Transcript TDC - Cost Factors

Business Industrial Network
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True Downtime Cost
Cost Factors (Definition:)
TDC – True Downtime Cost
•A method of recording and analyzing all significant cost
metrics associated with equipment downtime in a building
or manufacturing facility.
•TDC provides a way to assign time and/or monetary value
to previously considered “non-tangible” cost of downtime.
•Also TDC includes downtime factors commonly overlook to
arrive at a more true value for the cost of downtime.
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How we view cost
 ROI
 The
bottom line when dealing with owners
and investors.
 OEE
A
valuable means to view general
efficiencies or deficiencies, whichever the
case may be.
 ROA
 More
focused on the asset value it’s self.
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How we view cost (RAV)

Return Asset Value
 There are five phases in the life of a piece
of equipment: design, construction, startup, production and taking out of service.
Depending on the choices that are made
in each phase,
 the total cost will be fixed. For instance,
bad design entails greater labor costs
during the production phase. TDC must be
used in all five phases.
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Producer Value Model
Income from
Finished Goods
Cost of
Raw Materials
Conversion
Costs
Taxes
=
X
Net Assets
After Tax
Operating Profit
Interest rate
Cost of Capital
= EVA
Price of
Finished Goods
OEE
Production
Yield
Quality
(actual)
Production Rate
(actual)
Availability
(actual)
Conversion Cost
(objective)
_..
Quality
(objective)
Production Rate
(objective)
= TPE
Availability
(objective)
Conversion Cost
(actual)
Market Conditions
Operations & Maintenance, O & M
Value
Administrative
Cost
Operations
Maintenance
PM, PdM, parts, labor
Safety,
Environmental
Utilities;
electric, water
efficiency
Waste Disposal
OEE is great…
 If
generated from True Downtime Cost
metrics.
 OK, it’s great anyway you look at it, but
let’s really look at it.
IF 70% OEE was derived from 50%TDC data, it’s
really only 35%OEE
70% OEE X 90%TDC = 63% OEE (TDC)
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The operative word is…
Overall Equipment Efficiency
AT least monitoring OEE per equipment brings focus on the
equipment its self. But may not provide true cause of major
cost, unless the cause is obvious.
True Downtime Cost
TDC brings focus on where ever an issue may be, with
equipment, manpower, procedures, departmental, etc.
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Where to start
 OEE
per equipment (profit center)
 When
making every financial decision
about a piece of equipment, the OEE
should be considered.
 Take a look at this example of Acme Co.
 Improve
on OEE with TDC
 Front
End: Incorporate TDC in your data
collection.
 Back End: Incorporate TDC in you software
reporting.
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A Quick Look at TDC metrics
Equipment
Categories
People
Labor
LPP/M
Downtime
Time
Reduced
QC
Scrap
Product
Maintenance
Band-Aid
Start-Up
Bottleneck
Sales Exp
Engineering
OEM
Tooling
Management
Overhead
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Part / Ship
Examples of the Money saved by
looking at TDC category ...
 Power
 estimated
$26 billion per year cost to U.S.
companies in lost time, equipment repair
and equipment replacement.
 nearly 80% of transient activity at a given
facility may be internally generated.
 All mission-critical electrical and electronic
systems should be shielded to prevent
disruption, damage and destruction.
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Examples of the Money saved by
looking at TDC category ...
 Tooling
 tooling
accounts for only three percent of
the cost of producing a part.
 downtime results from the failure of inferior
tooling adds up to many times that 3%
 Tooling often falls into the category “too
small to analyze”, even if MTBF is high.
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Examples of the Money saved by
looking at TDC category ...
 Troubleshooting
Time
 90%
of the time is spent finding the
problem and how to fix it, 10% actually
replacing the fuse.
 Who or what technical support will be
available to take care of an end user
whose production line is down at 2 a.m. on
the week end?
Business Industrial Network’s Online
Quick Help Service, that is who.
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Examples of the Money saved by
looking at TDC category ...
 Quality
 Product
quality does not cost, it pays.
 Quality really pays in reference to Machine
quality, replacement part quality, repair
quality, Service quality, and management
quality.
 With production quality, a simplified view is
better quality, more saleable products out
the door. (increased capacity)
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Examples of the Money saved by
looking at TDC category ...
 Reliability
 Mobil:
“has a reduction trend in 1999 to
yield $8-10 million.”
 If your reliability program resulted in an
OEE increase from 85 percent to 89
percent. If at 85% you had annual sales of
$1,236,500,000 Therefore, each
percentage point of OEE represents
$15,135,000 of sales. With the increase in
product represented by improved OEE,
sales would increase $60,520,000.
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Examples of the Money saved by
looking at TDC category ...

