What is Downtime in Manufacturing and How Much is it Really Costing You?

Downtime in manufacturing has always been touted as the “big bad” for the industrial sector. Downtime is lost productivity, lost business, and lost profit after all. This disdain for any sort of downtime in manufacturing is what’s spurred on movements such as the fourth industrial revolution. By adopting Industry 4.0’s interconnected solutions such as industrial PCs, IoT machinery, and analytics software, leaders in the industry are keeping a hawk-like eye on every operation in order to quash any instance of downtime before it has a chance to hinder production.

Factory managers are right to target downtime. Even today, reducing downtime stands as one of the most potent means to reduce overhead costs in manufacturing. Problems arise, however, when manufacturers slack off on reducing their factory downtime costs unknowingly. Oftentimes, many think they aren’t able to eliminate downtime in some cases where they actually can and, even more commonly, vastly underestimate how much profit they’re actually losing. In fact, consultants have found that 80% of industrial facilities inaccurately estimate their downtime costs, resulting in “solutions” that are believed to be good enough but, in reality, leave hundreds of thousands of dollars on the table.

Both of these issues boil down to a fundamental misunderstanding of what downtime can be defined as and how to calculate the real costs of downtime in manufacturing. Once these discrepancies are settled, strategies for eliminating downtime can then be truly optimized. 

What is Downtime in Manufacturing?

Downtime in manufacturing is any time when a machine is not operating. This can be because of a breakdown, a lack of having someone available to operate the machine, not having any orders for product – literally any time a machine is not running when it ideally should be. The reason factory downtime costs compound is because, while these machines are stopped in their tracks, other money-costing services are anything but – lights are still on, employees are still on the clock, and money is still being spent.

Downtime in manufacturing can be scary but, for the most part, it’s an expected part of manufacturing. No machine can truly be on 24/7. The real scary culprit is unplanned downtime in manufacturing. Unplanned downtime in manufacturing is downtime that isn’t predictable because it’s caused by a failure. Whether they be a broken machine, a lack of sufficient materials, or a lack of sufficient employees needed to run the machine, these failures cause downtime when the machines should be running and making profit.

Unfortunately, this unplanned downtime in manufacturing is more common than many would like to admit. According to a Vanson Bourne research study, over 80% of companies have experienced at least one outage resulting in unplanned downtime in the past three years with 2 being the average number of those outages experienced. And if that’s not already enticing you to skip down to the “How to Reduce Downtime in Manufacturing” section of this post, learning just how much these outages cost sure will. 

Factory Downtime Costs

Factory downtime costs vary from business to business, however, the averages drawn from that Vanson Bourne research study are alarming to say the least. According to those numbers, unplanned downtime in manufacturing costed companies an average of $250K an hour. Not scary enough? How about when you take into account that the average downtime causing outage lasted four hours, costing businesses an average of $2 million?

Factory downtime costs aren’t just limited to profits either. 46% of those surveyed commented not being able to deliver services to customers and other businesses during downtime, jeopardizing lucrative partnerships and deals.  

So, with factory downtime costs clearly defined, what strategies can be implemented to mitigate the amount of time a machine is unable to be operated?

How to Reduce Downtime in Manufacturing

1.) Start by First Calculating True Factory Downtime Costs

Like we mentioned, there are various ways downtime can cost manufacturers. Creating a plan to mitigate these losses needs to start with a firm understanding of how much you specifically stand to lose. Not only does this make strategies more targeted and effective, but, seeing in cold numbers how much capital you’re leaving on the table can motivate other members of your team to get moving on plans to cut factory downtime costs. For these and many other reasons, learning how to calculate the cost of downtime in manufacturing becomes necessary.

To uncover the cost of employee downtime, take the average hourly pay of an employee who would be impacted by an outage. Next, come up with a percentage for the amount of impact a moment of unplanned downtime will have on productivity. Let’s say, for example, an unexpected issue results in 40% of your production line being unable to produce. If you have 100 employees and each of those employees are paid an average of $50 an hour…

$50 x 100 Employees = $5,000

$5,000 x 50% = $2,500

That’s $2,500 for an hour of labor that has added no value to your business. Now, take that and multiply it by the number of hours this unplanned downtime lasts. No longer an issue that seems like it can be tabled for later, right? And we aren’t done. 

