When a downtime issue occurs, how much revenue is lost?
In manufacturing, this calculation is critical. Whether you’re coming up with a single number, or a list of impacted areas, the cost of downtime can be downright catastrophic. So how exactly do you quantify the cost of downtime?
From software updates to machine repairs to production delays, several factors can affect the flow of business. Aberdeen Research, a business analytics firm, puts the average cost per hour of downtime at $260,000.
In a study done by GE, most organizations have experienced two episodes of unplanned downtime in the past three years. That means millions of dollars lost, valuable production time gone, and an inability to deliver critical goods and services to customers.
To properly monitor downtime, you must consider both direct, tangible factors, as well as intangible costs. Here’s a breakdown of the causes and impacts of downtime in the manufacturing sector.
Causes of Downtime
Downtime can occur for a variety of reasons. Chief among them are equipment-related, IT-related, or just poorly-planned production methods. The following are some of the most common causes of downtime. Check to see if your organization is at risk for:
- A poorly laid-out manufacturing floor - Your productivity rates or production cycle may be impacted by a less-than-optimal floor layout. Although wasting 20 seconds here and 30 seconds there may not seem like a big deal, over time it will compound to cause a major drag on your operations.
- Confused assembly lines - If you don’t have clear work instructions, your production employees will run into issues. You must have a meeting of the minds between engineers, draftsmen, and production managers, with one set of instructions. By the time those instructions reach the assembly line, they should be perfectly understood by all parties.
- Shared tools / excessive tool changeovers - If production employees are sharing tools and equipment across shifts, teams, and locations, mistakes will be made. Though this practice might save money in the short-term, it’s unwise in the long-term.
- Equipment jams / equipment failures - There’s no way to keep all equipment up and running 100% of the time. If jams, adjustments, and breaks aren’t anticipated, there can be a negative downstream impact. Maintenance can take hours, days, or weeks.
- No operators / breaks - An unmanned station can halt operations until the station is manned again.
Impacts of Downtime
The impacts of downtime can be felt far and wide across an organization. Manufacturing now has more digital processes, from remotely-controlled equipment to automated assembly lines. For businesses to fully control downtime impact, they must first understand how to monitor it. Organizations should plan for impact in the following areas:
- Service and goods delivery - At the endpoint of production, goods and/or services go out to the customer. This process is held up if there are delays in the manufacturing process.
- Production time - When a critical asset is jammed, broken, being cleaned, or otherwise out of service, it can delay production times.
- Communication - If there’s a sudden power outage, managers and operators may move from their normal positions. Phone lines and power lines might be down, which hinders normal channels of communication. Without a backup or a networked communications system in place, you may face messaging delays.
- Security - When operations aren’t running normally, security can waver. System vulnerabilities are exposed if technical staff is drawn away to concentrate on unexpected issues. Additionally, if new individuals are visiting a site because of unexpected problems, the security risk grows.
- External stakeholders - If downtime happens often or is particularly severe, you may lose business. Clients, customers, and partners might lose their patience if their orders or requirements are not met.
- Budget - Unplanned expenditures pop up in response to unplanned downtime. Whether it’s spending money to fix a problem or spending money to cope with a lost asset, budget will take a hit from extended downtimes.
- Data - Machine operation errors can also impact data storage and data availability. Without proper backup mechanisms, downtime can have a permanent impact on data.
- Accessibility - When operations are derailed, field engineers may not be able to access equipment and data that they need.
Best Practices for Mitigating Risk
While you can’t always prevent downtime, you can mitigate its impact. Certain preventative measures can help keep business up and running, even when the unexpected happens. Here are the best practices for mitigating risk of downtime in manufacturing:
- Replace antiquated emergency response systems - for example, when a crisis occurred, a large manufacturer of industrial machinery could no longer ignore the fact that its emergency management system was outdated. They revamped their mass notification model and deployed the AtHoc Suite, resulting in quicker response times and limited downtime.
- Establish clear communication practices - affected parties need to be able to exchange critical messages in a crisis. Using a networked crisis communication platform, you’ll empower personnel and other stakeholders with the tools they need to get critical data where it needs to go.
- Establish incident response teams - for the most common issues that pop up, train designated groups to maintain business continuity in an emergency. This guarantees that the right people will be onsite to lead emergency response.
- Establish accountability - plan for how to collect information from the field for real-time visibility
- Regularly test your critical communication system - build in an annual review, and schedule improvements based on stakeholder feedback, compliance, and how closely your plans map to your theories once they’re put in practice.
The effects of downtime go beyond a few hours here or a few dollars there. Unplanned downtime can wreak havoc on a manufacturing facility. A reactive model won’t minimize the impact. Instead, construct a proactive management process that nips problems in the bud before they lead to long spells of downtime.
Several citations in this piece come from: After the Fall: The Costs, Causes & Consequences of Unplanned Downtime by Vanson Bourne and ServiceMax, a GE Digital company.