True Down Time Cost

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The True Cost of Downtime

By Don Fitchett
The glue that will hold together your manufacturing initiatives.

Text Version 3 - Copyright 1995,2003 - Business Industrial Network www.BIN95.com
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Shared Left Border HOME True Downtime Cost Main Categories Equipment Constants Categories People Product Startup Bottleneck Sales-Expectation Labor Constants Labor-per-Product QC Maintenance Engineering Management Overhead Downtime Occurrence Maintenance Time Reduced Production Scrap Band-Aid OEM Tooling Shipping OEE Data Standards Included Articles What is TDC? (Overview) Data Collection Root Cause Analysis Selecting CMMS Resources Savings Examples Glossary
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Asset Management - What's your facility's true downtime cost?
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TDC - True Downtime Cost

Definition:
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 nontangible cost of downtime. Also TDC includes downtime factors commonly overlook to arrive at a more true value for the cost of downtime. In viewing the Cost Factors below, one might think micro-analyze, but the fact is, most of this data is already being collected, and exist in your computer systems today. Below is an overview of the cost factors
With all these categories, it may appear to be too much to monitor and analyze. Feel free to momentarily review the "Data Overload" section to see why there is no need to sound the "Data Overload" alarm.
Copyright 1995 Business Industrial Network
- All rights reserved. Revised: March 11, 2003.
This EBook provided by Business Industrial Network and we make no manner of an endorsement, representation or warranty regarding any contents located within. It is recognized that there is a great deal of uncertainty and honest scientific difference of opinion surrounding parameter selection for these futurelooking cost analyses. This EBook content is provide as a starting point for improving manufacturing cost analysis. Viewers understands that any content or other information offered on or through BIN95.com and DowntimeCentral.com are provided for informational purposes only.
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industrial manufacturing downtime cost categories
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TDC - True Downtime Cost

Cost Factors Overview Coments
This list is provided as a starting point for improving manufacturing cost analysis.
Equipment Cost Category (constants) Categories Standardize your data collection categories, learn from MIMOSA. People Indirect labor cost can often be greater than the more apparent direct labor cost. Product Made up of two sub-categories. Cost per Unit, and Units per Hour. Start-up Every time you startup your machine, there is hidden cost. Bottleneck Using a process flow diagram, pre-determine a bottleneck factor for each asset. Sales Expectation Our goal is always to maintain a 100% capacity readiness. Labor Cost Category (constants) LPP/M Does your LPP/LPU calculations include indirect labor? QC Associate QC cost, re-work, etc. with actual downtime occurrence. Maintenance There is a substantial staff supporting those one or two who actually do the machine repair. Engineering Engineering costs to support troubleshooting and repair of machines can slip through the cracks. Management Requesting maintenance, redirecting operators, reporting to upper level management, altering production schedules/flow, administrative tasks, etc.
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Downtime Cost Category (Occurrence) Time Are you tracking when maintenance arrives at the scene, or when the machine actually went down? Reduced Production Time and percentage of full capacity equipment is running a reduced rate due to a malfunction. Scrap On continuous flow systems, scrap related directly with downtime can be a very significant cost. Band-Aid Please take note that band-aid time estimates, and amount of times needed to be done are usually under estimated. OEM, Consulting, Contractor Your interactions with OEMs can be a major cost factor in downtime as well as other areas. Tooling Often classified as a nuisance problem if allowed to continue, can really add up in cost. Parts/Shipping Out of the parts and procurement fields, the actual parts cost is the only value commonly tracked. What about shipping, locating, rentals?
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Take a closer look at equipment operational cost
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TDC, a closer look at Equipment

Categories
Use MIMOSA, machine, priority, type, cell, line, Notes, etc.
People
Number of Direct and in-direct idle workers
Product
Cost per unit at that stage in production Units per hour
Start-Up
Electrical surge cost, Set up, % reduced till start/stop Equipment fatigue Scrap produced, is it recycle able
Bottleneck
List other downstream equipment, and % effected
Expected Sales
% effect on product out the door.
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TDC - Data collection categories.

What you measure is what youll get! Ultimately must be able to accurately track failure rates and allocate costs individual machines (location, asset) machine categories (motors, pumps) components (bearings, seals) Major benefits can be attained with current technology -- more effectively applied lower cost data collectors
To accurately track cost...

How to select and implement CMMS software
Please view this article online - How to prioritize production layout and categorize within CMMS. (The
CMMS article at DowntimeCentral.com was donated by non-bias CMMS consultants - Perspective CMMS who specialize in how to select and implement CMMS software.)
Note they did not overlook plant wide bottlenecks like the powerhouse, steam, air, vacuum and emergency power. After viewing the online article, you can return here and read the example below.
Some areas like Tooling often falls into the category too small to analyze, even if MTBF is high. Once you adapt TDC methods of monitoring and analyzing downtime cost, you will be amazed at the potential savings in what was once thought to be an insignificant category. In the example of "Tooling", TDC shows us much larger categories that add to the cost. When a tool breaks, it's not just a couple dollars to replace, plus five minutes of time (labor). Each time a tool breaks or needs replaced, there is cost of lost production (amplified by possible bottleneck), scrap, quality, start-up cost, indirect labor (such as maintenance, quality, engineering, supervisors, etc.). There is also risk of higher cost such as Safety, damage to equipment etc. After considering all the TDC metrics outlined on this web site, it becomes apparent that ten cents you saved on cheaper tooling could cost you hundreds or thousands times what the whole tool cost. Especially when you are monitoring frequency of toll defect such as MTBF.
Ease of Data Collection and Analysis

As stated by John S. Mitchell and the MIMOSA.org organization, your facility data must be readily available, easily exchanged and clearly understandable for everyone with requirements throughout the enterprise. Open exchange of equipment information between condition monitoring (assessment), maintenance (CMMS) and control (DCS) systems. Providing an open exchange of conventions will assure vital information to define the status and condition of process, manufacturing and production equipment is readily available and produces greatest value for users throughout the enterprise. Require your vendors to adhere to MIMOSA standards of being capable of automatic communication and (non proprietary or non specific) information exchange. Software links can make system access of information, resident in programs from different suppliers without special software. Be aware of TDC and MIMOSA categories, and insure they are in all your systems. To learn more about these open standards, please visit MIMOSA.org file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Categories.htm 3/16/2003
Learn that the indirect affected labor cost is often greater than the more apparent direct labor cost. Page
TDC- People Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. It is quite common for daily management decisions related to equipment downtime to be made based primarily on labor cost. Of course, production demand is also right up there on the priority list. When deciding a course of action related to downtime, the number of idle workers and man-hours to repair is thought to be the total labor cost. With the True Downtime Cost (TDC) methodology, we pre-determine the TDC cost using all the metrics, not just labor and lost production. Even looking at just labor through a TDC perspective can be very enlightening. We will learn that the indirect affected labor cost is always greater than the more apparent direct labor cost. The key to realizing greater savings by more informed management decisions is to predetermine the "True" labor cost for each profit center category. (As should be done for all TDC metrics) For example all should be aware of the hourly cost per machine, cell, department, area, facility, etc.
Directly affected people

Most of the time, one or two machine operators. Sometimes in more apparent bottleneck cases like air compressors, or corrugators, directly affected idle workers will be realized from six to an entire facility.
Indirectly affected people

Production Maintenance Management Administrative As mentioned above, with bottlenecks, all downstream employees should be considered in downtime labor cost. (you may consider them direct or indirect, and may be only a percentage of their hourly cost for reduced production scenarios) There should be four primary categories for indirectly affected people by downtime.
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Learn that the indirect affected labor cost is often greater than the more apparent direct labor cost. Page
Some may state, "that is covered in our overhead calculations" or "that is covered in our labor per product calculation". That is great as long as those previous methods includes the indirect labor listed below. You will then realize the cost savings, where as those general "Overhead" numbers may not point out a particular cost reduction area.
Production
Setup personnel Quality Delivery Engineering Other Production related personnel
Maintenance
Repair personnel Parts person Engineering Other Maintenance Support personnel
Management
Floor Supervisors Maintenance Manager Production Manager Engineering Manager General Manager Safety Manager
Administrative
Maintenance Secretary MIS Accounting Legal While each individual's involvement may only be minutes, they all add up. Also keeping in line with obtaining the "True" cost, the hourly wage should be calculated from an accounting stand point. That is, how much the employee costs the company per hour, not how much they are paid. (A maintenance manager who does a lot of the leg work that could have delegated to his subordinates, may spend 30 minutes supporting the repair of a machine. TDC would show this, and amplify the cost savings to resolve. His base pay may calculate out to $20 per hour. But with insurance, retirement plans, and other benefits, he may actually cost the company $30 per hour. That 30 minutes of one manager can easily equal the cost of one machine operator. As you move up the management chain, and add all indirect labor, the true labor cost could have been over $100 instead of $15 for one employee. See Also... A Regional Survey to Determine the Significance of Human Error in Manufacturing (www.engr.orst.edu/~HFE/HMSE/Error/survey.html)
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Cost per Unit, and Units per Hour calculation.
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TDC - Product Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. When analyzing and recording the true cost of downtime, the product category is made up of two subcategories. Cost per unit, and units per hour. An example of how being aware of direct labor cost can save over $ 50, 000 (www.int-puck.com/Direct/) other product cost listed in TDC metrics. Cost per unit at that stage in production This sub-field is a general assessment of the product cost at the stage in the process relative to the machine (cell or other method of categorizing the profit center) uses it for raw material. This percentage of total product cost will be used to calculate downtime at the machine/profit center. Most companies view cost per unit as "labor per unit". This can be very deceptive when each unit consumes its share of overhead, maintenance, machine wear, raw material, etc. Even if you're just supervisor, QC, managers, maintenance labor, etc. looking at "labor per unit", most don't consider (Follow the links below to read about who does include labor tipicaly labeled as "Overhead") REF: (www.auburn.edu/~taborrh/cp/mickey.htm) (spot.colorado.edu/~sharmav/engecon/answers.html) Units per hour Units per hour is another sub-field used to calculate downtime at the machine/profit center. It is important to use the units that would be produced if the machine was running at manufacturer's specified speed and capacity. This is a key area of potential savings as pointed out in the OEE section. An example is High-tech gluers, which are all computer controlled, and provide speeds of up to 60 thousand units per hour with on line quality control. If your machine falls in the industry average OEE of 60%, that's 24 thousand units per hour times the cost per unit, you are losing. , just think of the savings when you monitor the
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Every time your startup your machine, there is hidden cost
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TDC - Startup Category

