true down time cost

The True Cost of DowntimeBy Don Fitchett

The glue that will hold together your manufacturing initiatives.

Text Version 3 - Copyright 1995,2003 - Business Industrial Network

www.BIN95.com

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HOMETrue Downtime Cost

Main CategoriesEquipment Constants

CategoriesPeopleProductStartupBottleneckSales-Expectation

Labor ConstantsLabor-per-ProductQCMaintenanceEngineeringManagementOverhead

Downtime OccurrenceMaintenance TimeReduced ProductionScrapBand-AidOEMToolingShipping

OEEData Standards

Included ArticlesWhat is TDC? (Overview)Data Collection

Root Cause AnalysisSelecting CMMS

ResourcesSavings ExamplesGlossary

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TDC - True Downtime Cost Definition:

A method of recording and analyzing all significant cost metrics associated with equipment downtime in a building or manufacturing facility. TDC provides a way to assign time and/or monetary value to previously considered non-tangible cost of downtime. Also TDC includes downtime factors commonly overlook to arrive at a more true value for the cost of downtime.

In viewing the Cost Factors below, one might think micro-analyze, but the fact is, most of this data is already being collected, and exist in your computer systems today.

Below is an overview of the cost factors

With all these categories, it may appear to be too much to monitor and analyze. Feel free to momentarily review the "Data Overload" section to see why there is no need to sound the "Data Overload" alarm.

Copyright 1995 Business Industrial Network - All rights reserved. Revised: March 11, 2003.

This EBook provided by Business Industrial Network and we make no manner of an endorsement, representation or warranty regarding any contents located within. It is recognized that there is a great deal of uncertainty and honest scientific difference of opinion surrounding parameter selection for these future-looking cost analyses. This EBook content is provide as a starting point for improving manufacturing cost analysis. Viewers understands that any content or other information offered on or through BIN95.com and DowntimeCentral.com are provided for informational purposes only.

PageAsset Management - What's your facility's true downtime cost?

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TDC - True Downtime CostCost Factors Overview ComentsThis list is provided as a starting point for improving manufacturing cost analysis.

Equipment Cost Category (constants)Categories

Standardize your data collection categories, learn from MIMOSA. People

Indirect labor cost can often be greater than the more apparent direct labor cost. Product

Made up of two sub-categories. Cost per Unit, and Units per Hour. Start-up

Every time you startup your machine, there is hidden cost. Bottleneck

Using a process flow diagram, pre-determine a bottleneck factor for each asset. Sales Expectation

Our goal is always to maintain a 100% capacity readiness. Labor Cost Category (constants)

LPP/M Does your LPP/LPU calculations include indirect labor?

QC Associate QC cost, re-work, etc. with actual downtime occurrence.

Maintenance There is a substantial staff supporting those one or two who actually do the machine repair.

Engineering Engineering costs to support troubleshooting and repair of machines can slip through the cracks.

Management Requesting maintenance, redirecting operators, reporting to upper level management, altering production schedules/flow, administrative tasks, etc.

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Downtime Cost Category (Occurrence)Time

Are you tracking when maintenance arrives at the scene, or when the machine actually went down?

Reduced Production Time and percentage of full capacity equipment is running a reduced rate due to a malfunction.

Scrap On continuous flow systems, scrap related directly with downtime can be a very significant cost.

Band-Aid Please take note that band-aid time estimates, and amount of times needed to be done are usually under estimated.

OEM, Consulting, Contractor Your interactions with OEMs can be a major cost factor in downtime as well as other areas.

Tooling Often classified as a nuisance problem if allowed to continue, can really add up in cost.

Parts/Shipping Out of the parts and procurement fields, the actual parts cost is the only value commonly tracked. What about shipping, locating, rentals?




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TDC, a closer look at Equipment Categories

Use MIMOSA, machine, priority, type, cell, line, Notes, etc.

PeopleNumber of Direct and in-direct idle workers

ProductCost per unit at that stage in productionUnits per hour

Start-UpElectrical surge cost, Set up, % reduced till start/stopEquipment fatigueScrap produced, is it recycle able

BottleneckList other downstream equipment, and % effected

Expected Sales% effect on product out the door.



PageTake a closer look at equipment operational cost

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TDC - Data collection categories.

To accurately track cost...How to select and implement CMMS software

Please view this article online - How to prioritize production layout and categorize within CMMS. (The CMMS article at DowntimeCentral.com was donated by non-bias CMMS consultants - Perspective CMMS who specialize in how to select and implement CMMS software.) Note they did not overlook plant wide bottlenecks like the powerhouse, steam, air, vacuum and emergency power. After viewing the online article, you can return here and read the example below.

Some areas like Tooling often falls into the category too small to analyze, even if MTBF is high. Once you adapt TDC methods of monitoring and analyzing downtime cost, you will be amazed at the potential savings in what was once thought to be an insignificant category.

In the example of "Tooling", TDC shows us much larger categories that add to the cost. When a tool breaks, it's not just a couple dollars to replace, plus five minutes of time (labor). Each time a tool breaks or needs replaced, there is cost of lost production (amplified by possible bottleneck), scrap, quality, start-up cost, indirect labor (such as maintenance, quality, engineering, supervisors, etc.). There is also risk of higher cost such as Safety, damage to equipment etc.

After considering all the TDC metrics outlined on this web site, it becomes apparent that ten cents you saved on cheaper tooling could cost you hundreds or thousands times what the whole tool cost. Especially when you are monitoring frequency of toll defect such as MTBF.

Ease of Data Collection and Analysis

As stated by John S. Mitchell and the MIMOSA.org organization, your facility data must be readily available, easily exchanged and clearly understandable for everyone with requirements throughout the enterprise. Open exchange of equipment information between condition monitoring (assessment), maintenance (CMMS) and control (DCS) systems.

Providing an open exchange of conventions will assure vital information to define the status and condition of process, manufacturing and production equipment is readily available and produces greatest value for users throughout the enterprise.

Require your vendors to adhere to MIMOSA standards of being capable of automatic communication and (non proprietary or non specific) information exchange. Software links can make system access of information, resident in programs from different suppliers without special software.

Be aware of TDC and MIMOSA categories, and insure they are in all your systems. To learn more about these open standards, please visit MIMOSA.org

What you measure is what youll get! Ultimately must be able to accurately track failure rates and allocate costs

individual machines (location, asset) machine categories (motors, pumps) components (bearings, seals)

Major benefits can be attained with current technology -- more effectively applied

lower cost data collectors


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TDC- People Category This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below.

It is quite common for daily management decisions related to equipment downtime to be made based primarily on labor cost. Of course, production demand is also right up there on the priority list. When deciding a course of action related to downtime, the number of idle workers and man-hours to repair is thought to be the total labor cost.

