Does your plant underestimate revenue lost due to downtime? Many plants do, according to Dave Crumrine, president of the Construction Services division at The Interstates Companies, an electrical industrial consulting firm based in Sioux City, Iowa.
To make his case, Crumrine cites research conducted by DowntimeCentral.com, a Web site supported by St. Louis-based engineering and maintenance training firm Business Industrial Network, whose studies have found that most plants underestimate unplanned downtime cost by more than 1,000%.
The site also notes that 5% of a typical plant's productive capacity is lost due to downtime. “The truth of the matter is that in many of the industries that we work, this could be the difference between a break-even year and a great year,” Crumrine says.
To prevent downtime, Crumrine says it's important to know exactly how much a plant is losing due to downtime. “The key to doing a good job calculating your downtime cost is to make sure that you're including the indirect costs,” he says. “They're the hard ones to find.”
The following list outlines a few of the costs often overlooked when calculating total downtime cost (TDC).
Startup cost. How much it costs to start up each machine and portion of the plant should be calculated annually. This includes items such as energy surge costs, materials, manpower, units per hour lost, inspection, and rework costs. Then each time the plant or a portion of the plant is down, the cost to start it up again should be added into that occurrence's TDC.
Scrap. Typically a plant will need to pay to have someone haul away damaged or old parts and equipment replaced during downtime.
Band-Aid costs. “A lot of times in the haste of putting things together to fix things, the maintenance people come and put a Band-Aid solution to get it going, but they have to come back and fix the Band-Aid later,” Crumrine says. “And those costs don't typically get covered or recorded.”
Parts/shipping cost. Crumrine says these expenses are often categorized under the maintenance budget and are not properly associated with downtime.
For an expanded list of downtime costs and additional resources, visit www.downtimecentral.com.