Outsourcing (and OEM)





Supplemental services such as predictive,
preventative, consulting are great investments.
When it comes to Downtime, very costly if not
monitored. Especially when dealing with OEMs.
The service call alone starts at $3,000 the first
day.
TDC metrics will show you that average 10 hours
downtime waiting could cost you $60,000 easy!
What is the TDC of new installation? Lack of
technical documentation? TDC will show you
hidden cost.
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Examples of the Money saved by
looking at TDC category ...

PM



Like the maintenance department it’s self, the
question goes back and forth. Is preventative
maintenance (PM), an overhead, or profit center?
One company, seen automation of lubrication
points on just two lines translated into 30 to 60
hours of additional machine time and profit gains
of £60,000 to £120,000 annually.
Just because a $50 bearing fails, does not mean
that it did not cause $50,000 in lost production.
TDC is a road map to automating RCA, and
providing a means to accomplish “Lean
Manufacturing”
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Examples of the Money saved by
looking at TDC category ...
 Lost
Sales
 In
addition to lost sales, loss of market
share is even more threatening.
 The Whirlpool Findlay Division has been
able to increase production by 21%,
without any significant capital costs by
focused TPM and OEE utilization.
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Examples of the Money saved by
looking at TDC category ...
 Time
 Just
minutes in downtime reduction adds
up over week, month, year.
 At cost of $135.00 and $160.00 per minute
 Ten minutes per 16-hour workday saved by
installing a VT400 (Versacall.com)
 over $6,750 per 5-day workweek.
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Examples of the Money saved by
looking at TDC category ...
 Bottleneck
 Identifying
bottleneck cost can save
thousands
 Example: an industry accepted cost of a
corrugators is $10,000 per hour (varies by
facility).
Other Bottlenecks to a corrugated facility…
Boiler, Glue system, Air compressor,
Strapper, Facility Power, etc.
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Testimony

A maintenance manager replies when asked
if he has difficulty with cost justification to
upper management. “I have a situation right
now about spending about $7,500 for a new
electric distribution panel. it controls all our air
compressors and I was told tonight that
another compressor had to be shut down. If
one more goes down we will be down for
about 7-10 days at a cost of over $150,000
per day. tell me if a expenditure of $7,500 is
worth the investment?”
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Another Testimony

Another reports losses less visible can be much
greater. Equipment not running capacity, may result
in not filling orders, or reduced sales volumes. “For
example, if prolonged operation with four out of five
furnaces working reduces production capacity by 20
percent, a continuous process line with a design
rating of 1,000 units per hour would be capable of
only 800 units. To determine the loss, multiply the
200 units per hour by the unit sales price of $100.
This computes to a $20,000 loss for each hour of
operation at reduced capacity. Should this mode
continue for a full year, the annualized loss equals
more than $175 million.”
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One more

Another reports one of the most common executive
oversights in all types of manufactures. “An air
compressor goes out, a management decision to go
with the lowest bidder on the repair.” A common
policy in the manufacturing industry. “The repairs
where done improperly and the air compressor goes
down again. This time we hire the more reliable and
expensive repair service, but have to wait for their
schedule to clear up. During all this the company is
paying $ 1,000s a day to rent a compressor. The cost
of service twice, rent, and downtime, could have paid
for a new compressor with warranty.” They eventually
winded up buying a new one any way, the only
difference by the time they actually bought it the cost
was the same as if they had bought two.
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TDC will help you plan a budget that
reflects real world constraints on
production.
After speaking with the General Manager in the last
example, we found out that the cost was not in the
budget. This was a major factor in the decision
making process. The low budget resulted in spending
twice as much to resolve the issue.
Production demands is another factor that often results
in costly management decisions. With out TDC,
managers are not realizing the cumulative cost of a
nuisance issue. This sometimes results in a greater
cost and lost production than if they would have shut
down production and repaired.
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Business Industrial Network
TDC represents the final
bottlenecks to a fully integrated
“LEAN”
and auditable approach to
TPM, RCM, PM
maintenance strategy
TDC
development / justification.
Click the link to learn more about
•TDC Data Source
•TDC Overview
ERP,CMMS,EDI,DCS,PLC
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