Business Industrial Network

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Business Industrial Network

• www.DowntimeCentral.com

True Downtime Cost
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Cost Factors (Definition)

• TDC True Downtime Cost

• A method of recording and analyzing all
  significant cost metrics associated with
  equipment downtime in a building or manufacturing
  facility.
• TDC provides a way to assign time and/or monetary
  value to previously considered non-tangible
  cost of downtime.
• Also TDC includes downtime factors commonly
  overlook to arrive at a more true value for the
  cost of downtime.

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How we view cost

• ROI
• The bottom line when dealing with owners and
  investors.
• OEE
• A valuable means to view general efficiencies or
  deficiencies, whichever the case may be.
• ROA
• More focused on the asset value its self.

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How we view cost (RAV)

• Return Asset Value
• There are five phases in the life of a piece of
  equipment design, construction, start-up,
  production and taking out of service. Depending
  on the choices that are made in each phase,
• the total cost will be fixed. For instance, bad
  design entails greater labor costs during the
  production phase. TDC must be used in all five
  phases.

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Producer Value Model
X
Interest rate
Net Assets
Income from Finished Goods
Cost of Raw Materials
After Tax Operating Profit
Conversion Costs
Taxes

Cost of Capital
Price of Finished Goods
OEE
Production Yield
Conversion Cost (objective)
Production Rate (actual)
Availability (actual)
Quality (actual)
Conversion Cost (actual)
Production Rate (objective)
Availability (objective)
Quality (objective)
Market Conditions
Safety,Environmental
Utilities electric, water
Maintenance
Waste Disposal
PM, PdM, parts, labor
efficiency
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OEE is great

• If generated from True Downtime Cost metrics.
• OK, its great anyway you look at it, but lets
  really look at it.

IF 70 OEE was derived from 50TDC data, its
really only 35OEE
70 OEE X 90TDC 63 OEE (TDC)
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The operative word is
Overall Equipment Efficiency
AT least monitoring OEE per equipment brings
focus on the equipment its self. But may not
provide true cause of major cost, unless the
cause is obvious.
True Downtime Cost
TDC brings focus on where ever an issue may be,
with equipment, manpower, procedures,
departmental, etc.
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Where to start

• OEE per equipment (profit center)
• When making every financial decision about a
  piece of equipment, the OEE should be considered.
• Take a look at this example of Acme Co.
• Improve on OEE with TDC
• Front End Incorporate TDC in your data
  collection.
• Back End Incorporate TDC in you software
  reporting.

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A Quick Look at TDC metrics
Overhead
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Examples of the Money saved by looking at TDC
category ...

• Power
• estimated 26 billion per year cost to U.S.
  companies in lost time, equipment repair and
  equipment replacement.
• nearly 80 of transient activity at a given
  facility may be internally generated.
• All mission-critical electrical and electronic
  systems should be shielded to prevent disruption,
  damage and destruction.

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Examples of the Money saved by looking at TDC
category ...

• Tooling
• tooling accounts for only three percent of the
  cost of producing a part.
• downtime results from the failure of inferior
  tooling adds up to many times that 3
• Tooling often falls into the category too small
  to analyze, even if MTBF is high.

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Examples of the Money saved by looking at TDC
category ...

• Troubleshooting Time
• 90 of the time is spent finding the problem and
  how to fix it, 10 actually replacing the fuse.
• Who or what technical support will be available
  to take care of an end user whose production line
  is down at 2 a.m. on the week end?

Business Industrial Networks Online Quick Help
Service, that is who.
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Examples of the Money saved by looking at TDC
category ...

• Quality
• Product quality does not cost, it pays.
• Quality really pays in reference to Machine
  quality, replacement part quality, repair
  quality, Service quality, and management quality.
• With production quality, a simplified view is
  better quality, more saleable products out the
  door. (increased capacity)

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Examples of the Money saved by looking at TDC
category ...

• Reliability
• Mobil has a reduction trend in 1999 to yield
  8-10 million.
• If your reliability program resulted in an OEE
  increase from 85 percent to 89 percent. If at 85
  you had annual sales of 1,236,500,000 Therefore,
  each percentage point of OEE represents
  15,135,000 of sales. With the increase in
  product represented by improved OEE, sales would
  increase 60,520,000.

