What Is Equipment Downtime?

What Is the Cost of Equipment Downtime?

Unfortunately, machine failures affect critical business functions and limit profitability. Some of the costs an organization may incur as a result of equipment downtime include the following:

• Detection Costs: These are costs incurred to investigate the root cause of equipment downtime. An organization spends resources and dedicates its personnel to identifying and diagnosing the issue correctly.
• Containment Costs: Containment costs are expenses spent minimizing the downtime’s impact and preventing the failed asset from affecting other pieces of equipment. It also includes fees for temporary fixes.
• Recovery Costs: These are costs spent on restoring baseline operations after a downtime. For example, locating and installing backup systems for data recovery.
• Ex-post Response Costs: After equipment downtime, an organization incurs incidental expenses resulting from production disruption and recovery. Costs include legal costs and penalties from regulatory authorities.
• Equipment Costs: These are repair and replacement costs for the affected piece of equipment. It includes the cost of purchasing replacement parts and delivery to the location. Expenses to fix other assets damaged by downtime also fall into this category. (By the way, using a CMMS with a robust inventory feature allows you to track inventory and order directly from the vendor when parts run low.)
• Lost Revenue: This is the total revenue an organization loses directly as a result of downtime. It includes disruption to production, incomplete customer purchases, and collapsed sales contracts.
• Third-Party Costs: These are expenses that the organization pays to consultants, asset specialists, and contractors to resolve the issue. It can also include the costs of a PR firm to manage a possible fallout with stakeholders.
• Business Disruption: This refers to the overall cost of the downtime, including lost revenue, lost productivity, missed production deadlines, recovery costs, reputational damage, customer churn, and other long-term damages to the organization.

Unexpected equipment downtime causes interruptions to business process flow, damages assets, and results in massive losses. It also forces maintenance personnel to divert their focus from preventive maintenance activities to reactive maintenance. Reactive maintenance is often more expensive than proactive maintenance.

How to Track Equipment Downtime

Calculate the total amount of revenue from the sale of products made during the equipment breakdown. Here’s an example:

• Company X produces 10 units an hour that sell for $50 apiece.
• The machine used for making the products breaks down for 4 hours.
• The company will have lost $2,000 in profits during downtime.

Of course, the example doesn’t show the indirect costs of downtime. It’s possible that Company X also had to put extra capital toward the expedited shipping of parts, outsourced expertise, or overtime pay to mitigate the problem. Depending on the size of the organization and the frequency of downtime, each of these extraneous costs adds up to sizable reductions in profit margins.

“PdM (which has been around for many years now) utilizes data from various sources, such as critical equipment sensors, enterprise resource planning (ERP) systems, computerized maintenance management systems (CMMS), and production data.”

Deloitte

The Benefits of Tracking Downtime

Tracking equipment downtime allows operational managers to develop proactive maintenance strategies. With a CMMS and by practicing preventive maintenance (PM) and/or predictive maintenance (PdM0 on critical assets, technicians can correct minor parts issues before they cause total breakdowns.

Benefits of tracking equipment downtime include:

• Enabling maintenance teams to focus on proactive maintenance due to minimal unplanned downtimes.
• Giving maintenance managers useful insights to prioritize work orders.
• Encouraging the accurate implementation of corrective maintenance activities.
• Supporting higher equipment uptime, reliability, and efficiency.
• Minimizing unnecessary costs.

Industry experts suggest striving to maintain equipment at 90 percent availability with less than 10 percent downtime. However, don’t expect to get there overnight. Switching from reactive to proactive maintenance mode requires consistent asset historical data analysis, adequate staffing, and a commitment to following a strategic preventive maintenance program.

How to Manage Equipment Downtime

Company leaders cannot afford to overlook the impact of equipment downtime on organization profitability. Organizations must learn to manage downtime to control operational costs and maximize efficiency by:

• Anticipating the impact of downtime on the business: Even for planned downtimes, it’s important to schedule maintenance activities with minimal disruption to production. It’s advisable to schedule activities during off-hours. Scheduling maintenance also helps to organize resources for temporary fixes.
• Tracking an asset’s useful life cycle: Knowing when a machine will reach the end of its useful life cycle helps to prevent unplanned breakdowns.
• Using advanced technology: Technology such as computerized maintenance management systems (CMMS) helps an organization monitor asset performance and predict when failure is likely to occur. It enables an organization to take a proactive approach to maintenance and minimize unexpected downtimes. CMMS software can track probable causes of equipment downtimes and enable maintenance managers to make effective decisions. Additionally, such technology helps to inform where the organization should direct its maintenance efforts.

Get MaintainX to Help Reduce Equipment Downtime

Tracking downtime is essential because it determines how an organization uses its maintenance resources. Tracking equipment downtime saves money and time by directing resources to the right maintenance activities.

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