This category is a one time entry of a constant, updated annually. Like the bottleneck sub-category, this start-up cost are not considered by most. If you have previously calculated start-up cost per main category (machine, cell, line, profit center), then your existing method of calculation need only meet the TDC recommendations below. It is common for your machine start/stop times to already be monitored if you have systems like VersaCall.com or Wonderware.com . With TDC, it is only necessary to assign a true cost of start-up for the equipment/area. That cost can then be used as a multiple factor with your existing asset software. Once you can actually place a true cost on start and stop of your production lines, most will find the extra labor cost to run through lunch and breaks, to be insignificant.
Start up cost metrics

Energy surge cost Electrical (Ex: High torque motors) Gas (Ex: oven temperatures) Set up extra material, product/tool delivery manpower (supervisory too) Percent reduced production Parts per hour lost Equipment fatigue high torque motor, heat elements computer monitors, mechanical fatigu Scrap produced is it recycle able Quality Inspection cost, Rework cost Other cost Tell us your start up cost factors Energy Surge Cost: Much attention is already being given to this area, as most pay peak energy cost to their utility provider. Of course it is evident of the cost to bring an oven back up to temperature. If your one of those few who still shut down a production line, or even the entire plant, think of the surge to start it all back up. This as with the rest of the Start-up cost factors, can empower you to make some very efficient manpower decisions. Like when it comes to deciding which machine to shut down for breaks to gain a relief person. Set-up cost: The cost associated with product/customer changeovers is apparent. What is over looked often, is the set-up cost involved during a start up. This area just needs a second look to make sure the various cost are being weighed. Like extra material, manpower (supervisory too), product delivery, quality, etc. This category is for any special coast that are not covered in the other start-up cost areas. Percent of reduced production: As the machine ramps down in speed, and ramps back up, your parts per hour is affected. While it is usually a linier calculation, each shut-down and start-up reduces your ability to get parts out the door. This area has received a lot of attention with companies attempting to reduce changeovers. file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Startup.htm 3/16/2003
Every time your startup your machine, there is hidden cost
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Equipment fatigue: It is surprising how many don't realize the physical limitations of a light bulb. That is in respect that they are not designed to be turned off and on (the time to heat back up uses more energy). Each time they are, the life cycle of the bulb is considerably reduced. Now consider the fatigue on a high torque motor, devices with elements, computer monitors (that's why screen savers where invented), mechanical fatigue, etc. While it's difficult to consider all the parts of a piece of equipment, and arbitrary value should be assigned. (percent of equipment replacement cost) Scrap Produced and Quality: After the big quality boom of the seventies, this information should be well known. You need to assign the amount of scrap cost per product, at each stage of the production. The reduction in quality associated with a standard start-up/shut-down is not considered directly in TDC metrics. This is because each facility sets, their quality standards, and the part is ether saleable or scrap. (although there may be consideration of lost potential sales do to wide quality margins.) Calculating the actual dollar value per scrapped product, in relationship to that stage of the production is very important. A great example is the manufacturing of Ring and Pinions in a Dana axial plant. At the forging stage of the ring production, the scrap cost would be a fraction of a percent. As the entire part can be recycled, with only loss of forging cost. But if that ring was scrapped after it had been geared and matched with a pinion, the cost would be close to the total finished product cost. Other Cost: Hey, did we miss something? Well this sub-category is where you place that cost. The point of these categories may appear to be micro-analyzing, but the more you use in your asset managing strategies, the closer you will be to the True Downtime Cost. Also more profitable decisions can be reached. In summary, you sum all these factors together, per machine. On an annual bases, you re-evaluate. Then within you asset management software package of choice, you can readily see the start-up cost for machine, cell, line, or entire facility. Remembering the key to TDC is making this information known to all employees, not just a manager in some remote office. :>) See Also: Condition Monitoring in the 21st Century www.plant-maintenance.com/articles/ConMon21stCentury.shtml An article by Sandy Dunn, of Assetivity, outlining some of the challenges and opportunities that exist for users and providers of Condition Monitoring equipment and services in the 21st Century.
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How do you calculate downtime cost related to a manufacturing bottlekneck.
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TDC - Bottleneck-Factor Category

This category is a 'one time' entry of a constant, updated annually. Most have not identified all the bottlenecks in their systems, and the percentage of each affects their production. Your existing method of calculation need only meet the TDC recommendations below. Bottleneck Identifying bottleneck cost can save thousands Example: an industry accepted cost of a corrugator is $10,000 per hour (varies by facility). List other downstream equipment, and % of affect on downstream and upstream equipment. Other Bottlenecks in this example of a corrugated facility Boiler, Glue system, Air compressor, Strapper, Facility Power, etc. After visiting 100s of paper plants, I have seen the same misconception. It is well known that the corrugator is a bottleneck, because the entire facility is its downstream. So much so, they will run at top speed (not necessarily most efficient speed), with speed indicator in the production managers office. In many of those facilities, all material will flow through a single strapper, or conveyor, but these do not get a tenth of the investments of resources that the corrugator does. With this example the facility becomes a push production process, with storage, scrap, multiple handling, labor, etc., being the buffer and profit loss. With TDC, the question would no longer be "how can we have record production rates off of the corrugator while having reduced sales, quality, safety, and profits?" The other bottleneck examples above, like an air compressor, are not realized in the day to day management decisions, until the unrecognized bottleneck shuts down the facility, or a large portion thereof. As time goes by after a bottleneck makes itself know, it once again drops out of the spotlight in the daily decisions. Actually a bottleneck should be identified and classified, hopefully before a failure, but a least afterwards. This is one of the key advantages of the TDC method, and one of the greatest cost savings too. Ironically, TDC represents the final bottlenecks to a fully integrated and auditable approach to maintenance strategy development / justification.
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Sales Expectation - We have to maintain a 100% capacity readiness
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TDC - Sales Expectation Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. Possibly the most deceptive category of all when it comes to downtime. We have to completely change our way of thinking to realize the full potential savings, and make wise asset management decisions. The current view is "we need X amount of production to fulfill our current sales orders". The new view in line with TDC method should be one of "we have to maintain a 100% capacity readiness". The other TDC categories need to be calculated to determine what is the "True" capacity of our facility. This new way of thinking has two major differences. 1. It all starts out on the shop floor, making known to all, the manufacture's specified speed of each machine. (Yes, back to OEE) 2. Sales expectation should be calculated with the goal of 24/7/365 to get the most value out of your assets. More saleable products out the door. (increased capacity) In addition to lost sales, loss of market share is even more threatening.
Examples: The Whirlpool Findlay Division has been able to increase production by 21%, without any significant capital costs by focused TPM and OEE utilization. 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. 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. Most who do measure Producibility (production ability), do so by machine cycle times, then the next most common is yield rate. Have you reduced your cycle time, but increased your downtime? True product ability, capacity, 100% ready to meet sales expectation (of 100% capacity) has to be looked at as the big picture. How much product can you get out the door? Yes, sales expectation (and goal) should be calculated with all of your equipment running at 100% efficiency, 24/7/365. Once at 100% readiness, you can focus on getting your sales team to capture your chunk of the market share.
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Explorer labor cost in industry.
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TDC - A closer look at Labor

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary. As with all the labor categories, your accounting software is a good source to export or link all the various Management wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports. Please click on sub-topic in yellow, to learn more.
LPP /M
LPP / Equipment Contribution is not as accurate, as using the items below in addition to direct labor (machine operators).
QC
QC wages of those involved in Extra inspections, Rework, etc.
Maintenance
Indirect maintenance labor as well as Mechanic/Technicians doing actual troubleshooting and repair.
Engineering
Downtime support, troubleshooting, specifications, re-engineering.
Management
Time associated with downtime support, out at downed equipment, meetings, calls, administrative, and decision making research time. Granted, procedures will need to be put in place and enforced to accurately track labor time associated with equipment down, but the savings will be well worth it. With all these categories, it may appear to be too much to monitor and analyze. Feel free to momentarily review the "Data Overload" section to see why there is no need to sound the "Data Overload" alarm.
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Does your LPP/LPU calculations include indirect labor?
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TDC - Labor Per Product Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary. LPP / Equipment Contribution is not as accurate as using individual TDC labor categories, but can be used in place of them if LPP includes indirect labor. In most cases, LPP (also called Labor Per Unit, LPU) is calculated using only the direct labor cost. The cost per unit is normally used for external reporting only, not management decision. This is because that figure is made up of vague estimates of material, labor, and overhead cost. Even looking at just the labor calculation from cost per unit, will not result in a true cost. One need only take a closer look at how accountants derive this figure.
Existing LPP
Direct labor (operator) X 30% fringe benefits
TDC LPP
Direct labor (machine operator) X 30% fringe benefits QC labor X 30% fringe benefits + Management labor X 30% fringe benefits + Maintenance labor X 30% fringe benefits + Engineering labor X 30% fringe benefits + Material Handler labor X 30% fringe benefits + A product routing shows every step a product goes through in the manufacturing process, which includes labor times for each step. The accountant uses these direct labor times to estimate the labor time required to make the product. These labor hours do not include all the support personnel labor that goes into making the product, and support is not usually included in the overhead factor either. The above method of calculating LPP typically does involve a multiple for fringe benefits that amount to 30% of the hourly wage for example. But for the sake of monitoring and analyzing labor cost in relationship to TDC, QC, Management, Maintenance and engineering must be considered as well as direct labor (machine operator). Even something originally thought as trivial such as delivering raw material to the machine after repaired can add up over a years time. For decision making, labor per product should be a variable dependant on your OEE. Carefully examine the existing LPP information to see if you labor estimates are a variable. Don't use it if it appears it really is a fixed cost, use the individual labor categories mention above.
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Quality control cost in manufacturing.
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TDC - QC Labor Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary. As with all the labor categories, your accounting software is a good source to export or link all the various Quality Control wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports.
Direct QC labor related to downtime

First product inspections Re-work inspections
Indirect labor related to downtime

Return shipment sorting Material handling/shipping expenses Trips of QC personnel to customer's site
When calculating the cost of re-work, it often will bring insight to the most cost effective solution, in regards to the re-work or scrap question. Often re-work demands over-time, trips to customer locations and other hidden costs that are not given full consideration. A Quality Note: Quality does not cost, it pays. Quality really pays in reference to Machine quality, replacement part quality, repair quality, Service quality, and management quality.
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Maintenance labor cost in the manufacturing industry
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TDC - Maintenance Labor Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary. As with all the labor categories, your accounting software is a good source to export or link all the various Maintenance wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports. These are in-house maintenance labor cost only. Cost associated with Contactors, OEM, machine shops etc. will be covered in the "Downtime/OEM category. With maintenance being 30-50 percent of the production cost, there is a substantial staff supporting those one or two who actually do the machine repair.
Direct maintenance labor

