The Cost of Downtime in Manufacturing

What is Downtime in Manufacturing?

Downtime in manufacturing refers to any period when production stops or is significantly reduced due to unplanned issues, planned maintenance, or operational inefficiencies. It can stem from machine failures, supply chain disruptions, human errors, or inefficient changeovers.

While some downtime (known as planned downtime) is inevitable, excessive unplanned downtime can have severe financial and operational consequences. Here are a couple of industry examples of the true cost of unplanned downtime. 

An article from Forbes states: The average manufacturer confronts 800 hours of equipment downtime per year — more than 15 hours per week. Overall, unplanned downtime costs industrial manufacturers as much as $50 billion a year.

An article on The Manufacturer cites a report by RS Components which found that: On average almost 20 hours each week are spent on unscheduled maintenance in the UK and Ireland, and around 18 hours on scheduled maintenance.

Planned vs. Unplanned Downtime

Understanding the difference between planned and unplanned downtime in manufacturing is crucial for effective downtime management, the table below looks at each:

The Impact of Unplanned Downtime

The cost of unplanned downtime extends beyond immediate revenue loss. It affects multiple areas of a business, including:

• Lost Revenue/Reduction in Profit
• Increased Operational Costs
• Increased lead Times/Production backlogs
• Late Deliveries - Customer Dissatisfaction
• Safety and Compliance Risks

Check out our case studies to see how our customers have used our machine monitoring system to remove unplanned downtime and maximise machine utilisation. 

Calculating the costs of downtime

Manufacturers can use various methods to determine the financial impact of downtime. Commonly, manufacturers will have different ways to calculate downtime within their business. However, we’ve put together five examples below:

1. Basic Revenue Loss Calculation
   • (Lost Production Units) × (Revenue per Unit)
   • Example: If a machine downtime results in 500 lost units and each unit sells for £50, the revenue loss is 500 × £50 = £25,000.
2. Total Cost of Downtime per Hour
   • (Average Revenue per Hour) + (Labor Cost per Hour) + (Overhead Costs per Hour)
   • Example: If revenue loss is £10,000 per hour, labour costs £5,000, and overhead is £3,000, then downtime costs £18,000 per hour.
3. Lost Gross Profit Approach
   • (Downtime Hours) × (Average Gross Profit per Hour)
   • Example: If the plant's gross profit per hour is £8,000 and downtime lasts 3 hours, the lost profit is 3 × £8,000 = £24,000.
4. Lost Time Percentage
   • Downtime = (Time machine is down / Total Time) x 100
   • Example: A CNC machine operates for 8 hours per shift, but it was unavailable for 1 hour due to unplanned downtime, then the lost time percentage would be 1 / 8 = 0.125 x 100 = 12.5%

5. OEE (Overall Equipment Effectiveness) Impact

   • Downtime negatively affects OEE, which measures manufacturing productivity.

   • (Availability × Performance × Quality) × Total Production Time

   • By analysing historical OEE data, manufacturers can estimate how much downtime impacts their efficiency and profitability.

Try our ROI calculator to see how much value you could gain by minimising downtime with our software. 

Methods and tools to reduce manufacturing downtime

As we said at the start of this article, downtime in manufacturing is unavoidable – but it can and should be minimised wherever possible.

Planned downtime, such as routine maintenance and repairs are essential for keeping machines in optimal condition, and it's reasonable to expect some unexpected downtime over the course of a year. However, manufacturing companies can take proactive steps—through process improvements, training, and the right technology—to minimise unplanned (and costly) downtime, ensuring greater efficiency and productivity.

1. Align and Implement Predictive and Preventive Maintenance Schedules

• Ensure alignment with maintenance schedules – by doing so – you minimise the impact of planned downtime. For example – plan at times when you know production lines are at their quietest or when you have capacity on alternative machines to move the work over.
• Schedule routine maintenance based on machine usage rather than reacting to breakdowns.
• Use technologies such as machine monitoring software to record maintenance-related issues and feed this information into your planned maintenance schedule to predict and minimise failures before they occur.

Machine monitoring systems can automatically detect when a machine is down, prompting the operator to log the downtime reason from a predefined list. This data can then be used to support continuous improvement initiatives facilitated by root cause analysis, by using the systems downtime Pareto chart which shows the biggest downtime reasons over time. 

2. Provide the right tools & resources

• Provide Standard Operating Procedures (SOPs) to key personnel – from operators through to the cell/line or factory floor supervisors. Ensuring everyone is clear on how to perform tasks and processes efficiently.
• Implement technologies that support continuous improvement initiatives. For example, production monitoring software such as FourJaw enables operators to capture the root causes of machine downtime. This information can be used by management to do a Route Cause Analysis (Techniques like the 5 Whys or Pareto) to identify where unplanned downtime is occurring and look at ways to minimise it by improving processes or providing more resources.

3. Enhance Workforce Training and Standardised Procedures

• Implement standardised work procedures to ensure consistency in operations. Ensure alignment between the top floor and factory floor, to remove the chance of a ‘Us and Them culture’.
• Regular training programs help operators better handle equipment and reduce human errors. Well-trained people also feel more empowered to do the task and contribute to the overall business goals.

4. Conduct and review process audits

• Ensure every department across the business conducts, reviews and feedback on their process control. Identify, where are processes working, where they're breaking down, and therefore where can they be improved. By doing this, you ensure that processes continue to be fit for the business.

5. Use Automation and Smart Manufacturing Technologies

• We touched on technology such as machine monitoring in point two. However, the role of technology in reducing unplanned downtime goes much broader than this.
• Implementing smart technologies that automate manual processes can have massive benefits across several areas on the factory floor. From accurately capturing downtime reasons, to automating parts of a quality process to underpinning predictive maintenance planning. IoT solutions and AI-driven analytics can significantly minimise costly unplanned downtime.

Conclusion

Downtime in manufacturing is costly, but it is not inevitable. By leveraging the tools, techniques and technologies touched upon in this manufacturers can significantly reduce unproductive downtime.

For operations managers, continuous improvement professionals, and finance leaders, tackling downtime should be a top priority to enhance efficiency, profitability, and competitiveness.

Take Action Today

Want to see how FourJaw Machine Monitoring can help reduce downtime in your factory? Book a Demo today and take the first step toward a more productive and profitable manufacturing operation.