Employees being unable to work means product isn’t being made which means a loss of orders for your business. These losses can be calculated by dividing the average amount of sales orders made over a normal workday by the number of hours in said workday. This gives you the amount made every hour during a normal day where no unplanned downtime occurs.  Multiplying that number by the number of hours of unplanned downtime then gives you an accurate measure of how much that downtime cost your team. 

So, let’s say your business makes $300,000 in sales over a typical 8 hour workday where no unplanned downtime occurs. In this scenario, that would mean you make $37,500 in sales orders every hour. If a bout of unplanned downtime occurs and lasts for the average 4 hours we discussed before, that’s $150,000 lost that could have been made had your floor been running as planned.  

2.) Give Employees Tools to Help Combat Unplanned Downtime in Manufacturing

Your ground-level employees are going to be the ones who spot the possibility of unplanned downtime on your factory floor. As such, you need to ensure they have the tools necessary to report these red-flag symptoms not just accurately, but in real-time as well. As far as hardware is concerned, Rugged industrial tablets are incredibly portable and allow for employees to travel the factory floor with their workstations in hand. With this increased mobility and access to employee dashboards anywhere on the factory floor, they can better report breakdowns, troubling signs, and downtime more responsively and as they are observed, not a moment later.

 On the software side of the equation, connected worker platforms and manufacturing communication systems give employees the ability to share these concerning signals simply, in real-time, and more effectively send reports to decision makers who can actually do something about them.  

3.) Reskill Employees to Handle the Most Common Causes of Downtime

Manufacturing has been experiencing a rather demoralizing lack of skilled labor as of late. While there are several people willing to work, the nature of manufacturing and its habit of incorporating more and more complicated tech in order to further embrace Industry 4.0 programs is gradually increasing the amount of technical skill needed to break into the industry.

Fortunately, reskilling and upskilling programs remain an effective method of training employees in the new skills they need to better contribute to the ever-changing demands of the manufacturing sector. Why does this matter when looking to address unplanned downtime in manufacturing? Because addressing downtime requires a predictive approach. If you’re using sensors and interconnected hardware to gather data and diagnostics from machines in order to predict breakdowns, you need employees capable of reading that data and making those predictions.

To that end, employees need to be trained to handle 2 key responsibilities:

1. How to use the tools we mentioned earlier in order to improve frequency and accuracy of reporting on the front lines.
2. Taking data and being able to draw conclusions and predictions about machine performance based on observed patterns and red-flag symptoms. 

And there are several means of handling these education programs for your employees, many of which we highlighted in a previous post about reskilling the workforce

4.) Stop Us if You’ve Heard This One Before: Predictive Maintenance

70% of companies lack awareness of when a piece of equipment or asset is due for maintenance or an upgrade. And this is because not all signs of a breakdown are physically or visually noticeable. Many times, the most common symptoms that hint at a breakdown that can result in unplanned downtime in manufacturing are things like a slightly louder engine, overheating, or greater vibrations produced by the device.

And while the naked eye can’t observe this, sensors can. Iot sensors are low cost, provide heaps of actionable data, and give employees information on these symptoms that can go missed if you’re only looking for visually noticeable symptoms.

Of course, you’ll want to ensure the workstations that are being used to house this data and analyze it are designed to do so. Solutions like a din rail computer or HMI interfaces that are designed to be run near industrial machinery are well-advised. Manufacturers who build these workstations to be truly industrial grade will ensure they’re fortified against internal damage from debris like dust and moisture and also properly fall tested for a true rugged design.

Downtime is Unavoidable, Unplanned Downtime is Not

There’s never going to be a factory that is constantly running at 100% efficiency. Machines break, human error is a normal occurrence, and consumer demand is fickle. Downtime as a general concept isn’t the enemy, it’s unplanned downtime – downtime caused by a failure that could have been avoided – that is the true enemy. As long as you understand that and how much those unplanned bouts of downtime in manufacturing affect your bottom line, all you need is the right tech and software to prevent that downtime before it occurs. For more information on how you can incorporate that tech into your factory floor, contact an expert from Cybernet today.