Mechanic/Technicians doing actual troubleshooting and repair.
Indirect maintenance labor

Maintenance manager, Forman, parts person, set-up person, pm person, etc. secretary, and others that may work primarily for maintenance Ideally, you want a goal of being able to assign all personnel's activities to a cost center. In the interim, through analysis you could assign an hourly multiplier that represents the support personnel cost.
See also: Fundamentals of Preventive Maintenance http://www.amazon.com/exec/obidos/ASIN/0814407366/downtimecentr-20
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Engineering Cost in manufacturing
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TDC - Engineering Labor Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary. As with all the labor categories, your accounting software is a good source to export or link all the various Engineering wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports.
True hourly cost of Engineers

from accounting software
Track time associated with downtime support

troubleshooting specifications re-engineering Unless specifically assigned to maintenance department, engineering costs to support troubleshooting and repair of machines can slip through the cracks, while close attention goes to their primary function of projects, production overhead, etc. Even 15 minutes consulting here, another 30 minutes calculating a replacement motor specification, adds up over a year's time. The behind the scenes activities are even more difficult to track, when they aren't actually out on the machine, but on the phone. This is why a cost center management program must be strictly enforced. If it is necessary to increase engineering support, the proof will already be collected and visible. A very inexpensive cost saving solution to the demand for more Engineering support is found at Forward UPTIME Publications. They put out a monthly newsletter specifically written to teach engineering to plant operators and maintainers so they can learn to ceaselessly trim production and maintenance costs while lifting reliability by themselves! Please read the article UP-TIME donated -"Definition Root Cause Analysis" (included in this E-Book) and see what a refreshing approach they take. To see more E-Books by UP-TIME. (http://www.bin95.com/ebooks/) See Also: Process Life Cycle Engineering http://cwis.usc.edu/dept/ATRIUM/Papers/Process_Life_Cycle.html
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Management cost in manufacturing
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TDC - Management Labor Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary. As with all the labor categories, your accounting software is a good source to export or link all the various Management wages to your downtime cost reporting software. Tracking this manpower cost in relation to downtime cost can be automated through I.D. tags, or typical work order reports.
True hourly cost of Managers

from accounting software
Track time associated with downtime support

visiting downed equipment related meetings and calls related administrative and decision making research When equipment breaks down, we all realize the area supervisor will be there insuring necessary actions are taken. Requesting maintenance, redirecting operators, reporting to upper level management, altering production schedules/flow, administrative tasks, etc. Fifty percent of the time a machine is down can be extra tasks a supervisor is required to perform. What isn't tracked in today's facility is the time upper level management is tasked, related to a machine breakdown. The production manager, plant manager, general manager's time, can cost the the company several times the supervisors cost. Not just the time they may visit out on the floor to see how it's going, but other behind the scene tasks such as arranging meetings, making phone calls and other administrative tasks, to name a few. As with all the other labor categories, procedures must be put in place to track these cost and assign to the appropriate cost center. TDC reports will point out what task may be better performed by less expensive employees.
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Find the hidden cost placed in the overhead category
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TDC - Overhead Category

This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below. As with all labor categories, cost should be net cost (insurance, SSC, benefits, etc.), not just base salary. The indirect expenses allocated in your budgeting process and assigned to your resources or departments. You typically include administration, facility, depreciation activity, and other costs you cannot directly charge to your manufactured items. With predetermined overhead rate, overhead costs are allocated to events as they occur. This helps control overhead costs and measure profit. As long as you use the other TDC metrics to calculate overhead, you can accurately determine your true fixed and variable overhead rates. Only considering production demands and labor in your day to day management decisions, is just as bad as using labor and fixed overhead rates. This method divides the total expenses by the direct labor total. Even using such generalities as overhead cost proves to be many times the labor cost. For a large part TDC is a way to isolate potential reductions in overhead cost. Therefore to remain competitive and make smart daily decisions, one must be knowledgeable as to how your company overhead rates were derived, and if that rate covers the TDC metrics in their proper perspective. When calculating downtime cost, we strongly encourage managers to use individual cost factors such as TDC labor categories, as opposed to a blind overhead rate. Granted, procedures will need to be put in place and enforced to accurately track overhead associated with equipment down, but the savings will be well worth it. Although Activity-based costing (ABC), like TDC has the main advantage of its ability to provide more realistic product cost information for financial reporting purposes, use of TDC can lead to a better understanding of the strategic linkages existing between the various cost areas in the organization. It enables managers to have a holistic view of cost management. With all these categories, it may appear to be too much to monitor and analyze. Feel free to momentarily review the "Data Overload" section to see why there is no need to sound the "Data Overload" alarm.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Overhead.htm
3/16/2003
Find the hidden cost placed in the overhead category
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References, to learn more...
Manufacturing Cost Assessment

http://www.eren.doe.gov/buildings/codes_standards/notices/notc0012/viewer2/fl000006.htm The manufacturing cost assessment methodology used is a detailed, component-focused, activity based technique for rigorously calculating the manufacturing cost of a product (direct materials, direct labor and some overhead costs).
Manufacturing Cost Flow

http://dns1.epcc.edu/faculty/alfredos/Acct2CN_MfgAccounts.html The flow of manufacturing costs through the accounting system.
Handbook for Hands-On Managers

http://rjdadamo.com/mgtphysics/toc.htm Provides insight into basic topics like break-even analysis, working capital, interviewing key personnel, marketing tips, planning, and financing your company.
Standard Costing
http://rjdadamo.com/mgtphysics/toc.htm This power point presentation is from accounting 2120 on performance evaluation through standard costs. Right click yellow link above and select "Save As" to download.
Business Basics
http://www.swcollege.com/vircomm/skousen_acct/ppt/16/16.ppt This power point presentation describes the wholesale and retail business processes. Right click yellow link above and select "Save As" to download.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Overhead.htm
3/16/2003
How to use data collection to calculate cost of each downtime occurrence
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TDC - Downtime Category

These are "per downtime" occurrence entries, but most can be exported from your CMMS. Your existing method of reporting need only meet the TDC recommendations below. Recording the actual time and other real time information associated with each downtime occurrence is crucial to the success of any maintenances goals. The work order is the apex to determining true downtime cost. You can do an excellent job of obtaining the constants of TDC equipment and labor categories, and still have bad downtime cost calculations due to inaccurate reporting of the actual downtime occurrence. The fact is, there are still a lot of facilities out there who do not utilize their work order system 100%. This problem is compounded by most systems not utilizing the information to it's maximum cost saving potential. This main category of "Downtime" covers these deficiencies. Please click on sub-topic in yellow, to learn more.
Time
The time from the first occurrence of equipment breakdown to the time equipment was back into full production.
Reduced
The percentage of full production rate, and time running at reduced production during downtime occurrence.
Scrap
Number of total units scrapped during downtime occurrence and percentage of cost recovered by recycling.
Band Aid
Band-aid is a sub category of several TDC categories and should be a percentage of the actual downtime occurrence cost.
OEM
Annual fee/ est. hours used per year, or T&M + Expenses for OEM support during downtime occurrence.
Tooling
Replacement or reworking cost for tooling, related to downtime occurrence, minus recycling savings as a percentage.
Parts & Shipping

Everyone records parts cost related to downtime occurrence, but did you include shipping cost? (them next day air often cost more than the part. :>)
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Downtime.htm
3/16/2003
How to use data collection to calculate cost of each downtime occurrence
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Granted, procedures will need to be put in place and enforced to accurately track downtime associated with equipment down, but the savings will be well worth it. A common example to think about is one of production "annoyance" classification. Although very seldom realized, there are always production costs involved with these "annoyances". In slightly more extreme cases, we have seen equipment failure resulting in additional manpower go unreported and unknown to maintenance departments for over 30 days. Clearly a breakdown in the management of the work order system. In some cases, TDC shows the true cost to production being 30 times the cost of the additional employees. If the procedure and methodologies of TDC were in place, and cost was being indicated to all involved, the above example could never occur. With all these categories, it may appear to be too much to monitor and analyze. Feel free to momentarily review the "Data Overload" section to see why there is no need to sound the "Data Overload" alarm.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Downtime.htm
3/16/2003
Do you start the maintenance time clock when the machine first breaks down?
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TDC - Maintenance Time Category

These are per downtime occurrence entries, but most can be exported from your CMMS. Your existing method of reporting need only meet the TDC recommendations below. You've heard time can get away from you, well it can cost more than you realize too. The procedure for reporting time related to equipment breakdowns and malfunctions is the most important category of all TDC cost factors. Just minutes in downtime reduction adds up over week, month, year. Most reporting methods start the downtime clock when maintenance arrives at the scene and stops it when they leave. There should be two start time fields in a maintenance report; estimated time malfunction started, and time maintenance started repair. On some malfunctions labeled "annoyance", the difference between start of malfunction to the start of repair can be quite substantial. Breaking down the time into various stages will help pull your company out of mind sets that has been costing the industry millions in lost production. This is what makes companies like VersaCall.com and Wonderware.com , who cater to automated reporting of production reduction and stoppage so popular. Your Work orders/CMMS software should have the following time fields and their associated completed date/times... Date/Time symptoms first noticed as reported by supervisor or operator Date/Time work order generated or reported to maintenance Date/Time Maintenance investigated/troubleshoot Date/Time maintenance made band-aid If delayed do to waiting on parts or outsourcing, amount of wait time. Waiting on parts, service, or OEM is wrongly accepted as being out of maintenance control. Time Started taking equipment out of production This is important to track reduced production time while equipment is ramping down. Time Maintenance started permanent repair Time placed back into production Time full production speed reach
You will have the information to make more informed decisions about ... Repair under planned or unplanned downtime? Repair under planned or unplanned downtime? Repair or Replace? Report it or just deal with it? Strict work order policies, or passive? Run-to-failure or predictive maintenance?
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Time.htm
3/21/2003
Do you start the maintenance time clock when the machine first breaks down?
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More accurate reporting of times related to occurrence will bring your focus on known major cost factors... 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? 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. Learn by example; one of VersaCall's customers:
The USPS determined the operational cost of the entire facility to be between $135.00 and $160.00 per minute. They further determined that they could conservatively save ten minutes per 16-hour workday by installing a VT400 system to reduce the down time lost. Data collected and reported by the VT400 system showed that they were, on average, saving a combined 10 minutes over two shifts. This amounts to $1350.00 to $1,600.00 per day, or over $6,750 per 5-day workweek. As with all the other maintenance data entry categories, procedures must be put in place backed by the support and understanding of management. Neglecting this vital communication function will provide less than acceptable results. A system is useless unless data collection is a well-defined process. A CMMS lives on data.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Time.htm
3/21/2003
Reduced production should be part of your downtime cost calculation.
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TDC - Maintenance Reduced Production Category