With the True Downtime Cost (TDC) methodology, we pre-determine the TDC cost using all the metrics, not just labor and lost production. Even looking at just labor through a TDC perspective can be very enlightening. We will learn that the indirect affected labor cost is always greater than the more apparent direct labor cost.

The key to realizing greater savings by more informed management decisions is to predetermine the "True" labor cost for each profit center category. (As should be done for all TDC metrics) For example all should be aware of the hourly cost per machine, cell, department, area, facility, etc.

Directly affected people Most of the time, one or two machine operators.

Sometimes in more apparent bottleneck cases like air compressors, or corrugators, directly affected idle workers will be realized from six to an entire facility.

Indirectly affected people Production Maintenance Management Administrative

As mentioned above, with bottlenecks, all downstream employees should be considered in downtime labor cost. (you may consider them direct or indirect, and may be only a percentage of their hourly cost for reduced production scenarios) There should be four primary categories for indirectly affected people by downtime.

PageLearn that the indirect affected labor cost is often greater than the more apparent direct labor cost.

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Some may state, "that is covered in our overhead calculations" or "that is covered in our labor per product calculation". That is great as long as those previous methods includes the indirect labor listed below. You will then realize the cost savings, where as those general "Overhead" numbers may not point out a particular cost reduction area.

While each individual's involvement may only be minutes, they all add up. Also keeping in line with obtaining the "True" cost, the hourly wage should be calculated from an accounting stand point. That is, how much the employee costs the company per hour, not how much they are paid.

(A maintenance manager who does a lot of the leg work that could have delegated to his subordinates, may spend 30 minutes supporting the repair of a machine. TDC would show this, and amplify the cost savings to resolve. His base pay may calculate out to $20 per hour. But with insurance, retirement plans, and other benefits, he may actually cost the company $30 per hour.

That 30 minutes of one manager can easily equal the cost of one machine operator. As you move up the management chain, and add all indirect labor, the true labor cost could have been over $100 instead of $15 for one employee.

See Also...

A Regional Survey to Determine the Significance of Human Error in Manufacturing (www.engr.orst.edu/~HFE/HMSE/Error/survey.html)

Production Setup personnel Quality Delivery Engineering Other Production related personnel

Maintenance Repair personnel Parts person Engineering Other Maintenance Support personnel

Management Floor Supervisors Maintenance Manager Production Manager Engineering Manager General Manager Safety Manager

Administrative Maintenance Secretary MISAccounting Legal

PageLearn that the indirect affected labor cost is often greater than the more apparent direct labor cost.

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TDC - Product CategoryThis category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below.

When analyzing and recording the true cost of downtime, the product category is made up of two sub-categories. Cost per unit, and units per hour. An example of how being aware of direct labor cost can save over $ 50, 000 (www.int-puck.com/Direct/) , just think of the savings when you monitor the other product cost listed in TDC metrics.

Cost per unit at that stage in production

This sub-field is a general assessment of the product cost at the stage in the process relative to the machine (cell or other method of categorizing the profit center) uses it for raw material. This percentage of total product cost will be used to calculate downtime at the machine/profit center.

Most companies view cost per unit as "labor per unit". This can be very deceptive when each unit consumes its share of overhead, maintenance, machine wear, raw material, etc. Even if you're just looking at "labor per unit", most don't consider supervisor, QC, managers, maintenance labor, etc. (Follow the links below to read about who does include labor tipicaly labeled as "Overhead")

REF: (www.auburn.edu/~taborrh/cp/mickey.htm) (spot.colorado.edu/~sharmav/engecon/answers.html)

Units per hour

Units per hour is another sub-field used to calculate downtime at the machine/profit center. It is important to use the units that would be produced if the machine was running at manufacturer's specified speed and capacity. This is a key area of potential savings as pointed out in the OEE section.

An example is High-tech gluers, which are all computer controlled, and provide speeds of up to 60 thousand units per hour with on line quality control. If your machine falls in the industry average OEEof 60%, that's 24 thousand units per hour times the cost per unit, you are losing.



PageCost per Unit, and Units per Hour calculation.

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TDC - Startup Category This category is a one time entry of a constant, updated annually. Like the bottleneck sub-category, this start-up cost are not considered by most. If you have previously calculated start-up cost per main category (machine, cell, line, profit center), then your existing method of calculation need only meet the TDC recommendations below.

It is common for your machine start/stop times to already be monitored if you have systems like VersaCall.com or Wonderware.com . With TDC, it is only necessary to assign a true cost of start-up for the equipment/area. That cost can then be used as a multiple factor with your existing asset software.

Once you can actually place a true cost on start and stop of your production lines, most will find the extra labor cost to run through lunch and breaks, to be insignificant.

Start up cost metrics

Energy Surge Cost: Much attention is already being given to this area, as most pay peak energy cost to their utility provider. Of course it is evident of the cost to bring an oven back up to temperature. If your one of those few who still shut down a production line, or even the entire plant, think of the surge to start it all back up. This as with the rest of the Start-up cost factors, can empower you to make some very efficient manpower decisions. Like when it comes to deciding which machine to shut down for breaks to gain a relief person.

Set-up cost: The cost associated with product/customer changeovers is apparent. What is over looked often, is the set-up cost involved during a start up. This area just needs a second look to make sure the various cost are being weighed. Like extra material, manpower (supervisory too), product delivery, quality, etc. This category is for any special coast that are not covered in the other start-up cost areas.

Percent of reduced production: As the machine ramps down in speed, and ramps back up, your parts per hour is affected. While it is usually a linier calculation, each shut-down and start-up reduces your ability to get parts out the door. This area has received a lot of attention with companies attempting to reduce changeovers.

Energy surge cost Electrical (Ex: High torque motors) Gas (Ex: oven temperatures)

Set up extra material, product/tool delivery manpower (supervisory too)

Percent reduced production Parts per hour lost

Equipment fatigue high torque motor, heat elements computer monitors, mechanical fatigu

Scrap produced is it recycle able

Quality Inspection cost, Rework cost

Other cost Tell us your start up cost factors

PageEvery time your startup your machine, there is hidden cost

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Equipment fatigue: It is surprising how many don't realize the physical limitations of a light bulb. That is in respect that they are not designed to be turned off and on (the time to heat back up uses more energy). Each time they are, the life cycle of the bulb is considerably reduced. Now consider the fatigue on a high torque motor, devices with elements, computer monitors (that's why screen savers where invented), mechanical fatigue, etc. While it's difficult to consider all the parts of a piece of equipment, and arbitrary value should be assigned. (percent of equipment replacement cost)

Scrap Produced and Quality: After the big quality boom of the seventies, this information should be well known. You need to assign the amount of scrap cost per product, at each stage of the production. The reduction in quality associated with a standard start-up/shut-down is not considered directly in TDCmetrics. This is because each facility sets, their quality standards, and the part is ether saleable or scrap. (although there may be consideration of lost potential sales do to wide quality margins.)

