The Defect and Failure Total Losses and Cost of Downtime Can be 30 Times More than the Direct Maintenance Costs

The consequential losses and cost of downtime from equipment breakdowns accumulate company-wide. Once you suffer a breakdown its instantaneous company-wide costs are imposed on the firm.

A serious breakdown can impact all departments in an operation. The unfortunate thing is that every breakdown does not need to happen and not a single cent in loss or waste needs to be suffered.

 

Slide 26 – List of Losses and Cost of Downtime Destroying Operating Profits with Every Defect and Failure that Becomes a Breakdown

every equipment defect and failure that becomes breakdowns incur company-wide losses and cost of downtime

In the slide above is listed 63 costs that can arise when equipment fails. The losses and cost of downtime accumulate company-wide. It can be said that with every equipment breakdown a failure cost surge will go throughout the company.

The operation and maintenance groups initially suffer the impact of a breakdown. Labour is redirected from doing its usual work to doing breakdown related work. Operators start pushing brooms and cleaning floors that do not need cleaning. Maintenance technicians get taken off scheduled work to do the urgent breakdown recovery. Production becomes scrap and needs to be removed from the equipment. Specialist services and skilled contractors are urgently required at high hourly rates.

The losses and cost of downtime will grow to include other departments if the breakdown goes for too long. Repairing the equipment may need immediate fabrication of replacements, or rush purchase of parts from specialist suppliers. Urgent transport and storage arrangements need to be made. Raw materials that were meant for use in production instead need to be temporarily warehoused. The Procurement Group then contacts Vendors and Suppliers, and now that department is involved with the breakdown.

If the breakdown repair causes a stock-out the company’s clients will not receive their orders. The Sales Group must contact the clients and now the Sales Department is on the breakdown too. On and on the consequential impacts of a breakdown spread across the company.

Even the Administration Group will get caught up in breakdowns. All the purchases and expenses made repairing and recovering from the breakdown will be invoiced by Suppliers and Vendors. Some 30 days after the breakdown is fixed the invoices for repair work, materials, and services will be processed by the Accounts Payable group. Now the Administration people are also on the breakdown.

The strangest losses of all are the last costs titled, “Lost Value from Curtailed Lives.” Recurring breakdowns, where the same item is replaced each time, incur an investment loss as well as the operating losses and costs from the repair. Each time an equipment component does not survive its whole service life the proportion of operating life lost is a loss of value from the previous repair. If a part replaced due to breakdown was meant to last for 10 years, but another breakdown occurred two years following the repair, then eight years of value was lost. 80% of the moneys spent on the previous breakdown were wasted. That loss of curtailed value needs to be added the business-wide losses and costs to repair the new breakdown. Repetitive failures are terribly expensive problems because of the double loss. When you see repetitive failure get the cause corrected so you get the complete value of each repair.

The business-wide losses from a breakdown cannot be escaped. Be sure you include all the dozens of costs, wastes and losses resulting from an equipment breakdown in your Total Cost of Downtime analysis tables. Every single cent will be paid by the company. All the losses and cost of downtime did not need to occur. They only arose because there was a breakdown. The breakdown only occurred because a component failed. Had there been no part failure there would have been no equipment breakdown, and there would have been no losses and cost of downtime destroying profitability.

 

This slide is a companion to the new Industrial and Manufacturing Wellness book. The book has extensive information, all the necessary templates, and useful examples of how to design and build your own Plant Wellness Way enterprise asset life cycle management system-of-reliability. Get the book from its publisher, Industrial Press, and Amazon Books.

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