Equipment downtime can reduce the productivity and efficiency of any manufacturing sector, as well as have a significant economic impact. Whenever equipment fails, there are delays in production, loss of revenue, and increased costs due to repairs and maintenance.
As a result, the brand loses its reputation due to non-delivery on time, and price hikes. So, there can be a gradual decrease in the number of customers.
What can equipment downtime affect financially?
This can become a serious problem if equipment downtime is not addressed in time. This downtime creates chaos in production, which has adverse financial implications, productivity, and efficiency. Which ultimately results in the profitability and long-term viability of the manufacturing unit.
So, understand this equipment downtime and take measures for it. Here are a few examples detailing the financial impact of equipment downtime:
Substantial reduction in production
When I was working in the manufacturing sector, the owner of the company used to say, “The machines must be running all the time”. It is natural that production stops when equipment downtime is recorded. So, its direct effect will be reduction in production. The longer the downtime, the greater the impact on production and profitability. This can be a matter of concern for the manager, as it makes it difficult to deliver goods to customers on time. I would call this in one word “lost income”, which represents financial loss.
Increase in labor costs
It is straightforward and simple that equipment downtime increases labor costs. I would call this “what should not have happened, did” meaning, the equipment should have been produced as usual, the operator of the machine and his helpers should have been busy with the daily tasks. But if this happens, the equipment will be damaged, and it will be busy with non-productive tasks. What I call “hidden costs”. Actually, this cost is different from labor cost. “Increase in labor cost with respect to equipment downtime is called cost arising from additional labor required due to equipment downtime“. Which is direct financial loss. If equipment failure occurs during regular working hours, it is obvious that additional staff will need to be hired or existing employees paid overtime wages, thereby increasing labor costs.
Cost of repair of equipment
When an equipment downtime occurs, it creates a very serious situation for the manufacturing sector. Along with this, one has to suffer financial loss as well. Equipment repair costs are incurred to eliminate equipment defects. This may include the cost of replacement parts, labor costs for repair work, and any related fees such as expedited shipping or rush repairs.
Waste of materials
If you work in the production sector, you must have seen that often a machine stops suddenly. In such circumstances, when the machine is running, naturally the raw material inside the machine will remain unused. Which may be the goods or may not come into use again, in such case there is wastage. Goods that are burned are expenses for the business. We must also note that any business operates on tight profit margins, thus spoiling the sought-after material can cause huge losses.
Delayed Order
When equipment downtime is recorded, it is obvious that all customer orders are pending. Which is a big loss for the business. Due to frequently delayed orders, customers may stop placing orders. So, the business has to suffer financial loss.
High maintenance cost
When the equipment stops frequently, it is obvious that the business has to pay more maintenance costs for it. Equipment may require more frequent maintenance and repairs to keep it running. Which is financial loss.
Damage to reputation
When there is frequent downtime in the machines, so that the orders given by the customers are interrupted. Such orders are either delayed or cancelled. If such situations happen frequently, the reputation of the business gets bad in the eyes of the customers. As a result, they stopped placing new orders. The long-term financial impact on the business becomes very serious.
Overtime Expenses
When the equipment is working in the production areas, if there is downtime in the equipment then it is natural that it has to be repaired on time. Especially when equipment downtime occurs during regular business hours, additional labor is required to make up for lost production time. This results in increased labor costs. This includes expenses such as overtime wages, transportation, and meals.
Opportunity cost
Equipment downtime is a serious problem. Understand this as “being pushed into a deep well from which it is difficult to get out”. It is foolish to talk about new opportunities or new ideas if all the energy is wasted in getting out of the problem of equipment downtime. Realize that all these missed opportunities are actually financial losses.
Increase in energy costs
When equipment goes down, auxiliary equipment such as generators or backup power sources have to be used to continue operations. This can increase energy costs, and further affect profitability. Especially if the manufacturing unit operates in an energy-intensive industry.
As we have seen, the types of equipment downtime that affect it. It is all about the financial impact on the business. You can understand that equipment downtime can cause serious problems. Organizations should therefore prioritize equipment reliability and focus on regular maintenance and repair.
Impact of equipment downtime on productivity and efficiency
We have seen the economic effects of equipment failure on a business, now here we will look at the negative impact on productivity and efficiency due to equipment failure in the workplace. As we know, equipment failure leads to production delays, which reduce the speed and accuracy of work processes. Finally, the quality of the product in the workplace and the cost of the product will also be directly affected.
Disrupted workflow
Equipment downtime can be a serious problem for any manufacturing sector, as it adversely affects all operations of a manufacturing unit. It is obvious that normal work will be stopped, as well as production will be reduced due to disruption of daily work. When the equipment is down time then all the employees of the production unit have to wait for the restart of the equipment. Which will cause delays and disruptions. Which we can say that all production processes will be disrupted.