Calculating the actual dollar value per scrapped product, in relationship to that stage of the production is very important. A great example is the manufacturing of Ring and Pinions in a Dana axial plant. At the forging stage of the ring production, the scrap cost would be a fraction of a percent. As the entire part can be recycled, with only loss of forging cost. But if that ring was scrapped after it had been geared and matched with a pinion, the cost would be close to the total finished product cost.

Other Cost: Hey, did we miss something? Well this sub-category is where you place that cost. The point of these categories may appear to be micro-analyzing, but the more you use in your asset managing strategies, the closer you will be to the True Downtime Cost. Also more profitable decisions can be reached.

In summary, you sum all these factors together, per machine. On an annual bases, you re-evaluate. Then within you asset management software package of choice, you can readily see the start-up cost for machine, cell, line, or entire facility. Remembering the key to TDC is making this information known to all employees, not just a manager in some remote office. :>)

See Also:

Condition Monitoring in the 21st Centurywww.plant-maintenance.com/articles/ConMon21stCentury.shtml

An article by Sandy Dunn, of Assetivity, outlining some of the challenges and opportunities that exist for users and providers of Condition Monitoring equipment and services in the 21st Century.



PageEvery time your startup your machine, there is hidden cost

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TDC - Bottleneck-Factor Category This category is a 'one time' entry of a constant, updated annually. Most have not identified all the bottlenecks in their systems, and the percentage of each affects their production. Your existing method of calculation need only meet the TDC recommendations below.

After visiting 100s of paper plants, I have seen the same misconception. It is well known that the corrugator is a bottleneck, because the entire facility is its downstream. So much so, they will run at top speed (not necessarily most efficient speed), with speed indicator in the production managers office.

In many of those facilities, all material will flow through a single strapper, or conveyor, but these do not get a tenth of the investments of resources that the corrugator does. With this example the facility becomes a push production process, with storage, scrap, multiple handling, labor, etc., being the buffer and profit loss. With TDC, the question would no longer be "how can we have record production rates off of the corrugator while having reduced sales, quality, safety, and profits?"

The other bottleneck examples above, like an air compressor, are not realized in the day to day management decisions, until the unrecognized bottleneck shuts down the facility, or a large portion thereof.

As time goes by after a bottleneck makes itself know, it once again drops out of the spotlight in the daily decisions. Actually a bottleneck should be identified and classified, hopefully before a failure, but a least afterwards. This is one of the key advantages of the TDC method, and one of the greatest cost savings too.

Ironically, TDC represents the final bottlenecks to a fully integrated and auditable approach to maintenance strategy development / justification.

BottleneckIdentifying bottleneck cost can save thousands Example: an industry accepted cost of a corrugator is $10,000 per hour (varies by facility).

List other downstream equipment, and % of affect on downstream and upstream equipment.

Other Bottlenecks in this example of a corrugated facilityBoiler, Glue system, Air compressor, Strapper, Facility Power, etc.



PageHow do you calculate downtime cost related to a manufacturing bottlekneck.

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TDC - Sales Expectation Category This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below.

Possibly the most deceptive category of all when it comes to downtime. We have to completely change our way of thinking to realize the full potential savings, and make wise asset management decisions. The current view is "we need X amount of production to fulfill our current sales orders".

The new view in line with TDC method should be one of "we have to maintain a 100% capacity readiness". The other TDC categories need to be calculated to determine what is the "True" capacity of our facility. This new way of thinking has two major differences.

Examples:

The Whirlpool Findlay Division has been able to increase production by 21%, without any significant capital costs by focused TPM and OEE utilization. If your reliability program resulted in an OEE increase from 85 percent to 89 percent. If at 85% you had annual sales of $1,236,500,000 Therefore, each percentage point of OEE represents $15,135,000 of sales. With the increase in product represented by improved OEE, sales would increase $60,520,000. Another reports losses less visible can be much greater. Equipment not running capacity, may result in not filling orders, or reduced sales volumes. For example, if prolonged operation with four out of five furnaces working reduces production capacity by 20 percent, a continuous process line with a design rating of 1,000 units per hour would be capable of only 800 units. To determine the loss, multiply the 200 units per hour by the unit sales price of $100. This computes to a $20,000 loss for each hour of operation at reduced capacity. Should this mode continue for a full year, the annualized loss equals more than $175 million.

Most who do measure Producibility (production ability), do so by machine cycle times, then the next most common is yield rate. Have you reduced your cycle time, but increased your downtime? True product ability, capacity, 100% ready to meet sales expectation (of 100% capacity) has to be looked at as the big picture. How much product can you get out the door?

Yes, sales expectation (and goal) should be calculated with all of your equipment running at 100% efficiency, 24/7/365. Once at 100% readiness, you can focus on getting your sales team to capture your chunk of the market share.

1. It all starts out on the shop floor, making known to all, the manufacture's specified speed of each machine. (Yes, back to OEE)

2. Sales expectation should be calculated with the goal of 24/7/365 to get the most value out of your assets.

More saleable products out the door. (increased capacity) In addition to lost sales, loss of market share is even more threatening.

PageSales Expectation - We have to maintain a 100% capacity readiness

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TDC - A closer look at LaborThis category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary.

As with all the labor categories, your accounting software is a good source to export or link all the various Management wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports.

Please click on sub-topic in yellow, to learn more.

Granted, procedures will need to be put in place and enforced to accurately track labor time associated with equipment down, but the savings will be well worth it.


LPP /MLPP / Equipment Contribution is not as accurate, as using the items below in addition to direct labor (machine operators).

QCQC wages of those involved in Extra inspections, Rework, etc.

MaintenanceIndirect maintenance labor as well as Mechanic/Technicians doing actual troubleshooting and repair.

EngineeringDowntime support, troubleshooting, specifications, re-engineering.

ManagementTime associated with downtime support, out at downed equipment, meetings, calls, administrative, and decision making research time.



PageExplorer labor cost in industry.

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TDC - Labor Per Product Category This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary.

LPP / Equipment Contribution is not as accurate as using individual TDC labor categories, but can be used in place of them if LPP includes indirect labor. In most cases, LPP (also called Labor Per Unit, LPU) is calculated using only the direct labor cost.

The cost per unit is normally used for external reporting only, not management decision. This is because that figure is made up of vague estimates of material, labor, and overhead cost. Even looking at just the labor calculation from cost per unit, will not result in a true cost. One need only take a closer look at how accountants derive this figure.

A product routing shows every step a product goes through in the manufacturing process, which includes labor times for each step. The accountant uses these direct labor times to estimate the labor time required to make the product. These labor hours do not include all the support personnel labor that goes into making the product, and support is not usually included in the overhead factor either.

