True Costs of Unplanned Downtime in Manufacturing

Let’s say you’re a manufacturer, and one of your machines suddenly stops working because of overheating. You now have to stop it, find the problem and fix it before you use it again. The number of hours spent troubleshooting and repairing that machine is considered unplanned downtime.

Proactive maintenance is the best way to minimize equipment downtime costs, but most people don’t know whether spending on maintenance will yield savings more than the potential cost of downtime. But data says it will — manufacturers who rely heavily on predictive and preventive maintenance had 52.7 percent less unplanned downtime and 78.5 percent fewer defects, according to a National Institute of Standards and Technology report.

Read this guide to get a better understanding of the true cost of downtime in manufacturing and ways to minimize it.

Unplanned vs. Planned Downtime

Let’s start by understanding the two main types of downtime: unplanned versus planned. Unplanned downtime occurs without warning and typically disrupts your production schedule. It forces you to spend on quick fixes to restart production, which means expensive, often temporary repairs, which are bad news for your budget.

Planned downtime is scheduled and controlled. It’s usually planned before the beginning of the quarter or year, and your team is prepared for it. The purpose of planned maintenance is to prevent unplanned downtime, extend asset lifespan and improve operational efficiency. Note: A good rule of thumb for manufacturers is to have no more than 10 percent of downtime.

Examples of Unplanned Downtime

• Equipment breakdowns
• Sudden power outages
• System crashes
• Operator errors

Examples of Planned Downtime

• Preventive maintenance
• Equipment upgrades
• Software updates
• Regular maintenance inspections

Common Causes of Unplanned Downtime

There can be several causes for unplanned downtime, but here are the most common ones for manufacturers to consider:

• Aging equipment: As parts wear out, sensors go bad and systems become obsolete, making equipment less reliable and more prone to failure. Aging equipment is a ticking time bomb, especially when it’s not well-maintained. Maintaining old equipment also has its own set of challenges. For example, replacement parts needed to repair the equipment might not be readily available.
• Poor (or no) maintenance strategy: Avoiding maintenance costs saves plenty of money in the short term, but soon, you’ll have to spend a whole lot more on reactive maintenance and might even have to replace equipment sooner. In the long run, proactive maintenance can save you money and minimize unplanned downtime.
• Lack of employee training: Even the most advanced equipment can fail if the operator or the maintenance team doesn’t know how to use or care for it properly. Mistakes, misuse and slow troubleshooting are rooted in one problem — poor training. You don’t need to invest in an expensive workshop. Give your teams basic training to avoid user-induced errors and safety and compliance risks.
• Power outages or connectivity issues: Power cuts, voltage fluctuation, flaky internet or any type of disruption to power or connectivity can halt operations. 
• External events: Sometimes, it’s not even your fault. Natural disasters, supply chain delays or pandemics are beyond your control. They’ll occasionally force you to shut things down, and since it’s inevitable, just consider this a cost of doing business.

How Downtime Effects Your Bottom Line

The effects of unplanned downtime ripple through your entire operation. Here’s how unplanned downtime impacts your manufacturing business:

• Lost production capacity: When equipment stops working unexpectedly, production capacity is lost. This is especially a problem in high-output environments where production targets are tight. Lost production capacity can translate to missed quotas, backlogged orders, idle workers and wasted resources.
• Increased labor costs with emergency maintenance: Scrambling to repair a broken machine is almost always more expensive than doing it on schedule. Overtime pay, specialized technicians and rush fees for parts all add up and usually cost more than the cost of proactive maintenance.
• Damaged assets through rushed repairs: Taking shortcuts when performing emergency maintenance and repairs in haste can lead to mistakes or following incorrect procedures, causing more harm than good or even permanent damage.
• Disruptions in supply chain: A problem on the production line impacts every part of the supply chain downstream. Suppliers, warehouses, distributors and customers all feel the impact when you can’t deliver on time. Everything, from delayed shipments to contract penalties, diminishes your profitability.
• Customer dissatisfaction: Missed deadlines and late deliveries tarnish your reputation. If this happens frequently, your buyers might switch to a competitor. Frequent complaints, lost trust and negative reviews all lead to decreased customer retention rates.
• Decrease in staff efficiency and morale: A drop in morale is natural when productivity tanks because of frequent breakdowns. Frustration builds and eventually, turnover takes a hit.

