The Financial Impact Of Machine Downtime

business

#1

Machines generally have a long lifecycle that don’t include many interruptions due to faults. Although it’s expected, and can’t be helped but certainly reduced, it’s still a major issue for businesses across the UK. If not prepared for, interruptions to appliances can have a detrimental impact on the productivity and profit margin of a company. According to a study commissioned by Oneserve, a field service management firm, and carried out in collaboration with UK manufacturers; machine downtime costs the UK approximately £18 billion a year.

This is a figure that, if reduced, could boost the British economy at a time when the nation must be an industry powerhouse to combat Brexit anxieties. But what is the true impact of machine downtime in UK industry and what solutions are available?

Machine interruptions in the UK

Machine downtime is any unintentional scenario that causes your company’s manufacturing process to cease. With growing consumerism creating higher demand for products, fast and efficient machine procedures are critical to a firm’s success. But does the impact of machine downtime differ by industry?

In the global automotive industry, one minute of machine downtime costs just under £17,000, while a British Airways technical failure in 2017 came with a price tag of £80 million, according to the airline’s CEO. Due to the rising reliance on technology across the board, machine downtime affects every industry. Did you know that IT downtime — the period when a computer or IT system is inaccessible or broken — costs UK businesses £3.6 million a year, on average?

But costs aside, machine downtime negatively affects a variety of other business aspects — think about your company’s reputation if it fails to meet supplier demand, the stress it puts on employees who must rectify the downtime, and a workforce with lower morale due to lack of productivity. The key to reducing the impact of machine downtime — inevitably, it will occur at some point — is to know its effect on your business and plan a reaction to soften its impact.

Calculating the cost of downtime

The main question for an employer is: how do I work out how much downtime will cost my company? There are a number of ways to come to the downtime total, as you must take into account direct and indirect costs. These include:

  • Labour costs — when your employees can’t work.
  • Product costs — during downtime, your business is not creating new products to sell.
  • Recovery costs — including retrieving lost data and repairing machines.
  • Extra costs — such as the damage to your brand’s reputation.

To find your lost labour costs:

Multiply the duration of the machine downtime period by the hourly pay rate of your operators to find your lost labour costs. Obviously, this depends on how reliant your workers are on machines and technology. For example, if your business’ server goes down, your reception staff may still be able to answer queries but won’t be able to log details or access your database to book appointments. On the other hand, if a production lines loses power, the employees on it won’t be able to use tools and machines to do anything.

Therefore, work out what percentage of an employee’s working hour is reduced by downtime. If they can still work at 50% capacity during the downtime period, then half their hourly rate and multiply this by the duration of the machine downtime period instead of the full hourly wage.

To find your lost product costs:

For a manufacturing business, you can find the lost product costs of machine downtime by simply putting a price on a single-unit product, multiplying it by how many items you produce in a certain period (e.g. one hour or one day), and then multiplying this number by the machine downtime period. For example, say you produce £100 products and you generate 12 of these an hour. If you have machine downtime of two hours, your lost product costs are £2,400.

However, your downtime costs will differ depending on the type of business. If you’re an ecommerce website and your site goes down, you’re losing 100% of product costs, as nobody can buy from you. For example, if you typically make £2,000 an hour via online conversions and your website is down for three hours, you have a lost product total of £6,000. But, if you have a physical store and your site goes down, then consumers can still purchase from you.

So, if you usually make £1,000 an hour via in-store purchases on top of online profits, you need to factor this into your calculations by subtracting it from the lost product total of your website channel.

To find your recovery costs:

When determining an overall cost of machine downtime, you must take into account recovery charges. Consider how much it cost you for: machine reboots, energy surges (when machines were powered back up), replacing/repairing parts, and retrieving lost data. Then, add this onto your other calculations to get a more accurate machine downtime value.

To find the extra-cost total:

Discovering all the intangible, extra costs that machine downtime has created is perhaps the toughest part of calculating machine downtime. Rather than using figures to work this out, it’s worth simply bearing in mind that the value of machine downtime goes beyond profits lost during the downtime period itself.

To find your final machine downtime cost:

Your final calculation should include the total amount of each of the above sections. Simply add these together and you have your cost of machine downtime total. Remember to ensure that you use the same units of time to work each section out for an accurate outcome (e.g. employee pay per hour, product output per hour, etc.).

What are the solutions?

Clearly, costs can rack up when it comes to machine downtime, and it’s essential that companies strive to put a plan in place that helps reduce its negative impact. But how?

Reportedly, more than half of machinery downtime is due to hidden internal faults. So, it’s essential that you regularly check and maintain your machines. Chris Proctor, Oneserve CEO, states that: “One of the most common technical faults is the overheating of particular parts, especially where there is metal on metal, as these can short electrical circuits and cause the machines to stop running.

“Vibrations, usually the first sign a machine is breaking, are another major cause of internal technical fault — they cause a cascading effect which can have a devastating impact on the machine. General wear and tear, as well as operator misuse, can also be the cause of technical fault.”

Simple services, like motor overhauls and repairs, can enlighten you to internal issues that could have otherwise sparked lengthy machine downtime if not noticed. Adopt a preventative maintenance mindset and check your machines and computers for viruses, glitches, and inefficient parts that could cause a companywide cessation of work.

Boost manager-to-operator communications so that those working with the machines in question can relay concerns if they have any before it’s too late. Commit your company to regularly updating your software and equipment and ensure that every member of staff is trained to use their machine or working station properly to reduce the chance of user-error. IoT (Internet of Things) is also an avenue of downtime prevention. Utilise the abilities of fault-notification sensors to help detect dropping performance levels and computing clouds to store vital data. Using innovations like these will help you arrange repair services prior to scheduled manual checks, as well as give a way of backing-up details and services in the case of a malfunction.

All industries must deal with machine downtime. However, it doesn’t have to spell disaster. Bear preventative methods in mind and make sure to keep on top of downtime calculations so that you have an accurate oversight of the effect of downtime on your staff, processes, and profit margin.