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How much does equipment downtime actually cost and how to deal with it?

SmartEAM ,
09.03.2021

Production workers and their managers often perceive equipment downtime as inevitable, rather than an opportunity to find and solve a problem. After all, the unit has a service life, within which breakdowns will still occur. “Well now, attach a surveillance camera to each screw?” – such a worldview has logic from the point of view of the repairman, but not from the point of view of the enterprise and its profit.

Taking downtime for granted, we psychologically move away from finding and eliminating their real causes. All that remains for enterprises with such views is “extinguishing fires” on the fly. The activity is visible, sometimes rewarding, but shortsighted: in the long term, downtime translates into significant losses.

What should businesses do that want to use their resources efficiently? Before giving an answer, let’s figure out why downtime occurs, what they are and how much it costs those who ignore them.

Equipment downtime in theory and practice

Downtime is a forced inactivity of equipment for external or internal reasons. The latter include situations such as poor organization of repairs, lack of the necessary materials, or poor-quality instruction.

External factors are those that do not directly depend on employees. These include delays in raw materials and supplies from suppliers, power outages, workers’ strikes, etc.

While downtime differs in reasons and factors, they reduce a company’s bottom line in the same way. In general, losses from downtime consist of:

  • Reduced productivity. This primarily concerns the volume of production.
    Falling financial performance.
  • Enterprises lose their credit rating, investment attractiveness, pay salaries to workers during production stops, taking into account additional payments and deductions for social needs.
  • Reputational losses. Damaged relationships with suppliers, customers and financial markets will be expensive and time-consuming to repair.
  • Decrease in profitability. In addition to the resources expended during the shutdown of production (electricity, raw materials, materials), compensation payments to customers and investment losses are added here.
  • Other expenses. These are the costs of temporary workers, equipment rental, overtime payments and delivery of necessary materials.
    The tragedy of many businesses is that they don’t even realize these losses.

As a result, the company loses a huge part of the profit, because downtime is accepted as inevitable.

How can you reduce downtime?

To see the full scale of the problem, you need to collect data on uptime and equipment downtime. The next stage is a financial assessment of losses from downtime, both short and long term. To do this, you can calculate the average profitability per unit of time that the equipment brings. In the end, you must come up with a set of approaches and solutions that will be used to reduce or eliminate the cost of downtime.

Taking Toyota as an example, we see that it is possible to understand the systematic nature of downtime only by analyzing all the data on equipment operation. Since analytics should take place in real time on dozens, if not hundreds, of different indicators, it is almost impossible for a person to notice deviations in a timely manner. Industry 4.0 technologies and Predictive Maintenance come to the rescue. This technique can help reduce costs, reduce disruptions, and improve equipment availability for businesses of all sizes.

For example, Interpipe has set itself the task of increasing the efficiency of equipment maintenance management, reducing downtime and reducing repair costs. They were solved by the SmartEAM product. Thanks to him, the company has a system for accounting for downtime, which allows you to quickly and efficiently analyze unplanned malfunctions, as well as plan repair work based on the operating time of the equipment.

As a result, downtime was reduced by 30%, and the cost of scheduled repairs decreased by $ 2 / t.

Interpipe is one of the few companies that are already saving and earning more thanks to new approaches to equipment maintenance. As you can see, structured and analyzed data is at the root of reducing the number of downtime. By collecting all the indicators into a single system, you will be able to see a holistic picture of work and downtime. And only on its basis it will be possible to make accurate and effective management decisions and, as a result, save money.

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