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Frank Hill is the director of manufacturing business development for Stratus Technologies. |
Calculating Downtime Cost
Determining the total of hard and soft downtime costs is not easy, which is why it’s often not done well if at all.
One would think that tallying direct wage cost absorbed during an outage would be a simple matter. When is an outage over? When the problem is fixed or when full production is resumed? Employees do not immediately return to full productivity during the recovery period, and may not for hours; the full value of their labor is not being realized.
Work in process may need to be discarded, as may work produced during the recovery period that doesn’t meet specifications. The line can lose sequence, generate a lot of scrap, or even damage tools because systems recover to an unknown state. You may incur repair costs and outside service expenses. Internal IT resources are diverted from doing something else to fix your problem.
Highly integrated systems can push the effects of downtime on the production line to administrative functions upstream and down, into the supplier pipeline, to customer order fulfillment and product delivery. Downtime can invoke financial penalties if contract conditions are breached, or if regulatory requirements are violated. Customer relationships get damaged and reputations tarnished.
All these, and many other variables particular to your own manufacturing processes and environment, are legitimate contributors to the cost of downtime and should be included.
