Unplanned Downtime – The Causes, Costs and How You Can Reduce It
Unplanned downtime is one of the biggest headaches a manufacturer can have. It’s is a stressor looming over every company that relies on functioning equipment to get work done. Downtime is bad enough, even when it is scheduled for an important reason. But when it comes as a surprise, it is a costly, frustrating, unpredictable situation. It’s no wonder manufacturers want to reduce, or altogether eliminate, this problem.
That unplanned downtime seems like a terrible spectre hovering with no real way of knowing when or how it will hit. Yet, in fact, there are ways to reduce unplanned downtime, and reduce the costs that come along with it. Because, if there’s one thing we all know, it’s that unplanned downtime is expensive — no wonder it’s something we all work hard to mitigate!
If you’re not concerned about unplanned downtime, or are unsure of exactly how it can impact your organization, we can show you the financial costs associated with this scenario so you can weigh how important it is for your business to avoid outages. And, with those costs in mind, we’ll show you how you can reduce downtime and thus reduce its financial impact. Just as there are many reasons for unplanned downtime, there are many ways to address the problem. The shared root of these solutions is dependability. When you can make your people, your environment, and your equipment more reliable, downtime and its costs become more predictable.
The Causes Of Unplanned Downtime
When you are a part of any major service industry, there will be moments in any month when you face the struggles of unplanned downtime. Whether you are in the petroleum, petrochemical, power generation, or any other heavy industry, this type of stoppage can be almost too much to contemplate.
It’s not as if it doesn’t happen, because it does; in every industry, to every company. In industries where there is real danger on a daily basis to every employee, dangerous working conditions can often be more dangerous during unplanned downtime.
There are numerous reasons for this happening. According to a new study, “After the Fall: Cost, Causes and Consequences of Unplanned Downtime,” 450 service and IT decision-makers across manufacturing, oil and gas, energy and utilities, as well as other leading industrial sectors were surveyed.
The study finds that unplanned downtime hits production and productivity the hardest of all. Numerous factors can cause a company’s production to grind to an unexpected halt. Here are the top reasons for unplanned downtime.
Issues with equipment top the list of unplanned downtime causes. Also known as breakdowns, mechanical failures add up to more time wasted getting your production and productivity moving again. A lot of the time companies are reactive to machine issues rather than proactively. Some companies don’t even know when their equipment needs servicing or maintenance. This all adds up to waiting on replacement parts to be delivered, potential orders backlogged or lost, and the cost of employees remaining high even when they cannot get the job done.
Of course, if your equipment is sub-par, that maintenance and repair will happen more frequently. By investing in quality equipment, including valves, you can practically guarantee that you will reduce downtime of all kinds. When valves are built to last, downtime becomes a thing of the past.
Technology That Is Not Integrated
Often, there is a disconnect between what a company has planned with its technological ability and integrating it into its service models. All goals and technology must align to keep processes running smoothly. All ‘tools,’ whether digital or not, must be included in a company’s understanding that one area could lead to unexpected failure and unplanned downtime.
Human error comes in many forms: from scheduled repairs not being done, to missed certifications, right down to inventory mistakes. No company wants to be standing still waiting for what was missed by an employee.
Calculating the Costs of Unplanned Downtime
First, let’s look at the costs of downtime. There are many different estimates of downtime costs in manufacturing. One figure from Aberdeen Research says it can cost a company as much as $260,000 an hour. A ServiceMax study suggests the average outage costs a company $2 million. While numbers vary, it is clear that downtime is an expensive problem.
One study suggests nearly every factory loses at least 5 percent of its productive capacity from downtime. That figure rises to 20 percent at the higher end of the range. This happens when equipment is unavailable, bottlenecks are formed, time is lost and band-aid solutions are put into place.