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Examples of the Money saved by looking at TDC
category ...

• Outsourcing (and OEM)
• Supplemental services such as predictive,
  preventative, consulting are great investments.
• When it comes to Downtime, very costly if not
  monitored. Especially when dealing with OEMs.
• The service call alone starts at 3,000 the first
  day.
• TDC metrics will show you that average 10 hours
  downtime waiting could cost you 60,000 easy!
• What is the TDC of new installation? Lack of
  technical documentation? TDC will show you hidden
  cost.

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Examples of the Money saved by looking at TDC
category ...

• PM
• Like the maintenance department its self, the
  question goes back and forth. Is preventative
  maintenance (PM), an overhead, or profit center?
• One company, seen automation of lubrication
  points on just two lines translated into 30 to 60
  hours of additional machine time and profit gains
  of 60,000 to 120,000 annually.
• Just because a 50 bearing fails, does not mean
  that it did not cause 50,000 in lost production.
  TDC is a road map to automating RCA, and
  providing a means to accomplish Lean
  Manufacturing

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Examples of the Money saved by looking at TDC
category ...

• Lost Sales
• In addition to lost sales, loss of market share
  is even more threatening. 
• The Whirlpool Findlay Division has been able to
  increase production by 21, without any
  significant capital costs by focused TPM and OEE
  utilization.

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Examples of the Money saved by looking at TDC
category ...

• Time
• Just minutes in downtime reduction adds up over
  week, month, year.
• At cost of 135.00 and 160.00 per minute
• Ten minutes per 16-hour workday saved by
  installing a VT400 (Versacall.com)
• over 6,750 per 5-day workweek.

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Examples of the Money saved by looking at TDC
category ...

• Bottleneck
• Identifying bottleneck cost can save thousands
• Example an industry accepted cost of a
  corrugators is 10,000 per hour (varies by
  facility).

Other Bottlenecks to a corrugated
facility Boiler, Glue system, Air compressor,
Strapper, Facility Power, etc.
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Testimony

• A maintenance manager replies when asked if he
  has difficulty with cost justification to upper
  management. I have a situation right now about
  spending about 7,500 for a new electric
  distribution panel. it controls all our air
  compressors and I was told tonight that another
  compressor had to be shut down. If one more goes
  down we will be down for about 7-10 days at a
  cost of over 150,000 per day. tell me if a
  expenditure of 7,500 is worth the investment?

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Another Testimony

• Another reports losses less visible can be much
  greater. Equipment not running capacity, may
  result in not filling orders, or reduced sales
  volumes. For example, if prolonged operation
  with four out of five furnaces working reduces
  production capacity by 20 percent, a continuous
  process line with a design rating of 1,000 units
  per hour would be capable of only 800 units. To
  determine the loss, multiply the 200 units per
  hour by the unit sales price of 100. This
  computes to a 20,000 loss for each hour of
  operation at reduced capacity. Should this mode
  continue for a full year, the annualized loss
  equals more than 175 million.

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One more

• Another reports one of the most common executive
  oversights in all types of manufactures. An air
  compressor goes out, a management decision to go
  with the lowest bidder on the repair. A common
  policy in the manufacturing industry. The
  repairs where done improperly and the air
  compressor goes down again. This time we hire the
  more reliable and expensive repair service, but
  have to wait for their schedule to clear up.
  During all this the company is paying 1,000s a
  day to rent a compressor. The cost of service
  twice, rent, and downtime, could have paid for a
  new compressor with warranty. They eventually
  winded up buying a new one any way, the only
  difference by the time they actually bought it
  the cost was the same as if they had bought two.

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TDC will help you plan a budget that reflects
real world constraints on production.

• After speaking with the General Manager in the
  last example, we found out that the cost was not
  in the budget. This was a major factor in the
  decision making process. The low budget resulted
  in spending twice as much to resolve the issue.
• Production demands is another factor that often
  results in costly management decisions. With out
  TDC, managers are not realizing the cumulative
  cost of a nuisance issue. This sometimes results
  in a greater cost and lost production than if
  they would have shut down production and repaired.

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Business Industrial Network
TDC represents the final bottlenecks to a fully
integrated and auditable approach to maintenance
strategy development / justification.
TDC

• Click the link to learn more about
• TDC Data Source
• TDC Overview

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