These are per downtime occurrence entries, but most can be exported from your CMMS. Your existing method of reporting need only meet the TDC recommendations below. Under the main category "Equipment", sub category "Start up" is where you would place the percentage of reduced production from full capacity during a start up. This category is for time and percentage of full capacity equipment is running a reduced rate due to a malfunction. This malfunction may have not been reported for some time, or scheduled for planned downtime repair, or other reason for running at a reduced production rate for an extended period of time. Malfunctions that only reduce production communally have the lowest priority, and sometimes the cost is never reported. After learning about OEE, you'll know everyone is running at a reduced rate. For now reduce rate will refer to running less than normal benchmarked production rate. Common causes for reduced production rates... Bottlenecks and other material shortages Equipment failure, troubleshooting and waiting for repair To maintain quality and low reject rates A non-reported, or unscheduled for repair "annoyance" problem Operating with band-aid In-line production equipment installation An undetected drop in production rate Poor working conditions (human factor) Run till failure policy Some may think considering the human factor (HF&HE) to be pointing a finger at the machine operator. I remind you of a very common example in defense. Number of product out of the machine is the primary gauge for a supervisor's success in most facilities. (instead of quality product out the door.) This misdirected focus has caused some supervisors to bump machine speeds (Drive settings for example) up within the electrical control panels. Without the proper technical knowledge of a machines' operating parameters, this often results in shortened life, and increased unplanned downtime. If you are not watching for and recording the above causes for reduced production, you're losing a lot of profits. There is only one sure way to monitor all these factors and that is with sound procedures that are strictly enforced. Being able to assign a cost to these reductions in production will give you the cost justification to do productibility studies and analyses. As with all TDC methodologies, you will have the necessary information to make more sound management decisions on a proper coarse of action. See also ... Cost of Ignoring Human Factors in Manufacturing http://www.engr.orst.edu/~HFE/HMSE/Error/domains.html#Cost of Ignoring Human Factors in
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Reduced.htm
3/21/2003
Find out what your true scrap cost are.
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TDC - Scrap Cost Category

While most of the industry has a handle on recording manufacturing scrap cost, relating that cost to machine failure is seldom done. Another setback may be the fact that most facilities are still tracking scrap cost on paper only. You will need to incorporate your current reporting methods into your CMMS and/or EAM software, so that the relationship can be analyzed. Also the existing method of calculation will need to meet the TDC recommendations below. The amount of scrap produced, and whether or not it's recyclable at that stage of the production will be recorded in other TDC categories such as Equipment / Start-up cost. (Start-up cost records amount of normal scrap generated each time machine is taken out of, or placed back into production.) The Equipment / Start-up cost category is also where you would calculate the actual dollar value per scrapped product, in relationship to that stage of the production. This scrap category is where you record the amount of scrap not covered in other categories, that is directly related to equipment failure and maintenance operations. The cost per product of re-work at various stages of the production will be calculated and recorded in the Labor / QC category. That cost per product will be multiplied by amount of products needing re-worked do to downtime.
Some causes for scrap related directly with downtime...

Equipment failure, troubleshooting and waiting for repair A non-reported, or unscheduled for repair "annoyance" problem Operating with band-aid In-line production equipment installation Incorrect or lack of Maintenance procedure (human factor) Run till failure policy Examples from the above table... While these examples may be placed under more than one example area, the important point is that the scrap should be recorded and related to the downtime occurrence in this "Downtime/Scrap" category.
Equipment failure:
A closed loop control board on an extruder fails.... all parts made till machine stopped were too thin (scrap).... minor hardware failures which take hours or days to diagnose and repair.
Non-reported:
It is accepted by operators, every time machine speed is adjusted while running, one part is scrapped. But in accordance with manufacturers this should not be occurring. Therefore indicating a machine problem.
Band-aid:
Scrap per hour produced because of problem temporarily being band-aided till scheduled repair. Also scrap produced while performing band-aid repair on machine. True Band-aid cost are important to track, as they are deceiving when weighing decision as to full repair or just band-aid.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Scrap.htm
3/21/2003
Find out what your true scrap cost are.
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Equipment installation:
While new equipment is being installed, as long as production is not stopped, scrap costs can be overlooked. This area should be addressed during the planning, and monitored during the actual install. There is also the unplanned occurrence from accidents, such as the fork lift bumping a running machine while moving equipment. Also slowing or stopping production due to traffic by the installers. All the different aspects of an installation can affect many areas of downtime cost, and they add up quickly!
Maintenance procedure:
Consider this example of cost related to maintenance procedures and human error. A maintenance person makes an adjustment on one shift, but does not record what was done. This adjustment could have increased scrap rate for three shifts until that person returns to work the next day. Unwillingness of maintenance personnel to "accept ownership" of the system.
Run till failure:

Usually before such a radical practice is adopted, detailed analysis, including scrap predictions are performed. But if growing scrap rate in relationship to end of life of part was not considered, you will need to reconsider your run till failure policy.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Scrap.htm
3/21/2003
How much is a machine band aid costing you?
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TDC - Band-Aid Category

This category is a per downtime occurrence entry, often overlooked in CMMS programs. Your existing method of reporting needs to meet the TDC recommendations below. Two types of Band-Aid information...
Cost of this occurrence

Associate cost to permanent fix done later Parts used for band-aid repair Amount of times band-aided till permanent fix, etc.
Percentage of all other Downtime Metrics

What percent of full speed, increased scrap, extra manpower, tool breakage, etc.
Before computers, band-aid cost was never tracked, which has led to it being overlooked in most cases now days. A good example is a case of required re-engineering. The facility had a two week wait for planned downtime to replace a bearing with a different type. In the mean time, up to 3 times a day maintenance would have to drag the welder to the machine to do a band-aid spot weld. (the vibration had it's effects.)
Looking at the maintenance time only resulted in 1.5 times per day average, at 15 minutes per day. This went on for 12 days, resulting in a total of 4.5 hours downtime till scheduled permanent fix. When deciding whether to shut down for repair, or wait till scheduled downtime, the 6 hours to do repair was the only consideration.
At first glance, the decision looks pretty sound, till you see the true cost with TDC. To keep it simple we will use just a few of the TDC metrics to make our decision.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Band-Aid.htm
3/21/2003
How much is a machine band aid costing you? True Band-Aid cost... Estimated band-aid time* = 1X15 minutes per day (total 3 hours) Estimated permanent repair time* = (6 hours) Scrap produced* = 2X12 band-aid repairs (24 parts) Reduced Production* = 5 parts per incident (60 parts) Labor* per band-aid = 2 maintenance* X 15 minutes (6 man-hours) = 1 QC inspection* per start-up(1 man-hour) Closer to True Down Time (TDC) cost of Band-Aid TOTAL $ 45.00 $ 90.00 $ 120.00 $ 300.00 $ 150.00 $ 25.00 $ 595.00
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band-aid time* - Estimates are almost always low, should be 1.5 times per day. At some facilities, maintenance men often travel in pairs, especially on off shifts. :>) 15minutesX12days=3hrs, 3hrsX$15=$45 permanent repair time* - This and the estimate above are the common, on the spot estimates made. Usually the labor is calculated at what the hourly wage of a maintenance person is. It should be the hourly cost of maintenance person to the company. Insurance, benefits, etc. 6hrsX$15=$90 Scrap produced* - One part was scraped with each start-up, and one with each shut-down, at $5 per part. 2partsX12bandaids=24parts, 24 partsX$5=$120 Reduced Production* - In this example 5 parts per 15 minutes of band-aid downtime could not be made. In some cases you would have number of parts not produce while down, and number of parts reduced per hour do to running machine in limp mode. The ladder is usually higher. 60partsX$5=$300 Labor* - Two oversights when calculating labor, 1. should be hourly cost to company, not hourly wage. 2. The amount and type of people involved in downtime. Who performs extra activities do to downtime, maintenance, operators, set-up, engineering, management, QC, etc. 2 maintenance* - We used two maintenance to cover off shift where extra maintenance went out to see if they could help, day shift - maintenance manager supervised, etc. although maintenance wage was $15, actual hourly cost to company was $25 per hour for each employee. 1 QC inspection* - Procedures called for one part to be inspected after every start up of machine (5 minutes). To simplify, QC wage was same as maintenance.
3/21/2003
How much is a machine band aid costing you? True Permanent Fix cost ... Scrap produced = (2 parts) Reduced Production* = 20 parts per hour (120 parts) Labor for fix = 2 maintenance* X 6 hours (12 man-hours) = 1 QC inspection per start-up(1/4 hour ) Closer to True Down Time (TDC) cost of Band-Aid TOTAL $ 10.00 $ 600.00 $ 300.00 $ 6.25 $ 916.25
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Reduced Production* - 6 hours of downtime results in 120 parts lost production even if downtime is planned. This based on fact that machines should run 24/7/365 to maximize ROI. 120partsX$5=$600 2 maintenance* - Maintenance personnel utilization is much more efficient during planned downtime, but actual took two to do permanent fix. Although maintenance wage was $15, actual hourly cost to company was $25 per hour for each employee.
Had the data monitoring and decision making processes in compliance with TDC been in place, would they have made the same decision? As long as they could still make their ship dates, or had inventory, I don't think a band-aid would have been the choice. Without TDC they were looking at spending $45.00 now, and $90.00 approximately two weeks. Really they should have been looking at a conservative estimate of spending $916.25 now for a permanent fix, or $1511.25 with the band-aid for a permanent fix in 12 days (2+ times the cost). (Values based on fact that to get max ROI out of capital equipment, you should run equipment 24/7/365. There for even planned downtime has loss of 6 hours production.) The example above is a very low cost one. Consider if the machine in question was a bottleneck, and the parts cost at that stage of production was $30 each. They might then be looking at a labor only estimate of $45, when the true cost would be in the thousands (100+ times the cost). In summary, when looking at a band-aid decision, be sure to use manpower cost, not just their wages. Secondly, include all people involved in band-aid; maintenance, qc, set-up, power cost, machine depreciation, etc. Third, don't forget scrap cost and reduced production, just to name a few (bottleneck could cause similar cost throughout the plant). Last of all, take note that band-aid time estimates, and amount of times needed to be done are usually under estimated. See Also... Under pressure, supervisors and workers are inclined to apply Band-Aid fixes. http://www.reliability.com/article2.htm Are you a manufacturer? Please visit DowntimeCentral.com to participate in our Downtime survey and receive free 66+ page report. (updated and emailed to you automatically as survey grows.) Copyright 1995 Business Industrial Network - All rights reserved. Revised: March 11, 2003.
3/21/2003
What does your original equipment manufacturers cost you each year?
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TDC - OEM and Outsourcing Service Contractor or Consultant Category

