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The real impact of downtime in manufacturing

May 10, 2024

Updated on: May 10, 2024

4 min read

Uncovering the real impact of downtime in manufacturing

Machine downtime in manufacturing is one of the most formidable challenges faced by production companies. It poses a constant threat to profits and steadily chips away at productivity. This applies whether it's inside your own factory or to customers who depend on your machines.

It is of the utmost importance in the manufacturing industry to meet the delivery dates that have been set. When a machine comes to a standstill, it can have a major impact on the entire production line. In the event that this occurs, the production line may come to a complete stop.

Because of this, production schedules are delayed, which may result in unhappy customers and a loss of money. The domino effect of downtime underscores the importance of proactive maintenance strategies to keep machines running smoothly and efficiently.

Unplanned downtime in manufacturing: How common is it?

The manufacturing industry frequently experiences periods of downtime. According to findings from recent studies, firms are losing an average of 25 hours of production time each month. The cause of this is that there was an unexpected or unscheduled downtime with the equipment [1]. The annual loss of over two weeks and the equivalent of more than a full working day are both a result of this behavior.

Industries that feel the high impact of downtime

Industries heavily reliant on complex equipment, such as automotive, aerospace, and pharmaceuticals, are more prone to machine downtime than others. While no operation can completely avoid machine downtime, it is a challenge that these industries often face. Due to the high level of precision required in these sectors, even minor disruptions can result in substantial losses.

These disruptions can affect lead times and, as a result, impact the financial performance of businesses. This is because machine downtime limits manufacturers ability to fulfil orders and meet customer demand.

It is concerning to note that the cost of machine downtime in manufacturing has been on a rapid rise. In fact, hourly expenses have been increasing by at least 50% since 2020. The cost of an hour’s downtime in an automobile plant now exceeds $2 million, up from $1.3 million in 2019-20 [3].

Over the past few years, the hourly cost of machine downtime in the oil and gas industry has more than doubled to a total of $500,000. These ever-increasing costs have the potential to dramatically reduce profit margins. Particularly, when combined with other issues faced by the business.

Large operations, such as Fortune 500 manufacturers, face particularly eye-watering losses. This group is losing $1.5 trillion annually due to unplanned machine downtime, or more than 10% of their turnover. 

The sharp rise in costs is being fueled by spiraling inflation, production lines running at higher capacity, and stressed supply chains. Many experts are saying that companies can no longer afford to ignore the impact of machine downtime. The importance of investing in preventative measures and implementing proactive maintenance measures is growing. These actions help in reducing machine downtime and protecting profitability.

The hidden costs of machine downtime

Companies tend to downplay or underestimate the full impact of downtime in manufacturing, despite how evident it is. This tendency is compounded by the challenge of accurately measuring its full cost beyond immediate production setbacks. Calculating direct financial losses, such as lost production units or wasted raw materials, is a relatively straightforward task. However, quantifying the less tangible but equally as significant costs can be quite challenging.

The hidden costs of machine downtime go far beyond the immediate financial losses. The cost covers the maintenance team's wages and the replacement parts needed to get the machines back up and running.

Also, there are usually extra fees related to expedited part delivery. Also, staff who are unable to work due to the downtime still accrue wages, further impacting the bottom line. In addition, the prospect of contractual fines for late or missed deliveries adds another layer of financial burden.

Not only does downtime result in financial losses, but it also has a rippling effect that cannot be ignored. It is possible for production delays and enforced overtime to cause irritation among workers. This can have a negative impact on both morale and productivity.

Missed deadlines can damage customer relationships and erode hard-earned reputations. Product quality can be compromised in quality-critical industries when production is rushed after downtime. This can result in recalls and safety hazards, which can further damage brand trust.

Yet, despite the negative impact of machine downtime in manufacturing, two in three companies [4] still rely on reactive maintenance strategies. These are strategies such as "run-to-fail" techniques or time-based schedules. This means that they only fix equipment when a failure occurs or on predetermined schedules. Therefore, this leaves them vulnerable to the major hidden costs associated with unplanned downtime.