Downtime is a serious threat to any original equipment manufacturing business. A total of 82% of manufacturing companies have experienced unplanned downtime over the past three years, which can cost a company as much as $260,000 an hour. When unplanned downtime occurs, no value is being produced but the cost of overhead operations continues to grow, which directly impacts your bottom line.
Downtime can happen for several reasons. Reducing the amount of time that production idles is crucial to increasing efficiency and improving your overall revenue margins. Let’s take a closer look at the main causes of unplanned downtime and how to overcome them.
The most common cause of unplanned downtime is a breakdown, malfunction, or total failure of equipment, slowing down productivity and harming your bottom line.
On average, manufacturers deal with up to 800 hours of downtime annually stemming from machine maintenance, leading to negative impacts on the organization in terms of:
- Wasted Labor: When machines stop working suddenly, the employees who operate those machines become useless, which leads to wasted labor costs. In addition to the loss per hour, you are also paying employees for doing nothing.
- Depleted Inventory: Many organizations need to maintain a certain number of products in the warehouse to keep the operation running. Downtimes can quickly deplete the inventory. When there are production limits and you don’t have backup machines to take over in case of downtime, it can take days or even months to catch up.
- Loss of Production: Loss of production capacity is the most visible and devastating impact of downtime. Suppose your manufacturing unit produces 600 units per hour, with an average of $50 profit per unit; one hour of downtime can cost your company more than $10,000 in lost revenue.
To prevent these periods of costly downtime, you should practice preventative maintenance, a method that intends to prevent major machinery issues or breakdowns by consistently reviewing and caring for facility equipment (instead of fixing issues as they occur).
Combining this method with the technology-driven approach of Industrial Internet of Things will allow you to fully understand how machines are performing, giving you an opportunity to optimize your maintenance process, reduce machine downtime, and even predict when things will go wrong.
Raw Material Shortages
The current shortage of raw materials is causing serious problems for manufacturers, making it hard for them to fulfill their ongoing contracts. Given the current supply chain disruptions, the requests for corrugated metal parts by OEMs have been met with delays from suppliers that don’t have the capacity to meet increasing demand, leading to unwanted downtime. Shortages have already started taking effect and will have increasingly severe consequences, including:
- Rising Material Prices – Since March of 2020, steel prices are up a staggering 215%. As demand continues to rise and supplies remain tight, prices naturally rise, impacting your bottom line.
- Production Shortfalls – With demand showing no signs of slowing down, obtaining raw materials has become increasingly difficult, regardless of price, leading to a decline in production.
- Losing Clientele – rising prices and declining production levels has customers on the hunt for alternative suppliers that can fulfill orders on time, resulting in clientele loss for your business if you’re unable to deliver.
Metals prices and raw material shortages are influenced by more than just the pandemic. At a time like this, it is critical that you work with a trusted supplier that understands the ups and downs of the raw materials markets and can leverage purchasing power to secure materials during difficult times. Partnering with a company like Corrugated Metals Inc., which has an abundance of un-utilized capacity to service customer orders with quick turn-around times, will allow you to alleviate delays and downtime, get ahead of deadlines, and avoid incurring unnecessary costs.
Low Employee Productivity
Your staff are arguably your most important assets, but they’re also expensive. Low employee productivity dampens the production quality causing unplanned downtime, which leads to unwanted costs. In addition, the U.S. Bureau of Labor reported that the turnover rate for the manufacturing industry is 60.5%. High turnover impacts overall team performance and can cost a business thousands of dollars.
Invest in your staff by developing useful training modules, optimize facility safety, foster an employee-focused workplace, and make sure each member of your organization is appropriately compensated, rewarded, and held accountable. Companies that maintain a positive development culture are more likely to have happier, more engaged employees which will increase your staff performance, reduce downtime, and improve your bottom line.
Poor Quality Materials
Poor-quality materials will create manufacturing difficulties that lead to rejected parts. When products must be reworked or discarded due to defects, the loss is not only that of quality and material, but also wasted production time. Quality related losses can affect productivity and cause downtime due to:
- Plant stoppages to investigate or fix quality issues
- Slow running production lines from the materials in use deviating from their standard specifications
- Time spent reworking (or disposing of) products that did not meet quality requirements the first time
To avoid problems with low-quality materials, you should intend to only purchase materials and components that align with (or exceed) the quality standard to which you hold your products and processes. When choosing a supplier, schedule a site visit, ask your suppliers for references, and conduct your own quality testing to ensure materials meet the necessary specifications upfront.
Working with a trusted supplier (like Corrugated Metals Inc.) that has years of industry experience, continuously meets industry standards, thoroughly tests its products, and stands behind them with warranties, will support your business and help you reduce downtime stemming from quality issues.
Unexpected downtime will take a toll on your organization’s productivity and profitability. The longer it takes to complete a process or finish a product, the longer it takes to get those products into the hands of consumers. Don’t wait until efficiency becomes an issue, instead, be proactive and take the necessary steps to maintain operational excellence.
Ready to learn how CMI’s experience and innovation will help you streamline processes and reduce downtime in your facility? Get in touch today.