These are per downtime occurrence entries, but most can be exported from your CMMS. A couple fields are constants related to known cost such as annual contracts. Your existing method of reporting need only meet the TDC recommendations below. Your interactions with OEMs can be a major cost factor in downtime as well as other areas. You should be tracking the related metrics listed below to reveal areas of opportunity. Just the travel cost alone often start out at $ 3,000 for just one day! That is a lot to pay for a photo eye getting cleaned, which an operator or maintenance person could have done, but you would be surprised how often that scenario or a similar one, takes place. The size of cost saving opportunity when dealing with OEM, Contractors, and consultants is so great, that we will address it further in a future book. When integrating the metrics below, consider all outsourcing related to maintenance repair and operation, to be recorded and tracked associated with the equipment in your facility. OEM metrics (Who is responsible for checking?) ...
Per Occurrence:
T&M + Expenses Time and Material* charged by service provider Air, Hotel, Car, Perdiem, Expenses*. Time and Material* - Most commonly tracked and recorded in CMMS programs. Expenses* - Less commonly tracked. $1,000 for Air Fare, $300 for Car, $200 Hotel= $1500 just for a couple days. There are creative ways you can reduce this cost, like making a deal with a hotel near your facility.
Downtime due to new installations or modifications

Directly* caused downtime Indirectly* caused downtime Delays* in project schedule Directly* - The time and lost production are usually on your mind, but seldom related to the True Downtime Cost to the occurrence. For example, you put a new piece of conveyor inline with a bottleneck strapper. The least expensive OEM may take twice as long to do the installation. Yea, their conveyor only cost $3,000, but did the bottleneck downtime cost $2,000 per hour? Indirectly* - One of the most deceptive OEM cost. For example with an air compressor issue, the common thought might be - "well, the problem is only reducing the production rate". The question should be asked, was throughout the facility for two shifts while waiting for the OEM to open up the next morning at 8:00am. The thought may be well we where able to get by. Actually the downtime reduced production, increased scrap rate, OT later in the week, etc.- cost could have purchased a brand new compressor. Delays* - One of those rare occasions when it took a week longer to do the start up on new installation. If you are accurately tracking the true downtime cost, at some point it would not be unreasonable to start billing back the OEM for what their disorganization has cost your company.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\OEM.htm
3/12/2003
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Downtime cost where T&M was warranty* work

Downtime due to lack of OEM support No manual* No backup of equipment Program* Lack of Technical information* No 24/7 support (phone and online*) Finding service provider* (OEM out of business) warranty* - "Well they are taking a long time to get it fixed, but at least it is warranty." Most do not consider the downtime cost, especially when it is cumulative. No manual* - With a $100 VCR, or even a $10 watch you receive a manual. So why not expect one with a $20,000 machine. Program* - Sometimes the vendor will exclaim, it is proprietary. Other times last minute changes are not updated, or disk is left in electrical panel and corrupted. Technical information* - Not only should you insure you receive manuals, but check that they are not just glorified equipment brochures. Do they have adequate Safety, Machine Operation, troubleshooting, and parts information? phone and online* - Lack of phone and online support are felt hardest on the off shifts. Can you call your OEM at 10pm? Does their web site have technical info, or just a sales brochure? Does the OEM have 24/7 contact information online? If yes, do you allow your off shifts access to that online information? If you answered no to any of these, check out our Quick Help service, we fill those voids. (www.bin95.com) Finding service provider* - This becomes more of a problem in the market today of mergers and bankruptcies. We can often help find you the needed resources in these instances. We can advise on issues of world class standards too.
Constants:
Annual fee/ est. hours used per year Hourly/Daily charge of OEM or other service provider We have recorded many testimonies of unnecessary cost and unplanned downtime. Most of the greatest cost had a root cause related to OEM or equipment installation/modification. Not to insinuate that most OEMs aren't doing what they should, but to point out five facts when dealing with OEMs ... There are not many "World Class" OEMs out there. You are not at the mercy of an OEM, if you demand it, there is an OEM that will do it for you. If you don't insist on manuals, world class training, access to equipment data, true 24/7 support, etc; You may not receive it! Projects usually cost more time, downtime, quality, and money than you estimate. You get what you pay for. (Always take the cheapest bidder, and you may pay more in the long run, as pointed out in the four facts above.)
3/12/2003
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An example: Utilizing all TDC metrics can show you that 10 hours downtime waiting on a service provider could cost you $60,000! Those manufacturers and especially corporations who use the five facts above, can quickly resolve 90% of their unplanned downtime with in-house personnel. What is the TDC of a new installation? Lack of technical documentation? Our surveys show most TDC will show you the hidden cost. companies have inadequate equipment documentation (Note1). TDC with OEE will also show you most supplemental services such as predictive, preventative, consulting are great investments.
(Note1 - http://www.bin95.com/Survey/OEMdoc1.asp)
An OEM Support Note: Business Industrial Network's "Quick Help" (http://www.bin95.com/Manufacturing.asp) service is designed to fill the voids left in OEM support. Give it a try! Can you afford not too? Business Industrial Network is not in the business of replacing OEM support, but enhancing it, both on the customer side and on the OEM side. We work with customers, OEM contacts and other knowledgeable personnel around the world. This enables us to come up with a collaborative solution to get your equipment quickly repaired and back into full production. See also... Our Downtime Cost Survey of over 80 companies and Corporations http://www.bin95.com/Survey/GraphOEM.htm Alternative sourcing of Original Equipment Manufacturer (OEM) machinery spare parts can cost you in many ways. http://www.tobaccoreporter.com/backissues/May2001/story1.asp
3/12/2003
Is that tooling savings costing you more money?
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TDC - Tooling Cost Category

These are per downtime occurrence entries, not usually recorded in CMMS programs. Your existing method of reporting need only meet the TDC recommendations below. The decision to record this cost is very dependant on the manufacturing environment. If your greatest tooling cost related to machine failure is an occasional $5 insert, it is probably not worth the time to incorporate the tooling category in your downtime tracking software. On the other hand, if a machine was destroying one $5 insert every hour, due to machine needing repaired, it could warrant this field being implemented. Let's look at the true cost, if the nuisance problem was allowed to continue for just one week. 24 hours, times 7 days, equals 168 inserts ($840). Closer but still not at the TDC. Tool change time cost 30 minutes of production, (1/2 hour TDC = $350). Are we there yet? No. Assume 1 scrap/rework resulted out of every 5 times the tool broke, (34 X % $15 per part = $510) Two Sides to every coin ...
Tooling damage caused by Machine failure
What is the Frequency of tooling damage?

X + Times the cost of tooling Plus the other TDC Metrics (Set-up time, QC labor, Reduced production, etc.)
Machine failure caused by Tooling damage Root cause for tooling failure
Is Tooling Quality adequate? Is it the right tool for the right job? Is procedure the cause for tooling failure?
Tooling Solution vs TDC of Machine Failure

First calculate the True Downtime Cost Second, the cost to resolve tooling issue Then set priority appropriate with difference between cost Now we are close enough to the true cost of downtime. Tooling ($840) + Lost Production ($350) + Scrap ($510) = $1,700 To keep it simple we did not consider the many other cost, such as QC labor hours doing extra inspections. Armed with your new TDC knowledge; Would you decide to shut the machine down for the 1 hour repair ($700)? Or would you wait till scheduled downtime on the weekend ($1,700+)? Final Notes: Tooling accounts for only three percent of the cost of producing a part. The true downtime cost 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 the MTBF is high. Copyright 1995 Business Industrial Network - All rights reserved. Revised: March 11, 2003.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Tooling.htm
3/21/2003
Standard maintenance parts and shipping cost calculation.
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TDC - Maintenance parts and shipping Category

These are per downtime occurrence entries, but most can be exported from your CMMS. Your existing method of reporting need only meet the TDC recommendations below. Out of the parts and procurement fields below, the actual parts cost is the only value commonly tracked. Those with sound work order procedures may also do a good job of tracking Band-aid parts cost, and inhouse fabrication time associated with a downed machine. Rental cost for such items as JLGs, temporary air compressors, generators, etc. seldom are added to that final dollar amount associated with each downtime instance. Hours of parts (store) personnel's involvement in parts procurement is another big ticket item not associated with each downtime occurrence. Instead, parts procurement is hidden among the vague "overhead cost" dollar amount. Your Parts and procurement cost... Actual parts cost as commonly reported Band-Aid parts cost Rental cost Parts procurement Time In house fabrication time We can see the hidden cost of parts and procurement in the following testimonial from one company. This example is one of the most common executive oversights in all types of manufacturers. 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 were 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 bought a new one anyway, the only difference by the time they actually bought it, the cost was the same as if they had bought two! They may have recovered all the money they were charged for the first fix, (or may not have) but the administrative man hours related to this entire event had to be astronomical. There was time finding the first service provider, meetings between management on what to do, then more meetings when the first service provider's work failed. Then more meetings, then finding a rental, then finding a second service provider, or new unit, analysis, maintenance personnel involved. Then there was the rental fees, and the cost of downtime. Hind site is 20/20, yep heard that more times than I care to remember. The fact is, if all involved were aware of the true downtime cost (TDC) of that bottleneck, they would have seen it viable to invest in quality craftsmanship. Are they the only company in their corporation to make this mistake? No! Hopefully the above situation resulted in corporate policy so all companies could share in that hind site. This is what Business Industrial Network (bin95.com) other's mistakes. is all about. Helping us all learn from each
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Shipping.htm
3/23/2003
Standard maintenance parts and shipping cost calculation.
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Your shipping cost have a default value... Shipping Standard $20.00 Shipping Express $50.00 Shipping Emergency $700.00
Looking at the example shipping cost above, it's clear that emergency shipping should be considered carefully. But if your equipment is down, most often your hands are tied. See also... UPS Quick Cost Calculator (http://wwwapps.ups.com/servlet/QCCServlet) Do your parts procurement the Intelligent Internet way (http://www.mcsolutions.co.uk/dti/Dean_Foods.pdf) Using the Internet as a universal networking standard, business partners can create seamless, automated supply chain systems, learn from GE. (http://www.cio.com/archive/061597/commerce_content.html)
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Shipping.htm
3/23/2003
Learn to measure OEE (Overall Equipment Effectiveness) and TEEP (Total Effective Equipment ...P Page
Understanding Overall Equipment Effectiveness (OEE), then advancing to Total Effective Equipment Productivity (TEEP
The overall performance of a single piece of equipment, or even an entire factory, will always be governed by the cumulative impact of the three OEE factors: Percent of (scheduled production - reliability) or (calendar 24/7/365 - equipment utilization), that equipment is available for production. Percent of parts produced per time frame, of maximum rate OEM rated production speed at. If OEM specification not available, use best known production rate. Percent of good sellable parts out of total parts produced per time frame.
Calculators only work online at DowntimeCentral.com or in the interactive version of this book.
OEE Calculator
Availability Performance Quality OEE
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Example: 50% Availability (0.5) X 70% Performance Rate (0.7) X 20% Quality Reject Rate (results in 80%(0.8) acceptable) = 30%OEE
A complete understanding of OEE is required to make sound decisions.