How to Calculate Unplanned Downtime

Calculating unplanned downtime as a percentage of total operating time isn’t all that complex. Here’s a quick step-by-step overview of how to calculate this crucial maintenance KPI (key performance indicator):

• Step 1: Set your planned operating time. Determine the number of hours your equipment should run during a given period. Let’s say your conveyor belt runs 200 hours/month (10 hours/day x 20 days/month).
• Step 2: Track unplanned downtime. Record the number of hours the equipment was unexpectedly offline during that period. Suppose the conveyor belt was down for 20 hours last month.
• Step 3: Do the math. Divide the downtime by the planned operating time and multiply that by 100. For our example, the downtime would be 10%, calculated as follows:
  • Unplanned Downtime = [Downtime / Planned Operating Time] x 100
  • 10% = [20 hours / 200 hours] x 100

Costs of Unplanned Downtime for Manufacturers

Calculating the dollar amount of unplanned downtime in manufacturing involves calculating the opportunity cost of unplanned downtime. Let’s look at the process:

• Step 1: Determine the hours of downtime. If you want this and other downtime metrics readily available, use a computerized maintenance management system (CMMS) like Coast. Alternatively, you can calculate downtime manually by subtracting actual operating time from planned operating time:
  • Downtime = Planned Operating Time – Actual Operating Time
• Step 2: Calculate the average production rate per hour. Use the following formula to calculate the average production rate per hour:
  • Average Production Rate Per Hour = Total Number of Units Produced / Planned Operating Time
• Step 3: Determine the number of units produced due to downtime. This is how much you could have produced without unplanned downtime and represents the opportunity cost. To calculate it:
  • Number of Units Not Produced Due to Downtime = Average Production Rate x Downtime in Hours
• Step 4: Calculate the total gross losses. Now, let’s convert the opportunity cost to a dollar amount. Here’s the formula:
  • Total Gross Loss = Number of Units Not Produced Due to Downtime x Gross Profit Per Unit

Manufacturing Downtime Cost Example

For example, let’s say you produce pipes. Each unit of pipe, which takes two hours to produce, contributes $50 to your gross profit when sold. Last month, your production line was down because of an unexpected equipment failure, which caused you to lose 20 of the 200 operating hours.

Because of the unplanned downtime, you produced 10 fewer pipes last month (20 hours / 2 hours/pipe), which could have earned you $500 ($50/unit x 10 units) in gross profit. These $500 are your gross loss.

Of course, this is an oversimplified example. Depending on your industry, the actual cost of downtime can be significantly higher. In fact, previous studies show that unplanned downtime costs industrial manufacturers an estimated $50 billion annually.

How to Reduce Unplanned Downtime

There’s no doubt that unplanned downtime lowers productivity and profitability for manufacturers. The sooner you can reduce it, the better. Here’s how you can reduce unplanned downtime:

• Measure downtime: Track downtime with metrics like unplanned downtime hours, mean time between failures (MTBF) and mean time to repair (MTTR). These will help you spot downtime-related problems that require further investigation.
• Automate equipment monitoring using a CMMS: A CMMS helps manufacturers monitor equipment health in real time using data from maintenance tasks and IoT sensors. This helps you predict potential problems and schedule maintenance before they lead to failure.
• Document maintenance and repairs: Don’t rely on your team’s memory. Use a manufacturing maintenance software to keep detailed logs of maintenance tasks, repairs and inspections. This ensures nothing slips through the cracks, especially during shift changes.
• Standardize maintenance procedures for individual equipment: Create standard operating procedures (SOPs) for each machine and system. That way, every technician knows exactly what needs to be done, how to do it and when. Optimizing your SOPs can go a long way if your MTTR is high.
• Implement a preventive maintenance strategy: Think of industrial preventive maintenance as insurance against breakdowns. Routine inspections, lubrication, part replacements and systems checks are small efforts that help avoid major problems later and minimize unplanned downtime.

Benefits of Tracking Unplanned Downtime

If you’re still not convinced that tracking and reducing unplanned downtime is worth it for manufacturers, here are a few benefits to consider: Tracking unplanned downtime helps:

• Provide a good overview of equipment wealth: Having consistent downtime data gives you a clear view of assets that are lowering productivity.
• Encourage a proactive maintenance culture: When your team sees the impact of unplanned downtime, it reinforces the value of staying ahead with preventive and predictive maintenance instead of just reacting as failure events occur.
• Improve overall operational efficiency: Fewer unexpected breakdowns translate to smoother workflows, less disruption and more consistent output across the board.
• Increase equipment lifespan and reliability: Identifying problem areas early helps perform timely maintenance, which prevents more serious damage and keeps machines running longer.
• Reduce unnecessary maintenance costs: Monitoring downtime helps target resources where they’re actually needed. This cuts out redundant tasks and minimizes costly emergency repairs.