Machine downtime costs can quickly add up, lost production, labour, and missed deliveries can eat into profit margins. Use our simple downtime cost formula and calculator to estimate your potential savings through condition monitoring and condition-based maintenance.
Enter your figures into the spreadsheet below to calculate your potential savings.
Machine downtime refers to any period when equipment is not operational, leading to lost production and productivity. Using a cost of downtime calculator is key to justifying investment in condition monitoring systems or predictive maintenance.
Many engineers know in their hearts that Condition-Based Maintenance makes sense, and that investing in Condition Monitoring Equipment is the right thing to do. However, this is rarely sufficient justification to get approval to spend money on a system, or on the education and training that go with the system to deliver the full benefits.
Reducing the scope to get something through the budget approval process all too easily results in buying a piece of equipment that sits unused under the desk, because there was no funding for training nor for the ongoing encouragement and support for the use of the tool. And when the decision can be taken at a low level in an organisation without needing senior level sign-off, there is little senior level commitment to ensuring that the investment was a success – and hence little encouragement or support to make sure it is being used as intended.
By contrast, where a business has made a decision to invest in a major programme that has required approval at a more senior level, the senior management are “on the hook” to ensure it is successful. They will take an active interest, check that it is being successful, and will take steps to unblock obstacles to successful adoption.
It is an example of a counter-intuitive phenomenon often seen in businesses – the little things can become the hard things, and the big things can become the easy things.
So when planning a Condition-Based Maintenance initiative, or a Condition Monitoring System project, it can help to think big. A permanently installed system that covers all the significant plant items may be an easier project to deliver results than one that only picks off one or two plant items. Condition Monitoring only delivers benefits when you do something different from what you would have done before, and getting people to do things differently – a business change – is generally hard work. It is much harder work still if you are only asking people to adopt a new approach on a few items of equipment, and they can stick to their old ways on everything else. It is much easier to implement a new way of working on everything. It makes it easier to implement and easier to enforce.
Investment decisions like this are almost always made on the basis of a clear cost-benefit case, and this can be difficult to do. As with many decisions in maintenance, the evidence needed to justify the plan of action is rarely black and white, because it is normally probabilistic and risk based. It is not normally possible to say with 100% certainty “if we do this, it will definitely NOT fail in the next 12 months; if we don’t do this, it definitely WILL fail in the next 12 months.”
The underlying truth may be that the probability of unexpected failure will be reduced from 82%+ to less than 11% – but this is a more difficult argument to put across, and in practice, it is extremely rare to have adequate statistical history data to generate exact numbers like this. But the absence of analytically exact numbers does not mean figures are not of use. The answer is to adopt an approach that “Roughly Right is better than Exactly Wrong.”
To a first approximation, the cost of downtime can be calculated as being one of two numbers, depending on your business circumstances:
Then compare your annual benefit figure with the outlay you have in mind to give an indication of the payback period. Most businesses have payback requirements in the range 1 – 5 years, so if the figure you have calculated comes within the requirements for your business, it is worth pursuing the proposal.
(NB We know there are lots more complex cost-benefit evaluation methods possible, like DCF (Discounted Cash Flow), IRR (Internal Rate of Return) etc – but these are just adding a level of sophistication on something that is as we said above, roughly right rather than exactly wrong. Applying overly sophisticated analysis to these figures is often a waste of time, and can give a misleading sense of precision to what should be a broad-brush decision. But you will no doubt need to follow the laid down process for your organisation).
Condition-based maintenance helps identify faults early and schedule repairs before breakdowns occur. By reducing unexpected stoppages, it lowers your effective downtime cost and increases plant reliability.
Use our cost of downtime calculator or contact us for future assistance.
In this section, we share some frameworks and approaches that have helped others to persuade their senior managers and finance managers to back really good condition monitoring projects and programmes.
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