The above method of calculating LPP typically does involve a multiple for fringe benefits that amount to 30% of the hourly wage for example. But for the sake of monitoring and analyzing labor cost in relationship to TDC, QC, Management, Maintenance and engineering must be considered as well as direct labor (machine operator).

Even something originally thought as trivial such as delivering raw material to the machine after repaired can add up over a years time. For decision making, labor per product should be a variable dependant on your OEE. Carefully examine the existing LPP information to see if you labor estimates are a variable. Don't use it if it appears it really is a fixed cost, use the individual labor categories mention above.

Existing LPP Direct labor (operator) X 30% fringe benefits

TDC LPP Direct labor (machine operator) X 30% fringe benefits QC labor X 30% fringe benefits + Management labor X 30% fringe benefits + Maintenance labor X 30% fringe benefits + Engineering labor X 30% fringe benefits + Material Handler labor X 30% fringe benefits +



PageDoes your LPP/LPU calculations include indirect labor?

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TDC - QC Labor Category This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary.

As with all the labor categories, your accounting software is a good source to export or link all the various Quality Control wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports.

Direct QC labor related to downtime First product inspections

Re-work inspections Indirect labor related to downtime

Return shipment sorting Material handling/shipping expenses

Trips of QC personnel to customer's site

When calculating the cost of re-work, it often will bring insight to the most cost effective solution, in regards to the re-work or scrap question. Often re-work demands over-time, trips to customer locations and other hidden costs that are not given full consideration.

A Quality Note: Quality does not cost, it pays. Quality really pays in reference to Machine quality, replacement part quality, repair quality, Service quality, and management quality.



PageQuality control cost in manufacturing.

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TDC - Maintenance Labor Category This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary.

As with all the labor categories, your accounting software is a good source to export or link all the various Maintenance wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports.

These are in-house maintenance labor cost only. Cost associated with Contactors, OEM, machine shops etc. will be covered in the "Downtime/OEM category. With maintenance being 30-50 percent of the production cost, there is a substantial staff supporting those one or two who actually do the machine repair.

Ideally, you want a goal of being able to assign all personnel's activities to a cost center. In the interim, through analysis you could assign an hourly multiplier that represents the support personnel cost.

See also: Fundamentals of Preventive Maintenance

http://www.amazon.com/exec/obidos/ASIN/0814407366/downtimecentr-20

Direct maintenance labor Mechanic/Technicians doing actual troubleshooting and repair.

Indirect maintenance labor Maintenance manager, Forman, parts person, set-up person, pm person, etc. secretary, and others that may work primarily for maintenance



PageMaintenance labor cost in the manufacturing industry

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TDC - Engineering Labor Category This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary.

As with all the labor categories, your accounting software is a good source to export or link all the various Engineering wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports.

Unless specifically assigned to maintenance department, engineering costs to support troubleshooting and repair of machines can slip through the cracks, while close attention goes to their primary function of projects, production overhead, etc.

Even 15 minutes consulting here, another 30 minutes calculating a replacement motor specification, adds up over a year's time. The behind the scenes activities are even more difficult to track, when they aren't actually out on the machine, but on the phone. This is why a cost center management program must be strictly enforced.

If it is necessary to increase engineering support, the proof will already be collected and visible. A very inexpensive cost saving solution to the demand for more Engineering support is found at Forward UP-TIME Publications. They put out a monthly newsletter specifically written to teach engineering to plant operators and maintainers so they can learn to ceaselessly trim production and maintenance costs while lifting reliability by themselves! Please read the article UP-TIME donated -"Definition Root Cause Analysis" (included in this E-Book) and see what a refreshing approach they take. To see more E-Books by UP-TIME. (http://www.bin95.com/ebooks/)

See Also: Process Life Cycle Engineeringhttp://cwis.usc.edu/dept/ATRIUM/Papers/Process_Life_Cycle.html

True hourly cost of Engineers from accounting software

Track time associated with downtime support troubleshooting specifications re-engineering



PageEngineering Cost in manufacturing

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TDC - Management Labor Category This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary.

As with all the labor categories, your accounting software is a good source to export or link all the various Management wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports.

When equipment breaks down, we all realize the area supervisor will be there insuring necessary actions are taken. Requesting maintenance, redirecting operators, reporting to upper level management, altering production schedules/flow, administrative tasks, etc. Fifty percent of the time a machine is down can be extra tasks a supervisor is required to perform.

What isn't tracked in today's facility is the time upper level management is tasked, related to a machine breakdown. The production manager, plant manager, general manager's time, can cost the the company several times the supervisors cost. Not just the time they may visit out on the floor to see how it's going, but other behind the scene tasks such as arranging meetings, making phone calls and other administrative tasks, to name a few.

As with all the other labor categories, procedures must be put in place to track these cost and assign to the appropriate cost center. TDC reports will point out what task may be better performed by less expensive employees.

True hourly cost of Managers from accounting software

Track time associated with downtime support visiting downed equipment related meetings and calls related administrative and decision making research



PageManagement cost in manufacturing

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TDC - Overhead CategoryThis category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary.

The indirect expenses allocated in your budgeting process and assigned to your resources or departments. You typically include administration, facility, depreciation activity, and other costs you cannot directly charge to your manufactured items. With predetermined overhead rate, overhead costs are allocated to events as they occur. This helps control overhead costs and measure profit. As long as you use the other TDC metrics to calculate overhead, you can accurately determine your true fixed and variable overhead rates. Only considering production demands and labor in your day to day management decisions, is just as bad as using labor and fixed overhead rates. This method divides the total expenses by the direct labor total.

Even using such generalities as overhead cost proves to be many times the labor cost. For a large part TDC is a way to isolate potential reductions in overhead cost. Therefore to remain competitive and make smart daily decisions, one must be knowledgeable as to how your company overhead rates were derived, and if that rate covers the TDC metrics in their proper perspective.

When calculating downtime cost, we strongly encourage managers to use individual cost factors such as TDC labor categories, as opposed to a blind overhead rate.

Granted, procedures will need to be put in place and enforced to accurately track overhead associated with equipment down, but the savings will be well worth it. Although Activity-based costing (ABC), like TDC has the main advantage of its ability to provide more realistic product cost information for financial reporting purposes, use of TDC can lead to a better understanding of the strategic linkages existing between the various cost areas in the organization. It enables managers to have a holistic view of cost management.


PageFind the hidden cost placed in the overhead category

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References, to learn more...

