The Real Cost of Unplanned Downtime in Manufacturing
The cost of unplanned downtime in manufacturing adds up quickly and gets expensive fast. It’s no secret that unplanned downtime in manufacturing is a leading cause of lost revenue. Downtime affects your bottom line in many more ways than just the cost of fixing a machine or some equipment. You are losing money on inefficient employees’ time when equipment is down, longer project lead times, and of course the time and money it takes to get your equipment back up and running.
When you add all of this up, it equates to an enormous amount of lost revenue. The question is, do you know how much money downtime is costing you in your factory? Some consultants believe that 80% of industrial facilities are unable to accurately estimate their downtime. It’s commonly estimated that factories typically lose 5-20% of their productivity due to downtime (source). Again, these are just estimates, the actual number for each manufacturer is going to vary.
It’s not realistic to expect to completely cut out downtime altogether. Nonetheless, there absolutely are tools out there that you can take advantage of to cut the cost of unplanned downtime in manufacturing.
In the remaining parts of this article, I’ll be sharing more downtime statistics that you might find alarming. But don’t worry, I will also share some possible solutions that can help you to avoid unplanned downtime in manufacturing and run the most efficient factory possible.
Planned vs Unplanned downtime in manufacturing
Manufacturing downtime in general always has room for improvement and can be cut back and decreased. Planned downtime is any downtime for regular maintenance, changing fluids, maybe making an upgrade to the system. It could be an inspection or just any regular upkeep of the machine or equipment.
Unplanned downtime is any of the events that pop up out of nowhere. Unplanned downtime consists of machines or equipment unexpectedly breaking, human errors by the operators, and slow changeover times. It can be any unforeseen time that a machine is not up and running and producing.
You may think that only unplanned downtime is where the lost revenue is coming from. However, inefficient planned downtime can match the cost of unplanned downtime in manufacturing, or be even more costly. With planned downtime, maybe you have excessive scheduled maintenance or inefficient inspections. Operator changeover times are technically planned downtime, but an inefficient process leads to unexpected and excessive amounts of unnecessary downtime.
Following the continuous improvement philosophy can prove to be greatly beneficial in these instances. No process is ever completely optimal. Even multi-billion dollar corporations such as Amazon and Apple have room for improvement. And these companies are aware of this, they are not content with their current process. They are constantly innovating and actively looking for ways to get even better. If these companies see room for improvement, there is no reason why any manufacturer of any size should be content with their current manufacturing processes.
How much Money Downtime is Actually Costing You
Some of these numbers can be hard to wrap your head around. A great number of manufactures know that the real cost of planned and unplanned downtime in manufacturing is going to be a substantial number. Let’s get into it and go over some actual numbers from studies that have been conducted in recent years. This study took place in 2016 and comparing it to a previous study conducted in 2014, there was a 60% increase. In 2014, the average cost of downtime per hour across all businesses was $164,000. This is already a massive amount of money, then in 2016, that number jumped up to $260,000 per hour (source). I’ll leave it up to you to determine where you think that number is today in 2021 compared to 2016.
Let’s try to translate this into a very mild real-life scenario. Say you have your plant floor full of machines, operators, and equipment running 40 hours in a week. Keeping this as a fairly mild situation, we can say that just 5% of that time will be downtime. According to the statistics in these studies, that would amount to just 2 hours of downtime, and $520,000. Keep in mind this is just 1 mild week and using average numbers from 2016 that are up an incredible 60% in 2 years from 2014.
More Eye-Opening Downtime Statistics
The stat that I brought up earlier about downtime costing $260,000 per hour is a very general statistic. This goes across all businesses. There is good and bad news here. The good news is that number might be high for some manufacturing sectors. The bad news is that number might be substantially low in some manufacturing sectors. The Auto industry is especially high in downtime cost. A survey revealed that just one minute of downtime in the auto industry can amount to $50,000, with an average of $22,000 (source). What is that per hour? $3 Million. This shows the importance of really putting effort into decreasing downtime, and actively trying to improve your process.
With so many machines and moving parts around the plant floor, it makes sense that machines breaking even just little parts here and there would be by far the biggest cause of manufacturing downtime. You might be surprised to hear that human error accounts for 23% of unplanned manufacturing downtime (source). The manufacturing sector is among the highest percentages compared to the average of other sectors at just 9%.
Now, this wasn’t to downplay the amount and cost of unplanned downtime in manufacturing coming from the machines and equipment. Faulty and improperly maintained equipment is an extremely common cause of unplanned downtime within the sector. A more recent survey in 2017 revealed that 70% of companies are completely unaware of when their machines and equipment are due for an upgrade or proper maintenance (source). This is an astonishing number. Roughly 2 out of 3 manufacturers have a hard time determining the needs of the equipment on their own plant floor.
What You can to do Cut down on the Cost of Unplanned Downtime in Manufacturing
Machines, equipment, and operators are all leading causes of both planned and unplanned downtime. We have gone over some pretty scary statistics today. So, what can you do to bring those numbers down?
Industry 4.0 has been making a strong push in the manufacturing world over the last few years. Yet still, many manufactures choose to ignore the new capabilities brought by the Industrial Internet of Things (IIoT) and industry 4.0. However, this is the modern-day answer to combating downtime.
As we have seen, 70% of manufactures are unaware of what is going on inside the machines on the plant floor. This is a major problem. Many of the other leading causes that bring up the cost of unplanned downtime in manufacturing can also be attributed to improper data or no data at all.
IIoT fixes this issue. IIoT pulls data directly from the source of truth (the equipment) and delivers it in real-time, in a contextualized, easy-to-read format. Data that would otherwise not be possible to extract. You can also benefit from the help of big data analytics, bringing you deep and detailed large sets of data. When you implement an IIoT system and follow Industry 4.0 principles, you will gain the insight you need on your plant floor to reduce downtime.
Complete and accurate data is the answer. A large amount of downtime is attributed to not knowing what’s going on, and guessing on maintenance schedules. You need to become a data-driven company. Gather data, put it in the decision maker’s hands, and make the final decision based on the data. Numbers don’t lie. Every minute, every hour of downtime can prove to be very costly. It’s important to make it a point to reduce downtime as much as you possibly can.
With IIoT and industry 4.0, you can establish a strong company culture, allow employees to get smarter, and gain knowledge on the plant floor by analyzing the data. At the end of the day, this leads to happier employees, improved lead times, less downtime, and more company revenue.
On the Ectobox blog, we have tons of information about IIoT, Industry 4.0, digital transformation, real-life downtime case studies, and more. Subscribe to our newsletter on the right-hand side for weekly tips and tricks in the manufacturing world. Also, feel free to contact us with any questions, we are happy to help and enjoy talking about all things IoT and manufacturing.