To understand the potential cost of your business downtime, both intangible and tangible costs must be considered. Tangible costs are easier to see and quantify, such as product loss or increased labor to deal with downtime. Intangible costs are trickier to calculate, and include costs like lost reputation or stress on the company. The true cost of unplanned downtime depends on variables like the size of your company, the complexity of your systems and the length of the outage. However, there are factors that influence the overall cost, that you can look at and individualize to your situation to get a good estimate. Here’s what to consider in your own calculations.
The most obvious impact of unplanned downtime is lost production. If you know what you can typically produce or manufacture within a given time period, and what those items are worth, you can then calculate the direct costs of lost production from unplanned downtime. And, even when you get back online, any depleted inventory as the result of lost downtime will also contribute to overall costs as you try to catch up.
You will also have to add in personnel costs. Even if there is no work to be done thanks to unplanned downtime, you have staff that need to be paid. You’re paying people whether or not you’re making money off of production. Add to that any costs of bringing other staff on board to deal with outages, whether they are working to repair the equipment, or are shoring up the customer service department as your clients become frustrated with lack of output.
There are indirect costs to unplanned downtime that are a bit more challenging to calculate, but still important. Your equipment and staff will experience stress and possibly even burnout as they work to catch up from an unplanned outage, which can lead to poor decisions that lose even more money or productivity. It also takes away time your organization could be spending innovating new products and ideas, expanding your customer base, or otherwise improving profitability.
Together, these factors in unplanned downtime can cost a lot. A survey from ITIC found that 98 percent of surveyed organizations say a single hour of downtime costs over $100,000, with 81 percent indicating it costs over $300,000. One-third of surveyed businesses report that one hour of downtime costs $1 million to over $5 million. As ITIC says, the only good downtime is no downtime. Knowing how to reduce your unforeseen downtime risk is key to keeping costs low.
Reducing the Risk and Costs Of Downtime
When you reduce the risk of unplanned downtime, you are automatically reducing the potential cost. Often this risk reduction does take a slight investment upfront, but compared to the overall costs of downtime, planning ahead is much more affordable and predictable.
An audit will reveal that issue, leaving your organization with a choice — invest in replacing or repairing that valve over and over again, eating the cost of any planned or unplanned downtime that goes alongside. Or, you can reduce the risk and cost of unplanned downtime by spending more upfront on a valve that will last.
When you invest in an Everlasting Valve product, you’re getting a rotating disc valve that actually gets better over time, improving efficiency and productivity instead of inching ever closer to downtime. That’s because our specialty valves feature a unique open-body design and self-lapping rotating disc that clears out the valve and tightens the seal every time it is used. With our products in service, your equipment keeps going through even the toughest situations.
Case Study In Reduction
One of our client stories is a great example of why life cycle value is key to reducing costs and the risk of downtime. A less expensive, less-robust valve was the first choice. It came at a third of the cost of our durable valve, but failed twice a year, necessitating a spare. Every time the valve failed and needed a switch, it came at the cost of an eight-hour shift and two employees’ labor. That is not even counting indirect costs of that downtime!
With one of our valves in place, that twice-yearly downtime is no longer an issue. On top of that, there is a cost savings of $188,000 for maintenance fees. The client can be more productive without that costly downtime. Ultimately, the life cycle value of our valve is massive given its role in eliminating all of that maintenance and repair.
All of our valves are designed to last for a very long time, even in extremely severe service. We are the choice for valves in countless challenging industries, including oil and gas. That is because our valves start out strong and keep themselves working well with a self-lapping rotating design.
In many situations, the actuators on the valves require maintenance before the valve itself will. When you purchase an Everlasting Valve product we will work with you to ensure your equipment suits your needs. That includes letting you know about any preventative maintenance that would help extend the life of your valve, ensuring less downtime for your company.
The Key To Reducing Unplanned Downtime
Take a predictive approach, and combine that with preventative maintenance and durable equipment. Know your manufacturing machinery well, and understand when and how it can lead to unplanned downtime. With that information you can choose investments with a strong life cycle value to ensure preventative maintenance.
You can rely on Everlasting Valves to help reduce the risk, and the costs of unplanned downtime. Get in touch with us to learn more.