Manufacturing Cost Assessment http://www.eren.doe.gov/buildings/codes_standards/notices/notc0012/viewer2/fl000006.htm The manufacturing cost assessment methodology used is a detailed, component-focused, activity based technique for rigorously calculating the manufacturing cost of a product (direct materials, direct labor and some overhead costs).Manufacturing Cost Flow http://dns1.epcc.edu/faculty/alfredos/Acct2CN_MfgAccounts.html The flow of manufacturing costs through the accounting system.Handbook for Hands-On Managershttp://rjdadamo.com/mgtphysics/toc.htm Provides insight into basic topics like break-even analysis, working capital, interviewing key personnel, marketing tips, planning, and financing your company.Standard Costinghttp://rjdadamo.com/mgtphysics/toc.htm This power point presentation is from accounting 2120 on performance evaluation through standard costs. Right click yellow link above and select "Save As" to download.Business Basicshttp://www.swcollege.com/vircomm/skousen_acct/ppt/16/16.ppt This power point presentation describes the wholesale and retail business processes. Right click yellow link above and select "Save As" to download.

PageFind the hidden cost placed in the overhead category

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TDC - Downtime CategoryThese are "per downtime" occurrence entries, but most can be exported from your CMMS. Your existing method of reporting need only meet the TDC recommendations below.

Recording the actual time and other real time information associated with each downtime occurrence is crucial to the success of any maintenances goals. The work order is the apex to determining true downtime cost. You can do an excellent job of obtaining the constants of TDC equipment and labor categories, and still have bad downtime cost calculations due to inaccurate reporting of the actual downtime occurrence.

The fact is, there are still a lot of facilities out there who do not utilize their work order system 100%. This problem is compounded by most systems not utilizing the information to it's maximum cost saving potential. This main category of "Downtime" covers these deficiencies.

Please click on sub-topic in yellow, to learn more.Time

The time from the first occurrence of equipment breakdown to the time equipment was back into full production.

ReducedThe percentage of full production rate, and time running at reduced production during downtime occurrence.

ScrapNumber of total units scrapped during downtime occurrence and percentage of cost recovered by recycling.

Band AidBand-aid is a sub category of several TDC categories and should be a percentage of the actual downtime occurrence cost.

OEMAnnual fee/ est. hours used per year, or T&M + Expenses for OEM support during downtime occurrence.

ToolingReplacement or reworking cost for tooling, related to downtime occurrence, minus recycling savings as a percentage.

Parts & ShippingEveryone records parts cost related to downtime occurrence, but did you include shipping cost? (them next day air often cost more than the part. :>)

PageHow to use data collection to calculate cost of each downtime occurrence

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Granted, procedures will need to be put in place and enforced to accurately track downtime associated with equipment down, but the savings will be well worth it. A common example to think about is one of production "annoyance" classification. Although very seldom realized, there are always production costs involved with these "annoyances".

In slightly more extreme cases, we have seen equipment failure resulting in additional manpower go unreported and unknown to maintenance departments for over 30 days. Clearly a breakdown in the management of the work order system. In some cases, TDC shows the true cost to production being 30 times the cost of the additional employees.

If the procedure and methodologies of TDC were in place, and cost was being indicated to all involved, the above example could never occur. With all these categories, it may appear to be too much to monitor and analyze. Feel free to momentarily review the "Data Overload" section to see why there is no need to sound the "Data Overload" alarm.



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TDC - Maintenance Time Category These are per downtime occurrence entries, but most can be exported from your CMMS. Your existing method of reporting need only meet the TDC recommendations below.

You've heard time can get away from you, well it can cost more than you realize too. The procedure for reporting time related to equipment breakdowns and malfunctions is the most important category of all TDC cost factors. Just minutes in downtime reduction adds up over week, month, year.

Most reporting methods start the downtime clock when maintenance arrives at the scene and stops it when they leave. There should be two start time fields in a maintenance report; estimated time malfunction started, and time maintenance started repair. On some malfunctions labeled "annoyance", the difference between start of malfunction to the start of repair can be quite substantial.

Breaking down the time into various stages will help pull your company out of mind sets that has been costing the industry millions in lost production. This is what makes companies like VersaCall.com and Wonderware.com , who cater to automated reporting of production reduction and stoppage so popular.

Your Work orders/CMMS software should have the following time fields and their associated completed date/times...

You will have the information to make more informed decisions about ...

Date/Time symptoms first noticed as reported by supervisor or operator

Date/Time work order generated or reported to maintenance Date/Time Maintenance investigated/troubleshoot Date/Time maintenance made band-aid If delayed do to waiting on parts or outsourcing, amount of wait time.

Waiting on parts, service, or OEM is wrongly accepted as being out of maintenance control.

Time Started taking equipment out of production This is important to track reduced production time while equipment is ramping down.

Time Maintenance started permanent repair Time placed back into production Time full production speed reach

Repair under planned or unplanned downtime? Repair under planned or unplanned downtime? Repair or Replace? Report it or just deal with it? Strict work order policies, or passive? Run-to-failure or predictive maintenance?

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More accurate reporting of times related to occurrence will bring your focus on known major cost factors...

Learn by example; one of VersaCall's customers:

The USPS determined the operational cost of the entire facility to be between $135.00 and $160.00 per minute. They further determined that they could conservatively save ten minutes per 16-hour workday by installing a VT400 system to reduce the down time lost. Data collected and reported by the VT400 system showed that they were, on average, saving a combined 10 minutes over two shifts. This amounts to $1350.00 to $1,600.00 per day, or over $6,750 per 5-day workweek.

As with all the other maintenance data entry categories, procedures must be put in place backed by the support and understanding of management. Neglecting this vital communication function will provide less than acceptable results. A system is useless unless data collection is a well-defined process. A CMMS lives on data.

90% of the time is spent finding the problem and how to fix it, 10% actually replacing the fuse. Who or what technical support will be available to take care of an end user whose production line is down at 2 a.m. on the week end? One company, seen automation of lubrication points on just two lines translated into 30 to 60 hours of additional machine time and profit gains of 60,000 to 120,000 annually.



PageDo you start the maintenance time clock when the machine first breaks down?

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TDC - Maintenance Reduced Production CategoryThese are per downtime occurrence entries, but most can be exported from your CMMS. Your existing method of reporting need only meet the TDC recommendations below.

Under the main category "Equipment", sub category "Start up" is where you would place the percentage of reduced production from full capacity during a start up. This category is for time and percentage of full capacity equipment is running a reduced rate due to a malfunction.

This malfunction may have not been reported for some time, or scheduled for planned downtime repair, or other reason for running at a reduced production rate for an extended period of time. Malfunctions that only reduce production communally have the lowest priority, and sometimes the cost is never reported. After learning about OEE, you'll know everyone is running at a reduced rate. For now reduce rate will refer to running less than normal benchmarked production rate.

Common causes for reduced production rates...

