In any well-run production facility, operations management knows the following information for each piece of production equipment:

  • Revenue per hour, both capacity and actual.
  • Hours of uptime required to realize 100% potential revenue.
  • Gross margin (or similar metric) per lot, batch, or run.
They know which equipment makes the most money for the company and how many hours it must run to fill open orders by X deadline. You also need to know this.

A 5% improvement in repair time for your top moneymaker is probably worth more than a 100% improvement in that little machine that fills a $2,500 order each month. Of course, delivery schedules also affect the value of repair time. If that $2,500 order needs to go out today and the machine is down, that’s an entirely different situation from needing to fill the order some time in the next three weeks.

In future issues, we’ll look more closely at these factors.