OEE can be used to save companies from making inappropriate purchases, and help them focus on improving the performance of machinery and plant equipment they already own. Thanks to Justin Havens at OEE Consulting, we can spread this knowledge with one of the best power point presentations we have ever seen. Please visit http://www.oeeconsulting.com/ to download the free power point presentation. Business Industrial Network's CEO recently gave a presentation in Las Vegas, on The True Cost of Downtime. To his surprise, most attendees were not aware of what OEE is, or how to use it. If you work in manufacturing , there is no substitute for going out to the shop floor, and taking some rough measurements of OEE. You will be surprised by what you find!
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\OEE_TEEP.htm
3/24/2003
The operative word is Overall Equipment Efficiency

At least monitoring OEE per equipment brings focus on the equipment itself, but may not provide true cause of major cost, unless the cause is obvious. For example OEE can appear improved by actions such as purchasing oversize equipment, providing redundant supporting systems and increasing the frequency of overhauls.
True Downtime Cost

TDC brings focus on where ever an issue may be, with equipment, manpower, procedures, departmental, etc. TDC enhances OEE accuracy, and places it in perspective.
Where to start OEE per equipment (profit center)

When making every financial decision about a piece of equipment, the OEE should be considered. If you have not seen Money and Machine Power Point , please do so now. Excellent example of Acme Co. (http://193.119.130.78/MoneyandMachines.exe)
Improve on OEE with TDC

Front End: Incorporate TDC in your data collection. Back End: Incorporate TDC in you software reporting by requiring it of your software vendor.
Total Effective Equipment Productivity (TEEP).

After researching, we have found two persons who make reference to " TEEP", and their material looks shared. We believe the division of the OEE usage concept was intended for simplicity, which is also our cause. So we have included this lesser known acronym/methodology (TEEP), in our discussion.
After viewing the material above, you should be aware of how the OEE formula can help you identify the lack of efficiency in your production process. The next step is to maximize your equipment utilization with TEEP. As you strive for World Class productivity in your facility, this simple formula will make an excellent benchmarking tool.
3/24/2003
Where to start with TEEP OEM specified production rate

Using OEM specifications and other documentation, you determine the amount of parts your equipment/production should be capable of producing per hour.
Decide Sample time frame

Usually 7 days, a month, or a year, and always times 24 hours. (1 week = 168 hours)
Record number of good parts per time frame

Examples: You might have calculated theoretically a machine could run 2 parts per hour. But with changeovers, downtime, meetings, etc. you only put out 150 parts on the 168 hour time frame. Let's say you start out on a bottleneck machine in your facility (Good choice!). Use the examples above. You benchmark a TEEP of a little less than 50%. Use OEE to find your greatest areas of improvement, through changeover, quality, machine reliability improvements, and working through breaks, you now record a TEEP of 74%! That is an excellent Return On Asset, not to mention improvements to your bottom line. PPH Goal - The maximum Parts Per Hour the equipment is capable of running as per OEM. Total Time - The sample time frame. IE: week, month, quarter, or year. PPH Actual - The total actual good sellable Parts Per Hour ran on equipment during time frame. Calculators only work online at DowntimeCentral.com or in the interactive version of this book.
TEEP Calculator
PPH Goal Total Time PPH Actual TEEP
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Example: (2 Parts Per Hour (idealistically) X 1 week Total Time sampled (168 hours)) x = (336 parts (idealistically)) (336) / 112 parts (actually produced in 1 week) = 33% TEEP Also Overall Equipment Effectiveness A powerful Production / Maintenance Tool for Increased Profits, Robert C. Hansen-Industrial Press, 2002 http://www.amazon.com/exec/obidos/ASIN/0831131381/downtimecentr-20
See Also: The Twenty-Four Hour Business :... http://www.amazon.com/exec/obidos/ASIN/0814402402/downtimecentr-20
3/24/2003
Six Sigma and Data standards guide for manufacturing.
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Standards for Downtime Factors
Actually a combination of two methods are used to bridge the gap between data collection and management technique.
Strict usage of TDC metrics And data sharing standards like MIMOSA (www link)
Implementation of programs like TPM, requires the proper structure, measures, information and commitment. Only using vague, generalized tools like OEE to base day to day financial decisions on, cost thousands to millions. MIMOSA is more than an organization developing open exchange conventions. It is the enabling factor permitting integrated maintenance management, a connection to enterprise resource programs, and practical profitability-related operations and maintenance. See also the article on Data Collection included in this e-book.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\six_sigma.htm
3/12/2003
What is the True Cost of equipment downtime? A free manufacturing article for you to distribute. Page
What is the True Downtime Cost (TDC)?

By Don Fitchett
(Feel free to copy and distribute as long as article remains unchanged in its entirety with credits in tact and is free .)
The key to realizing greater savings from more informed management decisions is to predetermine the "True" cost of downtime for each profit center category. TDC is a methodology of analyzing all cost factors associated with downtime, and using this information for cost justification and day to day management decisions. Most likely, this data is already being collected in your facility, and need only be consolidated and organized according to the TDC guidelines. _ = 0 to 30 Employees _ = 31 to 50 Employees _ = 51 to 100 Employees _ = 101 to 200 Employees _ = 201 to 301 Employees
Typically daily management decisions related to equipment downtime are made based primarily on labor cost. Of course, production demand is also at the top of the priority list too. The bottlenecks are taken into account in the decisions when they are realized. Some facilities overlook equipment as a bottleneck, like air compressors, boilers, and strappers out in the warehouse. The decision making balance to maintain is between production demand and True Downtime Cost, not primarily production demand and direct labor cost. Using a TDC methodology, the Overhead bucket becomes very small, making clear to all, the areas of greatest opportunity. In these times of economic turmoil, it is ever more important to look at the True Downtime Cost in its respective categories, not only to see the greatest opportunity, but to profit from the valuable insight this methodology will bring. You will learn that many of the metrics with cost savings bottom line improvement opportunities, far outweigh the labor category and the immediate temporary gains of downsizing.
Hidden cost
Below is an example below of the hidden cost made relevant in just one of the proposed TDC buckets: labor. You will see the true cost of labor associated with the downtime scenario to be only $295. That amount pales in comparison to the other TDC categories combined, which can be 10 to 100 times that amount depending on the particular downtime occurrence. So you can see how the TDC method can be a valuable cost justification and benchmark tool to maintenance managers. A great analysis asset to executive management and a great sales tool to those who provide service and products to manufacturers. (Especially ERP and CMMS vendors who are the consolidators of the data)
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Whats_True_Down ... 3/25/2003
There are three main downtime categories proposed. The main category of Equipment Cost and Labor Cost are composed of metrics that are one time entry of constants, updated annually, exported from your existing computer systems. The main category of Downtime Cost contain the metrics that are "per downtime" occurrence entries, but most can be exported from your existing CMMS. The data being recorded from facility to facility, from software package to software package, vary greatly. I have done detailed analysis of each downtime cost metric, but the results are too great to mention in this article. Surprisingly some metrics have large cost savings opportunities and have been overlooked by the general industry. Since labor cost is one of the most popular areas to first start seeking opportunities, let us take a look at just one method of the old school style of thinking. (Which also happens to be a primary concern in downtime decision making.) Labor, more specifically direct labor. For example you have six operators doing not so productive cleaning while a machine is down and two maintenance technicians doing the repair. The decision makers are thinking At $10 per hour operator wage, $20 per hour maintenance wage, that is $100 per hour. Well, I know there is overhead involved too, but with so many categories it is too complicated to consider. Overhead is just a percentage of my man-hours anyway.
Now compare this to the true cost in just one TDC category; labor cost. First with the overhead bucket gone, the employees hourly cost is actual cost to the company. With insurance, retirement, training, admin, etc. double the hourly wage ($200) is a safe figure. As long as you are not dealing with a bottleneck, we need only take into account the indirect labor factor. Lets see in our example, there was a QC inspection at startup, the tool setup person, the line supervisor, maintenance supervisor, the plant manager, the parts procurer, to name the most apparent employees involved. A little more detail into the scenario, and we can calculate the indirect labor cost. The 15 minute QC inspection ($5), setup person also 15 minute ($5), the supervisor was taken from his normal duties the entire hour ($30). Doing what? Why supervising of course, well okay, he had logistics, reassigning employees, rescheduling, etc. For the sake of argument well say the production demand was high. This demanded two more high dollar employees, normally hidden in the overhead. The maintenance manager was summoned for coordinating, ($30) and the plant manager was on the scene for 15 minutes to set the priorities and get the facts first hand ($25). The grand total of TDC for labor is $200 direct labor + $95 indirect labor, for a total of $295. We all know in the industry, most would not bat an eye at $295. There are two points to made by this example. One is the commonly overlooked overhead cost, which is hiding almost 66% of the true cost in the labor category alone. The other point known to upper management and accountants, is indirect labor, which is a large part of the picture, yet only considered on a daily basis by very few.
Above was a best case scenario. Consider a bottleneck with 20 downstream employees affected. Add in Engineering, material handlers, more management/supervisors, controller, safety personnel, accounting, secretaries, rework, and offsite QC inspections. You could include the offsite personnel cost like consultants, OEM techs, etc., but it is recommended to have those costs in their own category as they are so great. Think about if the entire plant was shut down. How much would the TDC labor cost alone, be? You may re-prioritize the main breaker switch or air compressor PM.
Looking for the overlooked