Some may think considering the human factor (HF&HE) to be pointing a finger at the machine operator. I remind you of a very common example in defense. Number of product out of the machine is the primary gauge for a supervisor's success in most facilities. (instead of quality product out the door.) This misdirected focus has caused some supervisors to bump machine speeds (Drive settings for example) up within the electrical control panels. Without the proper technical knowledge of a machines' operating parameters, this often results in shortened life, and increased unplanned downtime.

If you are not watching for and recording the above causes for reduced production, you're losing a lot of profits. There is only one sure way to monitor all these factors and that is with sound procedures that are strictly enforced.

Being able to assign a cost to these reductions in production will give you the cost justification to do productibility studies and analyses. As with all TDC methodologies, you will have the necessary information to make more sound management decisions on a proper coarse of action.

See also ...

Cost of Ignoring Human Factors in Manufacturinghttp://www.engr.orst.edu/~HFE/HMSE/Error/domains.html#Cost of Ignoring Human Factors in

Bottlenecks and other material shortages Equipment failure, troubleshooting and waiting for repair To maintain quality and low reject rates A non-reported, or unscheduled for repair "annoyance" problem Operating with band-aid In-line production equipment installation An undetected drop in production rate Poor working conditions (human factor) Run till failure policy

PageReduced production should be part of your downtime cost calculation.

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TDC - Scrap Cost Category While most of the industry has a handle on recording manufacturing scrap cost, relating that cost to machine failure is seldom done. Another setback may be the fact that most facilities are still tracking scrap cost on paper only. You will need to incorporate your current reporting methods into your CMMSand/or EAM software, so that the relationship can be analyzed. Also the existing method of calculation will need to meet the TDC recommendations below.

The amount of scrap produced, and whether or not it's recyclable at that stage of the production will be recorded in other TDC categories such as Equipment / Start-up cost. (Start-up cost records amount of normal scrap generated each time machine is taken out of, or placed back into production.)

The Equipment / Start-up cost category is also where you would calculate the actual dollar value per scrapped product, in relationship to that stage of the production. This scrap category is where you record the amount of scrap not covered in other categories, that is directly related to equipment failure and maintenance operations.

The cost per product of re-work at various stages of the production will be calculated and recorded in the Labor / QC category. That cost per product will be multiplied by amount of products needing re-worked do to downtime.

Some causes for scrap related directly with downtime...

Examples from the above table...

While these examples may be placed under more than one example area, the important point is that the scrap should be recorded and related to the downtime occurrence in this "Downtime/Scrap" category.

Equipment failure: A closed loop control board on an extruder fails.... all parts made till machine stopped were too thin (scrap).... minor hardware failures which take hours or days to diagnose and repair.

Non-reported:It is accepted by operators, every time machine speed is adjusted while running, one part is scrapped. But in accordance with manufacturers this should not be occurring. Therefore indicating a machine problem.

Band-aid:Scrap per hour produced because of problem temporarily being band-aided till scheduled repair. Also scrap produced while performing band-aid repair on machine. True Band-aid cost are important to track, as they are deceiving when weighing decision as to full repair or just band-aid.

Equipment failure, troubleshooting and waiting for repair A non-reported, or unscheduled for repair "annoyance" problem Operating with band-aidIn-line production equipment installationIncorrect or lack of Maintenance procedure (human factor) Run till failure policy

PageFind out what your true scrap cost are.

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Equipment installation:While new equipment is being installed, as long as production is not stopped, scrap costs can be overlooked. This area should be addressed during the planning, and monitored during the actual install. There is also the unplanned occurrence from accidents, such as the fork lift bumping a running machine while moving equipment. Also slowing or stopping production due to traffic by the installers. All the different aspects of an installation can affect many areas of downtime cost, and they add up quickly!

Maintenance procedure:Consider this example of cost related to maintenance procedures and human error. A maintenance person makes an adjustment on one shift, but does not record what was done. This adjustment could have increased scrap rate for three shifts until that person returns to work the next day. Unwillingness of maintenance personnel to "accept ownership" of the system.

Run till failure:Usually before such a radical practice is adopted, detailed analysis, including scrap predictions are performed. But if growing scrap rate in relationship to end of life of part was not considered, you will need to reconsider your run till failure policy.



PageFind out what your true scrap cost are.

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TDC - Band-Aid Category This category is a per downtime occurrence entry, often overlooked in CMMS programs. Your existing method of reporting needs to meet the TDC recommendations below.

Two types of Band-Aid information...

Before computers, band-aid cost was never tracked, which has led to it being overlooked in most cases now days. A good example is a case of required re-engineering. The facility had a two week wait for planned downtime to replace a bearing with a different type. In the mean time, up to 3 times a day maintenance would have to drag the welder to the machine to do a band-aid spot weld. (the vibration had it's effects.)

Looking at the maintenance time only resulted in 1.5 times per day average, at 15 minutes per day. This went on for 12 days, resulting in a total of 4.5 hours downtime till scheduled permanent fix. When deciding whether to shut down for repair, or wait till scheduled downtime, the 6 hours to do repair was the only consideration.

At first glance, the decision looks pretty sound, till you see the true cost with TDC. To keep it simple we will use just a few of the TDC metrics to make our decision.

Cost of this occurrence Associate cost to permanent fix done later Parts used for band-aid repair Amount of times band-aided till permanent fix, etc.

Percentage of all other Downtime Metrics What percent of full speed, increased scrap, extra manpower, tool breakage, etc.

PageHow much is a machine band aid costing you?

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True Band-Aid cost...

band-aid time* - Estimates are almost always low, should be 1.5 times per day. At some facilities, maintenance men often travel in pairs, especially on off shifts. :>) 15minutesX12days=3hrs, 3hrsX$15=$45

permanent repair time* - This and the estimate above are the common, on the spot estimates made. Usually the labor is calculated at what the hourly wage of a maintenance person is. It should be the hourly cost of maintenance person to the company. Insurance, benefits, etc. 6hrsX$15=$90

Scrap produced* - One part was scraped with each start-up, and one with each shut-down, at $5 per part. 2partsX12bandaids=24parts, 24 partsX$5=$120

Reduced Production* - In this example 5 parts per 15 minutes of band-aid downtime could not be made. In some cases you would have number of parts not produce while down, and number of parts reduced per hour do to running machine in limp mode. The ladder is usually higher. 60partsX$5=$300

Labor* - Two oversights when calculating labor, 1. should be hourly cost to company, not hourly wage. 2. The amount and type of people involved in downtime. Who performs extra activities do to downtime, maintenance, operators, set-up, engineering, management, QC, etc.

2 maintenance* - We used two maintenance to cover off shift where extra maintenance went out to see if they could help, day shift - maintenance manager supervised, etc. although maintenance wage was $15, actual hourly cost to company was $25 per hour for each employee.

1 QC inspection* - Procedures called for one part to be inspected after every start up of machine (5 minutes). To simplify, QC wage was same as maintenance.

