Midsize business

How a manufacturing shutdown can save your firm $260,000 per hour

Research from ServiceMax and GE Digital shows 82 percent of manufacturing firms have experienced unplanned downtime in the last three years, with an average cost of $260,000 per hour. This statistic is alarming but it points to a simple and unpleasant truth…

Unplanned downtime affects most manufacturing companies.

Planned downtime won’t eliminate unplanned downtime altogether. However, a planned shutdown provides you with the data, clarity, and experience you need to fix key issues in your production line. Let’s start with manufacturing equipment.

Are manufacturing firms operating in the dark?

GE found that 70 percent of manufacturing respondents didn’t know when their equipment and machinery was due for maintenance, upgrades or replacement. Alarming yes, but what does it mean?

It means firms are flying blind.

If they’re unsure about maintenance or upgrade replacement schedules, there’s a very good chance they’re also in the dark on a number of related issues like…

  • Machine downtime
  • Downtime vs. uptime
  • Capacity utilization
  • The condition of their machinery or equipment

This also means there’s a good chance they aren’t relying on planned shutdowns to assess

the state of their equipment and operations. This effect tends to snowball.

It’s tough to cut costs, boost revenue, and generate cash flow when you’re forced to deal with an unexpected shutdown. It’s also difficult to meet customer deadlines or produce products quickly and affordably. If the survey above is true today, many firms are uncertain about the state of the machinery or equipment in their plant.

Perhaps in your mind, you’re figuring, “My last unplanned downtime was months ago. Maybe it’s not that bad.”

Maybe an occasional (unexpected) shutdown is simply the cost of doing business. It may be really expensive for other firms it’s probably not that bad for everyone.

You can do the math yourself.

Step 1: Calculate your Total Downtime: 

Planned Operating Time Actual Operating Time Total Downtime

Let’s say, for example, you plan to be in production for 280 days out of the year but your actual operating time is 240 days. This means you have been down for 40 days.

Step 2: Calculate Average Production Rate: 

Total Number of Products Produced ÷ Actual Operating Time =Average Production Rate

If you produce 600,000 units and it took you 240 days, your average production rate is 2,500 units per day.

Step 3: Calculate the Number of Products you were Unable to Produce:

Total Downtime × Average Production Rate = # of Products you were Unable to Produce

During the 40 days you were down, you were unable to complete 2,500 units per day. You were unable to produce 100,000 units.

Step 4: Calculate Your True Downtime Costs:

# of Products you were Unable to Produce × Gross Profit Per Product(Unit) = True Downtime Costs

If we were unable to produce 100,000 units and our gross profit per product was $22, our true downtime costs would be 2.2 million lost.

A manufacturer’s true downtime costs can be painful to look at. If you’ve taken the time to run the numbers you know what unexpected downtime really costs.

The bad news?

These are just the tangible costs, the figures you can calculate. What about the intangible costs? These figures are difficult to quantify but they affect your business in real and dramatic ways. Intangible costs like…

  • Customer trust and goodwill
  • Employee loyalty, stress levels and morale
  • Plant responsiveness (plants aren’t able to respond immediately to a dynamic event)
  • Decreased production due to higher stress levels, low morale, employee resentment, etc.
  • Damaged reputation costs

These details seem insignificant but unnecessary downtime has a compounding effect on manufacturing firms. The research shows, firms are  struggling to hire  due to  labor shortages . They’re struggling to turn a profit and many firms are simply  struggling to survive .

How planned shutdowns can save manufacturers

Planned shutdowns provide manufacturers with an opportunity to improve on something that is directly within their control—their facilities. Things like labor shortages and commodity prices are largely outside of their agency, but planned shutdowns give manufacturers the ability to continually improve plant performance.

A planned shutdown improves each of the metrics we covered in our calculations earlier. A healthy mix of small, partial and full shutdowns decreases unplanned downtime dramatically.

Rhodes Bake-N-Serv provides baked goods for 90 percent of the grocery stores in North America. They use yearly shutdowns to analyze their equipment, processes, and performance. They use weekly shutdowns to inspect, clean and repair equipment.

Here’s how Darry Campbell, former plant manager at Rhodes, describes it:

“In addition to the yearly shutdown, we actually shut down every Friday. We’d tear down all of the main manufacturing equipment. Take it apart, clean it, and sanitize it. One of the things a weekly shutdown did was it prepared us for the major shutdown. The full shutdown we did during the summertime.”

What does this mean for manufacturers?

  • Consistent cash flow
  • Happy (and loyal) customers
  • Professional longevity
  • Greater stability and predictability
  • Increased employee engagement
  • Increased revenue (and profit)
  • Decreased expenses
  • Predictable expenses

A planned shutdown enables you to collect the primary, secondary and tertiary data points you need to improve your firm’s performance. The kind of details you can only get through experience and time. Let’s take a look at what those are.

Making shutdowns work for manufacturers

As with other sorts of planning, you want to first make sure you have specific goals and objectives in mind. After that, you can identify the primary, secondary and tertiary data you receive during the process. Analyze performance before, during and after your shutdown.

Here are a few examples:

Primary data

This is firsthand, mission-critical data that directly affects production in a significant way.

  • Machine downtime
  • Product quality
  • Downtime vs. operating time
  • Number of products produced per machine/department (before, during, and after a shutdown)
  • Rework analysis
  • Capacity utilization (better/worse)

Secondary data

Implicit data that affects production in an indirect way.

  • Cycle times
  • Machinery problems
  • Parts and component data (e.g. uneven wear and tear on specific machine components)
  • Scope creep
  • Cost overruns (e.g. repair, upgrade and replacement budget)

Tertiary data

Important, but non-essential details manufacturing firms can and should optimize to further improve performance.

  • Startup times
  • Machine changeover times
  • Machine setup times
  • Inventory accuracy
  • Overall operating efficiency (OOE)

There’s a mountain of data to explore here. These data points may not apply to your firm or your specific circumstances. That’s okay.

The main take away from all of this is the fact that you have a tremendous amount of data at your fingertips. You’ll want to collect and organize as much of that data as you can before, during and after your shutdown.

Unplanned downtime doesn’t have to be the rule

As we’ve seen, most manufacturing firms aren’t using planned shutdowns to systematically improve their business. A planned shutdown gives you an opportunity to create a competitive advantage. But a planned shutdown, as a tactic on its own, isn’t enough.

You’ll need to combine these shutdowns with consistent pre and post-mortem analysis of your firm’s performance data to produce lasting growth. The metrics I’ve shared can enable you to identify the KPIs and metrics that matter most in your business.

Work to consistently analyze and optimize your equipment, people, process and performance. With practice and structure, you’ll find unplanned downtimes will become a rare part of the manufacturing process.

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