Details of the individual metrics within each of the main downtime cost categories would be out of the scope of this article. I hope you find the list below to have some useful information and tips. The object is to stimulate the creative thinking process and help you realize areas that might otherwise be overlooked. It is recognized that there is a great deal of uncertainty and scientific difference of opinion surrounding the metrics of manufacturing cost analyses. This list is provided as a starting point for improving manufacturing cost analysis.
Equipment Cost Category (constants) Categories Standardize your data collection categories, learn from MIMOSA. People Indirect labor cost can often be greater than the more apparent direct labor cost. Product Made up of two sub-categories. Cost per Unit, and Units per Hour. Start-up Every time you startup your machine, there is hidden cost. Bottleneck Using a process flow diagram, pre-determine a bottleneck factor for each asset. Sales Expectation Our goal is always to maintain a 100% capacity readiness.
Labor Cost Category (constants) LPP/M Does your LPP/LPU calculations include indirect labor? QC Associate QC cost, re-work, etc. with actual downtime occurrence. Maintenance There is a substantial staff supporting those one or two who actually do the machine repair. Engineering Engineering costs to support troubleshooting and repair of machines can slip through the cracks. Management Requesting maintenance, redirecting operators, reporting to upper level management, altering production schedules/flow, administrative tasks, etc.
What is the True Cost of equipment downtime? A free manufacturing article for you to distribute. Page Downtime Cost Category (Occurrence) Time Are you tracking when maintenance arrives at the scene, or when the machine actually went down? Reduced Production Time and percentage of full capacity equipment is running a reduced rate due to a malfunction. Scrap On continuous flow systems, scrap related directly with downtime can be a very significant cost. Band-Aid Please take note that band-aid time estimates, and amount of times needed to be done are usually under estimated. OEM, Consulting, Contractor Your interactions with OEMs can be a major cost factor in downtime as well as other areas. Tooling Often classified as a nuisance problem if allowed to continue, can really add up in cost. Parts/Shipping Out of the parts and procurement fields, the actual parts cost is the only value commonly tracked. What about shipping, locating, rentals?
Reporting true results
In the past, the philosophy was the less cost buckets I have to manage, the easier my job is. However today is the day of powerful computer tools and data collection technology. We now have the capability to have a computer manage all those buckets, and do it the way we want. This technology coupled with people type methodologies like TQM, TPM, RCM and Lean Manufacturing, enables us to spare our employees the hardships of downsizing and seek much greater opportunities such as equipment utilization.
What is the True Cost of equipment downtime? A free manufacturing article for you to distribute. Page When the worlds top consultants are asked, Why dont manufacturers realize the full potential of programs like TPM, RCM, or even their CMMS software? you have no doubt heard some of the following standard replies. The program was not endorsed from the top down, or Lack of understanding of the strategy or Lack of measurable or quantifiable results. The last reply is the most accurate. With the realizing the true cost of downtime, will best quantify the results. Hey, there is a lot of wisdom to that saying, Money talks, .. If what was believed to be a $30K opportunity, is found to be a $300K opportunity, endorsement form the top down and commitment to understanding will more likely follow. Just as the leaders who sell a program to the facility must be able to prove the true value, the mechanism must be in place to report the true results. TDC bridges the gap between data collection, software/hardware and an improvement program such as Lean manufacturing. I have outlined below some clear concise steps that will lead you to a world class status. Use a process flow chart and identify your bottlenecks Adopt information standards in your existing and future systems Predetermine the "True" cost of downtime for each profit center category Use OEE to benchmark and identify areas of opportunity These guide lines are self sustaining. Most have identified their bottlenecks. Just make sure you havent overlooked one hanging on a wall, in a back room, or outside the building. I have talked about identifying the True Cost, so the appropriate priorities are set. Next, Ill comment a little on adopting standards and using OEE.
Standards
Actually a combination of two methods are used to bridge the gap between data collection and management technique. Strict usage of TDC metrics and data sharing standards like MIMOSA. Implementation of programs like TPM, requires the proper structure, measures, information and commitment. Only using vague, generalized tools like OEE to base day to day financial decisions on, can cost thousands to millions. Build your facility on rock; build it on standards. MIMOSA is more than an organization developing open exchange conventions. It is the enabling factor permitting integrated maintenance management, a connection to enterprise resource programs, and practical profitability-related operations and maintenance. Require your software vendors and program administrators to use TDC guidelines, and MIMOSA standards. This will reduce implementation cost, enhance benchmarking tools, and insure your success.
Overall Equipment Effectiveness

The overall performance of a single piece of equipment, or even an entire factory, will always be governed by the cumulative impact of the three OEE factors: Availability , Performance Rate, and Quality Reject Rate. When I was a speaker at an AFE convention in Las Vegas, to my amazement the group did not know what OEE was. I was in a major online chat session the other day where the guest speaker was Robert Hansen, the author of the book Overall Equipment Effectiveness A powerful Production / Maintenance Tool for Increased Profits. What was the question being asked of him? What is OEE?
Overall Equipment Effectiveness Availability X Performance X Quality= OEE Availability - Measures the percent of time that the equipment can be used (usually total hours of 24-7365 for equipment utilization, or scheduled production time to result in a reliability only measurement), divided by the equipment uptime (actual production). Performance - The percentage of available time that the equipment is producing product at its theoretical speed for individual products. It measures speed losses. (e.g., inefficient batching, machines jams) If you can not obtain equipment specifications from OEM, use best recorded rate of pph/quality. Quality - Determining the percent of the total output (i.e. all products including production, rework and scrap ) that is good. Terrence O'Hanlon, the host of that chat session had an excellent quote that gets to the heart of what I have seen, They do not know what they do not know. With the knowledge and utilization of the OEE calculation, it is common to realize greater than 40% increase in your bottom line. If youre making a profit now, just think of the opportunity. More importantly, OEE is the glue that sustains other initiatives by enabling all to clearly see where to focus, and the results of their efforts. The exciting point is that OEE is a simple method of measuring, you can start utilizing it Today! The worlds leaders in the industry are mostly in agreement on how to implement OEE and why. I contribute this fact to its simplicity. Identify your bottlenecks and major cost centers to benchmark and monitor first. Most recommend using the calendar time metric (24/7/365) for your availability factor. As machine utilization will also indicate reliability performance, giving you the whole picture and immediately focusing your resources on the greatest opportunity. Also using OEE as a benchmarking tool would not work well if based on a variable such as production schedule. Benchmarks must be based on a constant to allow portability to similar industries and markets. The bottom line is the method of implementing OEE is irrelevant if you dont start utilizing it at all. It is very true what they say, Do something is better than doing nothing at all. My challenge to the industry is to Stop OEE Ignorance, and spread the word about this valuable tool. Joel Lenards favorite topic is What is the Cost of Ignorance?. I propose that in using True Downtime Cost, we will start to see. Below are the best resources I have seen to follow up on this article. TDC www.DowntimeCentral.com Standards http://www.mimosa.org/othermod.htm OEE - http://www.oeeconsulting.com/ Also Overall Equipment Effectiveness A powerful Production / Maintenance Tool for Increased Profits, Robert C. Hansen-Industrial Press, 2002 http://www.amazon.com/exec/obidos/ASIN/0831131381/downtimecentr-20
Don Fitchett is the founder of Business Industrial Network, an internet based company that offers online technical support for all equipment in all manufacturing industries worldwide. www.bin95.com
Production counting white paper by ATSI
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Production Counting White Paper