Estimated band-aid time* = 1X15 minutes per day (total 3 hours)

Estimated permanent repair time* = (6 hours)

Scrap produced* = 2X12 band-aid repairs (24 parts)

Reduced Production* = 5 parts per incident (60 parts)

Labor* per band-aid = 2 maintenance* X 15 minutes (6 man-hours)

= 1 QC inspection* per start-up(1 man-hour)

Closer to True Down Time (TDC) cost of Band-Aid TOTAL

$ 45.00

$ 90.00

$ 120.00

$ 300.00

$ 150.00

$ 25.00

$ 595.00



True Permanent Fix cost ...

Reduced Production* - 6 hours of downtime results in 120 parts lost production even if downtime is planned. This based on fact that machines should run 24/7/365 to maximize ROI. 120partsX$5=$6002 maintenance* - Maintenance personnel utilization is much more efficient during planned downtime, but actual took two to do permanent fix. Although maintenance wage was $15, actual hourly cost to company was $25 per hour for each employee.

Had the data monitoring and decision making processes in compliance with TDC been in place, would they have made the same decision? As long as they could still make their ship dates, or had inventory, I don't think a band-aid would have been the choice.

Without TDC they were looking at spending $45.00 now, and $90.00 approximately two weeks. Really they should have been looking at a conservative estimate of spending $916.25 now for a permanent fix, or $1511.25 with the band-aid for a permanent fix in 12 days (2+ times the cost). (Values based on fact that to get max ROI out of capital equipment, you should run equipment 24/7/365. There for even planned downtime has loss of 6 hours production.)

The example above is a very low cost one. Consider if the machine in question was a bottleneck, and the parts cost at that stage of production was $30 each. They might then be looking at a labor only estimate of $45, when the true cost would be in the thousands (100+ times the cost).

In summary, when looking at a band-aid decision, be sure to use manpower cost, not just their wages. Secondly, include all people involved in band-aid; maintenance, qc, set-up, power cost, machine depreciation, etc. Third, don't forget scrap cost and reduced production, just to name a few (bottleneck could cause similar cost throughout the plant). Last of all, take note that band-aid time estimates, and amount of times needed to be done are usually under estimated.

See Also...

Under pressure, supervisors and workers are inclined to apply Band-Aid fixes.

http://www.reliability.com/article2.htm

Are you a manufacturer? Please visit DowntimeCentral.com to participate in our Downtime survey and receive free 66+ page report. (updated and emailed to you automatically as survey grows.)

Scrap produced = (2 parts)

Reduced Production* = 20 parts per hour (120 parts)

Labor for fix = 2 maintenance* X 6 hours (12 man-hours)

= 1 QC inspection per start-up(1/4 hour )

Closer to True Down Time (TDC) cost of Band-Aid TOTAL

$ 10.00

$ 600.00

$ 300.00

$ 6.25

$ 916.25





TDC - OEM and Outsourcing Service Contractor or Consultant Category These are per downtime occurrence entries, but most can be exported from your CMMS. A couple fields are constants related to known cost such as annual contracts. Your existing method of reporting need only meet the TDC recommendations below.

Your interactions with OEMs can be a major cost factor in downtime as well as other areas. You should be tracking the related metrics listed below to reveal areas of opportunity. Just the travel cost alone often start out at $ 3,000 for just one day! That is a lot to pay for a photo eye getting cleaned, which an operator or maintenance person could have done, but you would be surprised how often that scenario or a similar one, takes place.

The size of cost saving opportunity when dealing with OEM, Contractors, and consultants is so great, that we will address it further in a future book. When integrating the metrics below, consider all outsourcing related to maintenance repair and operation, to be recorded and tracked associated with the equipment in your facility.

OEM metrics (Who is responsible for checking?) ...Per Occurrence:

T&M + Expenses Time and Material* charged by service provider Air, Hotel, Car, Perdiem, Expenses*.

Time and Material* - Most commonly tracked and recorded in CMMS programs. Expenses* - Less commonly tracked. $1,000 for Air Fare, $300 for Car, $200 Hotel= $1500 just for a couple days. There are creative ways you can reduce this cost, like making a deal with a hotel near your facility.

Downtime due to new installations or modificationsDirectly* caused downtime Indirectly* caused downtime Delays* in project schedule

Directly* - The time and lost production are usually on your mind, but seldom related to the True Downtime Cost to the occurrence. For example, you put a new piece of conveyor inline with a bottleneck strapper. The least expensive OEM may take twice as long to do the installation. Yea, their conveyor only cost $3,000, but did the bottleneck downtime cost $2,000 per hour?

Indirectly* - One of the most deceptive OEM cost. For example with an air compressor issue, the common thought might be - "well, the problem is only reducing the production rate". The question should be asked, was throughout the facility for two shifts while waiting for the OEM to open up the next morning at 8:00am. The thought may be well we where able to get by. Actually the downtime - reduced production, increased scrap rate, OT later in the week, etc.- cost could have purchased a brand new compressor.

Delays* - One of those rare occasions when it took a week longer to do the start up on new installation. If you are accurately tracking the true downtime cost, at some point it would not be unreasonable to start billing back the OEM for what their disorganization has cost your company.

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Downtime cost where T&M was warranty* workDowntime due to lack of OEM support No manual*No backup of equipment Program*Lack of Technical information*No 24/7 support (phone and online*)Finding service provider* (OEM out of business)

warranty* - "Well they are taking a long time to get it fixed, but at least it is warranty." Most do not consider the downtime cost, especially when it is cumulative.

No manual* - With a $100 VCR, or even a $10 watch you receive a manual. So why not expect one with a $20,000 machine.

Program* - Sometimes the vendor will exclaim, it is proprietary. Other times last minute changes are not updated, or disk is left in electrical panel and corrupted.

Technical information* - Not only should you insure you receive manuals, but check that they are not just glorified equipment brochures. Do they have adequate Safety, Machine Operation, troubleshooting, and parts information?

phone and online* - Lack of phone and online support are felt hardest on the off shifts. Can you call your OEM at 10pm? Does their web site have technical info, or just a sales brochure? Does the OEM have 24/7 contact information online? If yes, do you allow your off shifts access to that online information? If you answered no to any of these, check out our Quick Help service, we fill those voids.(www.bin95.com)

Finding service provider* - This becomes more of a problem in the market today of mergers and bankruptcies. We can often help find you the needed resources in these instances. We can advise on issues of world class standards too.

Constants: Annual fee/ est. hours used per year Hourly/Daily charge of OEM or other service provider

We have recorded many testimonies of unnecessary cost and unplanned downtime. Most of the greatest cost had a root cause related to OEM or equipment installation/modification. Not to insinuate that most OEMs aren't doing what they should, but to point out five facts when dealing with OEMs ...

