True Costs?
A study conducted by industry research firm Enterprise Strategy Group (ESG), estimates the average downtime lasts approximately 1.5 hours, while other studies suggest a higher average of three to four hours. When employees sit idle, the labor costs alone can add up to thousands of dollars. Figure in the necessary overtime to get production back on track along with additional factors noted earlier, and some calculations put the typical downtime costs to industrial manufacturers between $30,000 and $50,000 per hour, increasing costs anywhere between five to 10 percent.

Have you quantified the cost of downtime to your organization? If not, you’re not alone. Nearly three-quarters (71 percent) of survey respondents said they don’t track downtime expenses, so the estimated cost per hour may be even higher than already mentioned. What is known is that almost every factory loses at least five percent of its production capacity from downtime, and many lose up to 20 percent. It’s imperative for companies to calculate the true costs and do all they can to minimize disruption.

How IoT Can Help
Aligning the goals of operations and IT are critical to a company’s success. These goals likely require non-disruptive scalable systems and applications, cyber-security, increases in ROI, ROA, and KPIs—all of which are directly impacted by unplanned downtime.

Internet of Things (IoT) technology can help eliminate unplanned equipment downtime with predictive analytics, by future-proofing systems and measuring data, such as temperature, vibration, and other environmental factors. Software monitors any changes in the parameters of a machine’s operation and can automatically trigger an alert for a service technician to repair or replace parts prior to failure—and unplanned downtime—occurring. 

Implementing IoT technology is also a necessary part of any robust disaster recovery plan, so that if a breakdown or physical disaster occurs at the plant, valuable production, operational, and customer data is backed up and not compromised or lost.

By focusing on production assets and IoT technology integrations, manufacturers can reduce downtime and improve efficiencies, leading to greater productivity, a happier workforce, and more satisfied customers. Our manufacturing experts can provide insights into how IoT solutions can help your organization minimize breakdowns and the resulting downtime and related expenses. Reach out to us today to learn more! 

 

Author(s)

Mark Stevens
Mark Stevens
Partner
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