Reduced output
How will production happen if the machine is stopped? And at the end of the month, it will be known that there will be a decrease in the total production of the month. Obviously, equipment downtime will lower the productivity level. This may result in reduced revenue and profits.
Inefficient use of resources
One thing is clear that “Equipment downtime is a source of deterioration”. When downtime occurs in the equipment, all resources are disabled. For example, if a piece of equipment in a production area shuts down, all personnel, raw materials, and energy associated with that equipment become idle during equipment downtime. Which is a clear waste and has a direct impact on the efficiency and productivity of the product.
Increase in lead time
Equipment downtime becomes a serious problem for the manufacturing unit when it is repeated. Whenever the equipment stops working, there is a significant reduction in production, as well as all orders received by customers are stopped. When we estimate the time per customer, or per order, we will know that the lead time of each order will increase, which is a serious matter for the manufacturing unit.
Product backlog
This is a serious problem; every time a tool has downtime, a backlog of unfinished jobs is created. Which actually creates additional work for the employees. Which directly affects the efficiency of employees as well as production. Especially if a production area unit is working under tight deadlines.
Employee frustration and stress
This is a situation where employees want to complete their work on time but cannot complete it on time due to equipment downtime. As a result, they feel depressed and stressed. In many cases longer working hours may be required to compensate for disrupted production time. So, they have a negative impact, as well as productivity decreases.
Quality problems
Equipment downtime actually creates quality issues for the product. Because you must have seen that after starting any machine, if it continues for a long time, the quality of the goods is seen to be the same. But if the equipment is shutting down, the quality of goods deteriorates due to switching on and off.
Loss of skilled workers
I’ve worked in manufacturing fields, and I’ve seen that skilled craftsmen are often frustrated when the equipment is old or not working well. In many cases the artisans leave the work. And this is a serious problem. If skilled workers are discouraged and leave the company, there will be a shortage of skilled workers, resulting in a decrease in total productivity.
Safety Concerns
“Workers above all, and above all their safety”. Equipment downtime raises safety concerns. This is because staff are more likely to work with unfamiliar equipment or take shortcuts to meet deadlines, increasing the risk of accidents and injuries. As a result, productivity decreases.
By the manufacturing unit, if the rate of equipment failure is high, some concrete steps should be taken at the earliest to minimize the negative impact of equipment failure on productivity and efficiency.
Which will be facilitated by prioritizing equipment reliability. Also, regular maintenance and repair of the equipment by the personnel involved in the repair will have to be paid attention to.
A manufacturing unit should always have contingency plans to minimize the impact of equipment failure. Such as having backup equipment always available or having contracts with craftsmen or suppliers for emergency repairs.
By taking these steps, organizations can help maintain important levels of productivity and efficiency even in times of equipment failure.
List of ideas to reduce equipment downtime
Many people ask me if I am a manager of a manufacturing unit, I want to reduce equipment downtime, which areas, process, tasks, objects I have to focus on? So here we have tried to integrate this issue. As manager of a product manufacturing unit, here are a few points that should be carefully understood, and require to implement in the workplace.
But for that I have prepared here a checklist to minimize equipment downtime, which is as follows:
Here are some special precautions for production units.
The following steps can be taken to permanently solve the problem of equipment downtime:
- Maintenance schedule. Prepare a daily maintenance schedule for all equipment in permanent use in the manufacturing unit. Also ensure that maintenance tasks are performed on time, and that staff are trained on proper maintenance procedures.
- Training and education. Train all operators who operate, and maintain equipment. So that they can acquire the necessary knowledge and skills to prevent breakdowns and solve problems quickly.
- Root cause analysis. Implement a root cause analysis process to identify the root cause of equipment failure. Take corrective action if possible to avoid similar problems in future.
- Inventory Management. Steps should be taken in advance to avoid such downtime, but in case of sudden downtime, have critical spare parts already present.
- Safety procedures. Establish and implement safety procedures for operating and maintaining equipment to prevent accidents and equipment damage.
- Monitoring and Data Analysis. Create a system that can collect data to monitor equipment performance. So that future problems can be identified before they cause downtime.
- Redundancy and Backup Systems. Establishing redundancy and backup systems for critical equipment. So as to ensure that production operations can continue in case of equipment failure.
- Equipment upgrade. Consider upgrading equipment to newer, more reliable models to reduce the risk of breakdowns and extend equipment life.
- Continuous improvement. Continually evaluate, and improve, processes to reduce downtime and increase efficiency. Get feedback from staff and implement necessary changes.
The points mentioned above are general points, which can be applied in any type of manufacturing unit. So pay attention to that. Equipment is very important for any production unit, so its monitoring is very important. Hope this article will help us a little bit so that you can implement it for your production processes.