There are not many "World Class" OEMs out there. You are not at the mercy of an OEM, if you demand it, there is

an OEM that will do it for you. If you don't insist on manuals, world class training, access to

equipment data, true 24/7 support, etc; You may not receive it! Projects usually cost more time, downtime, quality, and money

than you estimate. You get what you pay for. (Always take the cheapest bidder,

and you may pay more in the long run, as pointed out in the four facts above.)



An example: Utilizing all TDC metrics can show you that 10 hours downtime waiting on a service provider could cost you $60,000! Those manufacturers and especially corporations who use the five facts above, can quickly resolve 90% of their unplanned downtime with in-house personnel. What is the TDC of a new installation? Lack of technical documentation? Our surveys show most companies have inadequate equipment documentation (Note1). TDC will show you the hidden cost. TDC with OEE will also show you most supplemental services such as predictive, preventative, consulting are great investments. (Note1 - http://www.bin95.com/Survey/OEMdoc1.asp)

An OEM Support Note: Business Industrial Network's "Quick Help" (http://www.bin95.com/Manufacturing.asp) service is designed to fill the voids left in OEM support. Give it a try! Can you afford not too? Business Industrial Network is not in the business of replacing OEM support, but enhancing it, both on the customer side and on the OEM side. We work with customers, OEM contacts and other knowledgeable personnel around the world. This enables us to come up with a collaborative solution to get your equipment quickly repaired and back into full production.

See also...

Our Downtime Cost Survey of over 80 companies and Corporations http://www.bin95.com/Survey/GraphOEM.htm

Alternative sourcing of Original Equipment Manufacturer (OEM) machinery spare parts can cost you in many ways. http://www.tobaccoreporter.com/backissues/May2001/story1.asp





TDC - Tooling Cost Category These are per downtime occurrence entries, not usually recorded in CMMS programs. Your existing method of reporting need only meet the TDC recommendations below.

The decision to record this cost is very dependant on the manufacturing environment. If your greatest tooling cost related to machine failure is an occasional $5 insert, it is probably not worth the time to incorporate the tooling category in your downtime tracking software.

On the other hand, if a machine was destroying one $5 insert every hour, due to machine needing repaired, it could warrant this field being implemented. Let's look at the true cost, if the nuisance problem was allowed to continue for just one week. 24 hours, times 7 days, equals 168 inserts ($840). Closer but still not at the TDC. Tool change time cost 30 minutes of production, (1/2 hour TDC = $350). Are we there yet? No. Assume 1 scrap/rework resulted out of every 5 times the tool broke, (34 X % $15 per part = $510)

Two Sides to every coin ...

Now we are close enough to the true cost of downtime. Tooling ($840) + Lost Production ($350) + Scrap ($510) = $1,700 To keep it simple we did not consider the many other cost, such as QC labor hours doing extra inspections. Armed with your new TDC knowledge; Would you decide to shut the machine down for the 1 hour repair ($700)? Or would you wait till scheduled downtime on the weekend ($1,700+)?

Final Notes: Tooling accounts for only three percent of the cost of producing a part. The true downtime cost from the failure of inferior tooling adds up to many times that 3%. Tooling often falls into the category too small to analyze, even if the MTBF is high.

Tooling damage caused by Machine failure

What is the Frequency of tooling damage? X Times the cost of tooling+ Plus the other TDC Metrics

(Set-up time, QC labor, Reduced production, etc.)

Machine failure caused by Tooling damageRoot cause for tooling failure

Is Tooling Quality adequate? Is it the right tool for the right job? Is procedure the cause for tooling failure?

Tooling Solution vs TDC of Machine Failure First calculate the True Downtime Cost

Second, the cost to resolve tooling issue Then set priority appropriate with difference between cost



PageIs that tooling savings costing you more money?

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TDC - Maintenance parts and shipping Category These are per downtime occurrence entries, but most can be exported from your CMMS. Your existing method of reporting need only meet the TDC recommendations below.

Out of the parts and procurement fields below, the actual parts cost is the only value commonly tracked. Those with sound work order procedures may also do a good job of tracking Band-aid parts cost, and in-house fabrication time associated with a downed machine.

Rental cost for such items as JLGs, temporary air compressors, generators, etc. seldom are added to that final dollar amount associated with each downtime instance. Hours of parts (store) personnel's involvement in parts procurement is another big ticket item not associated with each downtime occurrence. Instead, parts procurement is hidden among the vague "overhead cost" dollar amount.

Your Parts and procurement cost...

We can see the hidden cost of parts and procurement in the following testimonial from one company. This example is one of the most common executive oversights in all types of manufacturers. An air compressor goes out, a management decision to go with the lowest bidder on the repair. A common policy in the manufacturing industry. The repairs were done improperly and the air compressor goes down again. This time we hire the more reliable and expensive repair service, but have to wait for their schedule to clear up. During all this the company is paying $ 1,000s a day to rent a compressor. The cost of service twice, rent, and downtime, could have paid for a new compressor with warranty. They eventually bought a new one anyway, the only difference by the time they actually bought it, the cost was the same as if they had bought two!

They may have recovered all the money they were charged for the first fix, (or may not have) but the administrative man hours related to this entire event had to be astronomical. There was time finding the first service provider, meetings between management on what to do, then more meetings when the first service provider's work failed. Then more meetings, then finding a rental, then finding a second service provider, or new unit, analysis, maintenance personnel involved. Then there was the rental fees, and the cost of downtime.

Hind site is 20/20, yep heard that more times than I care to remember. The fact is, if all involved were aware of the true downtime cost (TDC) of that bottleneck, they would have seen it viable to invest in quality craftsmanship. Are they the only company in their corporation to make this mistake? No! Hopefully the above situation resulted in corporate policy so all companies could share in that hind site.

This is what Business Industrial Network (bin95.com) is all about. Helping us all learn from each other's mistakes.

Actual parts cost

Band-Aid parts cost

Rental cost

Parts procurement Time

In house fabrication time

as commonly reported

PageStandard maintenance parts and shipping cost calculation.

3/23/2003file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Shipping.htm

Your shipping cost have a default value...

Looking at the example shipping cost above, it's clear that emergency shipping should be considered carefully. But if your equipment is down, most often your hands are tied.

See also...

UPS Quick Cost Calculator (http://wwwapps.ups.com/servlet/QCCServlet)

Do your parts procurement the Intelligent Internet way(http://www.mcsolutions.co.uk/dti/Dean_Foods.pdf) Using the Internet as a universal networking standard, business partners can create seamless, automated supply chain systems, learn from GE. (http://www.cio.com/archive/061597/commerce_content.html)

Shipping Standard $20.00 Shipping Express $50.00

Shipping Emergency $700.00



PageStandard maint