By Rob Anderson of ATSI
Presumably, you are reading this because you are at least thinking about the benefits of installing a production counting system at your facility. This paper is intended to address the essential parts of a good production counting system. A production counting system can be divided into 5 parts. Each part building on the strength of the previous. As you will read, I elaborate on the first stage, Data Collection, because I feel that this is the single most important part of the system, do a good job here and the other four sections will be greatly simplified. Do a poor job here and this counting system may be a never ending job. Data Collection Data Storage Real-time Feedback and Displays Management Reporting Data Analysis Data Collection. A good solid method of data collection is as important to a production counting system as a good foundation is to a house. With a house, if the foundation isn't "square" you will be forever compensating by adjusting floors, walls, ceilings, windows and doors for the original mistake. With the counting system, if the data collection method isn't sound, you may lose counts or worse, mis-count. If the foundation isn't constructed from good materials, i.e., good quality concrete, rebar, block and mortar then the house can sag and cause you problems until the day you sell the house, or it falls down, whichever comes first. If the counting system isn't constructed from good materials, good quality industrial components using sound engineering practices, like the house, you can have problems for the lifetime of the system. Method. By method, I refer to the general architecture of the counting system. The best method, that I have found, is to use a centralized computer system for storage and computation and a field device like a PLC or dedicated Counter that is physically linked to the real world as shown in the illustration below. Don't try to bring the counts in directly from the field to the Computer System. A computer system typically isn't designed to receive the type of real world signals and respond to them in the way that you would want it to. If someone writes a big file over a network for instance, that may cause a delay in processing some counts, so any reports that you print may "look" wrong to the end user, because counts that should have been recorded, were recorded late due to the file transfer. Another problem with using the computer system as the data collection device is that when it fails and is down, you won't get any counting information for the downtime period. Using the PLC or counter method, the counts are still there and can be collected when the computer is back up.
Counts should always be taken from limit switches, photo eyes, proximity switches or other field devices that are necessary for the production line to operate. Counts should rarely be taken (if ever) from field devices installed for the sole purpose of counting. The reason is maintenance. A field device that is necessary for the production line to operate will be maintained, it has to be. A field device that is only there for counting purposes will get very low priority from the maintenance department, and it may be difficult to prove to them that it isn't functioning properly.
file://C:\My%20Documents\My%20eBooks\Downtime\Print%20Version\Production_Countin ... 3/26/2003
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Another good way to get a count is from the output of an already installed PLC or material handling device, like a robot. If the PLC sends a signal to a conveyor telling it to start running, after it has placed a part onto it, and it sends that same start signal every time it places a part, that might be a good way to get a count for parts out of that machine. Similarly, other machines have signals that they send to other devices that cause some action to be performed on the part of the device. In many cases these types of signals are a much better way of counting than a sensor at that location. Something that must be considered when programming the counting PLC or counter is the length of time the signal sent to it is made and how to condition that signal within the PLC or counter.
The first thing you must watch for is the signal being too fast. If the signal is being taken directly from a switch, you must ensure that the signal is in the "ON" state long enough for the PLC to "see" it and react to it. PLC response time can vary depending upon the type of controller and the size of the program it contains. By PLC response I mean the rise time of the signal within the PLC and the scan time of the program. Minimum sensor on time = Rise time of the PLC + 2 scan times + the ON Delay. We'll cover ON Delay in a minute. So, the rise time for a given PLC (the time it takes an input to go from 0 to 1 because of internal capacitance) might be 50ms. The scan time might be about 5ms. So assuming that you have no ON Delay at all, the sensor must be on a minimum of 60ms. If it doesn't stay on long enough ( see Figure 3 and Figure 5 ) you might miss a count, so your finished counts would be less than actual.
The second thing you must be concerned about is how much time your signal is in the "OFF" state between counts. Minimum sensor off time = Fall time of the PLC + 2 scan times + the OFF Delay. Using this equation you can be positive that the PLC has "seen" the transition from "ON" to "OFF". If your signal doesn't remain "OFF" long enough then your PLC might not see that it was ever "OFF" and fail to count the next part ( see Figure 2 above ). This would result in a count that was lower than actual. Another problem that you can encounter is if your signal is sent to the PLC more than once for the same part. This can happen if for instance, you have a limit switch that "swings". When the part first contacts the limit switch, the signal is sent to the counting PLC and the signal remains "ON" for some period of time while the part travels under the switch. At the moment that the limit switch is free from the part, the wand on the switch physically swings back to and through its normal position, and then swings up and "makes" again. If your PLC happens to read its I/O at this point, then you can get more counts than actual. The way you fix this problem is by having a debounce time or ON Delay programmed into your PLC or Counter that will allow it to ignore signals that are active for only a small amount of time. You may also need an OFF Delay which will act like the ON Delay to filter out erroneous signals. The ON Delay and OFF Delay time for each sensor is usually arrived at by trial and error, but it can be no longer than the amount of time your sensor is "ON" and must be greater than one scan time of the PLC. As a good starting place try one fourth of the sensor "ON" time. Look at Figure 1 for an example of how an OFF Delay can filter out a bad signal. Look at Figure 4 for an example of the perfect counting signal and response. In the preceding sections I have shown you a few things that you shouldn't do, and I've also given you some formulas for calculating the minimum amount of time your sensor should be on and off. But remember the longer your sensor is off between counts and the longer your sensor is on while the part is there is better, you don't have to use the minimums.
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From a software perspective, counts should always be retrieved as delta values and stored. So, for example you program the computer system to scan the PLC's once a minute, the computer would poll the PLC for any counts that had occurred since the last polling and then zero out the register(s) in the PLC. Something you don't want to do is to allow the PLC to count continuously without zeroing. The computer system can poll the PLC periodically and retrieve the new count, then calculate the difference between the old and the new. Although, it doesn't seem much harder on the surface, there are hidden pitfalls with this approach. The simplest method is the best, just zero out the PLC count after reading it. Store the delta value in a database. Materials and Installation. I don't have a whole lot to say about the materials you use. I have never used anything other than industrial grade equipment and haven't had many problems there. I do know of a system that used Bar Code readers for data collection on the factory floor. They used the type of bar code wands that you use to find in retail stores. The system was plagued with problems, the equipment just wasn't good enough. Not only did they have their share of normal hardware breakdowns, but also the inspection people entering the information would purposefully damage the equipment, to get out of work. As far as installation is concerned; if you have been involved with factory floor installations before, just do what you normally do. If you are from the IT world, make sure your Data Collection equipment is housed in the appropriate Nema enclosure for the job you're doing. Some sites may require a water tight enclosure, others may suffer from dust, others may need stainless steel. Do some research on your conditions and take the time and spend the money to use the right enclosure for the job. Protect your wiring. You will either want to run conduit or armored cable from the PLC enclosure to the machine. You will also need to protect your networking cable. This too should probably be in conduit. If there is a cable tray leading back to the computer system, then by all means use it, just don't drape your cables from the rafters or leave them exposed for people to swing on. Data Storage. All I can say here is to use a commercial database. Do not try to write your own code to store data in a user file. You will suffer from this later. There are many commercial databases available today that should do the job quite nicely. MS Access and FoxPro come to mind for smaller systems. If you need something larger MS SQL Server, Oracle or Sybase are leaders in the field. When storing the information, store it as deltas. So, if you are retrieving information once per minute, you should have an entry for every count each minute. Then when it comes time to print out a report, all you have to do is give the report a time span to look at and summarize. You may also want to have the ability to create summary data files. For example a daily file that has hourly entries for every count. This can be useful later on for displaying or reporting data, it's more efficient. Real-time Feedback and Displays. This is an interesting topic because it can be very minimalistic or all encompassing. For starters, the basic thing you need will be some sort of operator feedback. What's the use in keeping counts if you can't tell people what they are. It's my belief that whether you write your own program or buy someone else's, it should have a few displays to see counts that are "standard", so you can at least look at some counts without needing a custom display. You should also have the capability of building displays that don't require programming. You may be able to use the built in display capability of the database that you pick for the job. This would allow you or someone else within your organization to create and modify a display without the need to hire a programmer to do so. Many people are familiar with MS Access and FoxPro. Operator feedback can come in many forms. You may wish to have an overhead display, continuously displaying a single count for several of your production personnel. This may be the number of packed boxes from the end of an assembly line. Or you may wish to have a single light turn on or off to indicate that a quota has been met. No matter what types of feedback you choose, your counts, I refer to counts as a summary of deltas over a time period, need to be configurable. The first system I put in was unique for that customer, they wanted hourly, shift and daily counts. With the shift beginning at a pre-defined time 8am, 4pm and 12am. This inflexibility later caused problems in the form of added work. I advise that any system you write or buy should be flexible enough to allow your time period to begin at any time of the day and be any duration, because many manufacturers have some places in their process that don't quite conform to their norm. For instance, the company I mentioned above had over 99% of their counts based on the hour... but for a couple of unique machines, they needed 30 minute counts, and I remember being asked about a 20 minute count. So, keep your counting time periods flexible.
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Management Reporting. Maybe the single most important thing that your counting system will yield is a management production report. To what extent you choose to report your counts depends upon what you are trying to accomplish. There are basically two types of reports. Those used for problem analysis and those used for accounting. The accounting report is simple. You're concerned with how much raw material went into your production line and how many parts came out. This type of report is mainly concerned with line efficiency and material usage. The problem analysis type of report is usually more detailed. On this type of report you are concerned with the efficiency of a machine or area. Generally, you use this report as a tool to tell you how many parts went into a machine and how many good parts came out. So, for a given time period you can tell how many rejects your machine is producing. On some machines it's impossible to tell if it's making bad parts because the same number that went in comes out, regardless. For this type of situation you would usually include this machine in a larger area, maybe two or three machines. Or, maybe you can add a sensor of some sort that will detect only good pieces and not bad. You may have to tie it into the machine control system somehow to make the machine dependent upon the switch functioning properly, otherwise you violate the rule about not adding switches just for counting. In any case, this type of report will usually start at the beginning of a production line or production area and work its way through the area, so that the output of one machine or area is the input of the next, and so on. Data Analysis. I could have covered this topic as either part of the Display section or the Report section, but I have waited until last because I feel that it is a separate way of thinking about counts. The single most useful tool you can have in analyzing counts is a screen that will trend your counting information over some historical time period. You can use the trend to see patterns that you would miss by looking at a tabular report or display. Similar to a simple trend are some SPC tools like Pareto Charts and Xbar and R charts. These tools can be useful for operations personnel to spot their own problems. Sophisticated users may want to use something like Stat Graphics or some other numerical analysis tool. Which brings us to exporting data. How you export data is up to you, but as a minimum you should have the ability to export raw data from your database for a variable time period to a comma delimited file. If you can, exporting to an Excel spreadsheet would be a little nicer, as Excel has the ability to graph your data also. Summary. I hope that this paper has helped to educate and not been too tedious to read. If I am successful, you will not make the same mistakes that I have. If you should have any questions about production counting, e-mail me below and I will try my best to answer them. --Rob Anderson countingquestions@atsi.cc
Copyright 2002 ATSI

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The True Cost of Downtime

The glue that will hold together your manufacturing initiatives.

Asset Management - What's your facility's true downtime cost?

TDC - True Downtime Cost

Copyright 1995 Business Industrial Network

- All rights reserved. Revised: March 11, 2003.

industrial manufacturing downtime cost categories

TDC - True Downtime Cost

industrial manufacturing downtime cost categories

- All rights reserved. Revised: March 11, 2003.

Take a closer look at equipment operational cost

TDC, a closer look at Equipment

- All rights reserved. Revised: March 11, 2003.

industrial manufacturing downtime cost categories

TDC - Data collection categories.

To accurately track cost...

Ease of Data Collection and Analysis

TDC- People Category

Directly affected people

Indirectly affected people

Cost per Unit, and Units per Hour calculation.

TDC - Product Category

Copyright 1995 Business Industrial Network

- All rights reserved. Revised: March 11, 2003.

Every time your startup your machine, there is hidden cost

TDC - Startup Category

Start up cost metrics

Every time your startup your machine, there is hidden cost

Copyright 1995 Business Industrial Network

- All rights reserved. Revised: March 11, 2003.

How do you calculate downtime cost related to a manufacturing bottlekneck.

TDC - Bottleneck-Factor Category

Copyright 1995 Business Industrial Network

- All rights reserved. Revised: March 11, 2003.

Sales Expectation - We have to maintain a 100% capacity readiness

TDC - Sales Expectation Category

Explorer labor cost in industry.

TDC - A closer look at Labor

Copyright 1995 Business Industrial Network

- All rights reserved. Revised: March 11, 2003.

Does your LPP/LPU calculations include indirect labor?

TDC - Labor Per Product Category

Copyright 1995 Business Industrial Network

- All rights reserved. Revised: March 11, 2003.

Quality control cost in manufacturing.

TDC - QC Labor Category

Direct QC labor related to downtime

Indirect labor related to downtime

Copyright 1995 Business Industrial Network

- All rights reserved. Revised: March 11, 2003.

Maintenance labor cost in the manufacturing industry

TDC - Maintenance Labor Category

Direct maintenance labor

Indirect maintenance labor

See also: Fundamentals of Preventive Maintenance http://www.amazon.com/exec/obidos/ASIN/0814407366/downtimecentr-20

Copyright 1995 Business Industrial Network

- All rights reserved. Revised: March 11, 2003.

Engineering Cost in manufacturing

TDC - Engineering Labor Category

True hourly cost of Engineers

Track time associated with downtime support

- All rights reserved. Revised: March 11, 2003.

Management cost in manufacturing