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The Financial Impact of Machine Downtime on a UK business

11-Apr-2019
The Financial Impact of Machine Downtime on a UK business
Businesses across the UK can be majorly impacted if a machine were to break down. If the right preparations aren’t implemented, technical disturbances to appliances can have a significant detrimental impact on the productivity and profit margin of a business. A field service management firm called Oneserve commissioned a study that was carried out in collaboration with UK manufacturers; results showing that machine downtime costs the UK approximately £18 billion a year.

If this figure was reduced, it could boost the British economy which couldn’t come at more of a crucial time as nation’s industry is combating the unknowns of Brexit. But what is the true impact of machine downtime in UK industry and what solutions are available?

The UK machine downtime
Machine downtime is unpredictable scenario, that causes major harm to a company, especially as it causes processes to cease. With growing consumerism creating higher demand for products, fast and efficient machine procedures are critical to a firm’s success. But does the impact of machine downtime differ by industry?

In the world automotive industry, one minute of a machine downtime can cost just under £17,000, and British Airways had reported a technical failure in 2017, that cost the company £80million, according to their CEO. Due to the rising reliance on technology across the board, machine downtime affects every industry. Did you know that IT downtime — the period when a computer or IT system is inaccessible or broken — costs UK businesses £3.6 million a year, on average?

As well as the costs, machine downtime can have negative effects on other areas of the business too. C if it fails to meet supplier expectations, the stress it puts on employees who must rectify the downtime, and a workforce with lower morale due to a lack of productivity. The key to reducing the impact of machine downtime — inevitably, it will occur at some point — is to know its effect it has on your business and plan a reaction to soften its impact.

How to calculate to cost of downtime?
This is a main question for employers. There are a number of ways to calculate the downtime total, as you must take into account direct and indirect costs. These include:
  • Labour costs — when your employees can’t work.
  • Product costs — during downtime, your business is not creating new products to sell.
  • Recovery costs — including retrieving lost data and repairing machines.
  • Extra costs — such as the damage to your brand’s reputation

To calculate your labour costs:
First you’ll need to multiply the duration of the machine downtime by the hourly pay of your operators to find your lost labour costs. Obviously, this depends on how reliant your workers are on machines and technology. For example, if your business’ server goes down, your reception staff may still be able to answer queries but won’t be able to log details or access your database to book appointments. On the other hand, if a production lines loses power, the employees working on it won’t be able to use tools and machines to do anything.

In this case, work out what the percentage of an employee’sworking hour has been reduced by the downtime. If they can still work at 50% capacity during the downtime period, then half their hourly rate and multiply this by the duration of the machine downtime period instead of the full hourly wage.

To calculate your product costs:
If you’re a manufacturing business, you’ll need to find the lost product costs of machine downtime by simply placing the price on a single-unit product, then multiple it by how many items you produce in a certain period, and then multiply this number by the machine downtime period. For example, say you produce £100 worth of product and you generate 12 of these an hour, with machine downtime of two hours, your lost product costs are £2,400.

Although, your downtime costs may differ depending on the type of business. If you’re an ecommerce website and your site goes down, you’re losing 100% of product costs, as nobody can buy from you. For example, if you typically make £2,000 an hour via online conversions and your website is down for three hours, you have a lost product total of £6,000. But, if you have a physical store and your site goes down, then consumers can still purchase from you.

For instance, if you usually make £1,000 an hour in-store purchases on top of online profits, you need to consider this in your calculations by subtracting it from the lost product total of your website platform.

To calculate the extra-cost total:
The toughest part of calculating machine downtime, is discovering all the intangible, extra costs that machine downtime has created. Rather than using figures to work this out, it’s worth simply bearing in mind that the value of machine downtime goes beyond profits lost during the downtime period itself.

To calculate your recovery costs:
Before you determine the overall cost of machine downtime, you most note the recovery charges. Consider how much it cost you for: machine reboots, energy surges (when machines were powered back up), replacing/repairing parts, and retrieving lost data. Then, add this onto your other calculations to get a more accurate machine downtime value.

To calculate your final machine downtime cost:
The final calculation should include the total amount of each of the above sections. Simply add these together and you have your cost of machine downtime total. Remember to ensure that you use the same units of time to work each section out for an accurate outcome (e.g. employee pay per hour, product output per hour, etc.).

Solutions
So, as we’ve explained, the costs can add up on a machine’s downtime and therefore, it’s important for companies to implement a plan to help reduce the impact. But how?

Statistically, more than half of machinery downtime is due to internal faults that are hidden. So, it’s essential that you regularly check and maintain your machines. Chris Proctor, Oneserve CEO, states that: “One of the most common technical faults is the overheating of particular parts, especially where there is metal on metal, as these can short electrical circuits and cause the machines to stop running.

“Vibrations, usually the first sign a machine is breaking, are another major cause of internal technical fault — they cause a cascading effect which can have a devastating impact on the machine. General wear and tear, as well as operator misuse, can also be the cause of technical fault.”

Simple services, such as motor overhauls and repairs, can educate you on any internal issues that could have otherwise sparked lengthy machine downtime if not noticed. Adopt a preventative maintenance mindset and check your machines and computers for viruses, glitches, and inefficient parts that could cause a companywide cessation of work.

Improve manager-to-operator communications so that those working with the machines in question can relay concerns directly before it’s too late. Commit your company to regularly updating your software and equipment and ensure that every member of staff is trained to use their machine or working station properly to reduce the chance of user-error. IoT (Internet of Things) is also an avenue of downtime prevention. Utilise the abilities of fault-notification sensors to help detect dropping performance levels and computing clouds to store vital data. Using innovations like these will help you arrange repair services prior to scheduled manual checks, as well as give a way of backing-up details and services in the case of a malfunction.

All industries must deal with machine downtime however, it doesn’t have to spell disaster. Bear preventative methods in mind and make sure to keep on top of downtime calculations so that you have an accurate oversight of the effect of downtime on your staff, processes, and profit margin.

Learn more here.