Big Data

What Is The Cost of Quality in Manufacturing?

By | Blog

At the end of the day, nothing matters more than customer satisfaction. Fundamentally, this sounds quite simple; make the customer happy, and all is well. Keeping customers happy and loyal to your brand, however, is not as easy as it sounds. There are many factors that influence a customer’s experience. Things like proper packaging, attentive customer service, and product quality are important when trying to keep customer satisfaction high. The production of high-quality products is arguably the most important part of this process, but it isn’t cheap. On the other hand, the costs incurred from having a low-quality product can be much more expensive.

The Cost of an Underperforming Product

Keeping product quality high can be an expensive expenditure to deal with. Replacing or repairing a broken machine is costly, and few people would say that it’s not necessary. Ultimately, as a manufacturer, if your products are sub-par, you are guaranteed to lose customers. That is far more expensive. When it comes to losing the lifetime value of a customer because they’re unhappy, there is no question about it; avoid it at all costs.

Repair and replacement costs are pretty much unavoidable, and that is why it is important to focus on effective ways to go about incurring these costs. Every year, manufacturers waste money replacing and repairing machines before squeezing out every ounce of value from the machine. This underutilization of resources isn’t a financial problem as much as it is an information problem. The Internet of Things (IoT) and data analytics technology allow manufacturers to optimize the usage of their machines and save money in the long-run.

Wasted Time Detecting Bottlenecks

The most valuable commodity, by far, is time. The amount of time that plant managers spend on either searching for bottlenecks or suffering from having them at all is staggering. Without IoT devices to gather ongoing and accurate data on machines, technicians are forced to make more assumptions with less data. This increases the chance of unnecessary repairs and ultimately wastes time. It’s important for plant managers to identify the source of a given productivity problem once they know it exists.

Rather than spending days or even weeks spot checking their individual machines to find the productivity constraint, a manager’s time would be much better spent actually dealing with the problem. Having access to data via IoT devices empowers plant managers to get a better look at what’s really going on in their factories and to solve problems that are facing their organization faster.

 

The Opportunity Cost of the Compound Benefit

Costs that are often overlooked are opportunity costs. Having access to big data and data gathering devices helps with these costs and because of this is an appreciable commodity. It is a long-term investment that will definitely appreciate in value. Just like most successful investments, investing early on gives you the benefit of compound interest. Manufacturers can benefit immensely by focusing primarily on data gathering mechanisms.

In the increasingly complex world, data is just another tool in a business leader’s toolbox that can be used to facilitate sufficient and accurate decisions. Information gathered today will allow manufacturers to make decisions tomorrow. While other manufacturers struggle to digitize and build a smart factory, early adopters will begin benefitting from the compound interest. Becoming an early adopter of IoT technology doesn’t have to be difficult or obscenely expensive either. If done with the right service, being an early adopter could be a phone call and consultation away.

 

The Cost of Wasted Material

Material waste from poorly maintained machine is another heavily overlooked cost for manufacturers. Each year, manufacturers who fail to keep strict track of whether or not their production lines are on spec lose enormous amounts of money. This can be likened to printing 100,000 copies of a flyer with an obscene typo on it; it’s embarrassing, wasteful, and expensive. Miniscule quality issues like this can easily be avoided through better tracking practices or by implementing data analytics technology.

Overall, it’s quite clear that spending money on quality isn’t only productive, but it’s also absolutely necessary. However, that doesn’t only mean manufacturers should repair and replace their machines when needed; there is a technology component to this. Investing in technology that will put manufacturers ahead of their competitors in the long-run is a must. Don’t get left behind in the dust of your industry’s early adopters and digitize soon!

The Cost Of Downtime In Manufacturing

By | Blog

A crucial part in any area of business to realizing greater savings is determining the cost of downtime before an issue arises. Formally called the true downtime cost, or TDC, this measurement takes into account a variety of business support and lost opportunity costs when a downtime issue occurs. Things like a computer crashing, a machine not working, or a software program needing critical updates will disturb the natural flow of a business and lead to these costs.

Downtime consultants estimate that almost every factory loses at least 5% of its productivity due to downtime, and many lose as much as 20%. To determine the cost of downtime, a business must analyze every cost factor associated with the possible downtime issues. This data is usually available in most companies and can be organized according to the TDC guidelines to find meaning.

Downtime in the Manufacturing Industry

The cost of downtime in manufacturing can be pretty significant. There are many areas within the manufacturing process that become affected when a system malfunctions or does not operate at its normal efficiency. Downtime influences factors like equipment availability, labor overhead, maintenance, engineering, and production.

The cost of downtime in manufacturing is determined by looking two major classes of costs: 1) Tangible Costs and 2) Intangible Costs.

Tangible Costs

The tangible costs of downtime in manufacturing include:

  1. Lost Production – Every product that a manufacturer produces represents some amount of potential profit. Whether it’s pennies or dollars, these values add up over time-based on how fast each unit is produced. For example, let’s say a company can produce 100 units per minute, and each of these units represents a potential of $1 of profit. For this company, the cost of downtime in manufacturing based on lost production would be $100 per minute, $6000 per hour, etc. 
  2. Lost Capacity – When all systems are fully operational, a manufacturing plant that is running at suboptimal capacity. It is important for a factory to plan for when there is a sudden increase in demand. When this occurs, the factory will need to operate at a higher capacity to fulfill the added business. Reducing downtime is important because it creates additional capacity for free and makes situations like these a non-issue.
  3. Direct Labor – When you reduce downtime in manufacturing, your production levels go up while your labor stays the same. This will decrease the labor cost per unit. Also, when there are less issues, employees can focus on their main task and increase their efficiency.
  4. Inventory – The cost of holding inventory is typically around 10%-30% of the inventories value, per year. This means that if you have 1 million dollars of inventory, it would cost $100,000 to hold it for a year. One cause of downtime is changeover between products. Reduced changeover downtime will allow smaller lot sizes and lower inventory levels, which will lead to a lower cost of holding.

 

Intangible Costs

The intangible cost of downtime in manufacturing is less obvious, but can include things like:

  1. Responsiveness – When downtime occurs, employees must focus on addressing these issues as their top priority. Since the cost of downtime in manufacturing is so significant, it becomes more important to solve these problems than focusing on customer service issues. For example, the TDC in the automotive industry is around $22,000 per minute!
  2. Stress – Downtime can cause a lot of stress in both employees and the machines that they are operating. When a system isn’t working, it can get overwhelming for an employee to accomplish their daily tasks. On the other hand, if a machine needs to produce at their maximum capacity for long periods of time, it becomes more likely that they will malfunction. People and machines perform better under less stress.
  3. Innovation – Downtime can be a very time-consuming issue for a business. This takes away time from other things like innovation and creative brainstorming opportunities. It is much more important to make sure a current system is working before imagining how to improve that system’s capabilities for the future.

The True Cost

Calculating the cost of downtime in manufacturing is not easy. To accurately calculate this, you need to take in several factors. Luckily, there are some calculators available online that can help you get started.

Downtime is a very prevalent thing in the manufacturing industry. On average, manufacturers deal with up to 800 hours of downtime annually. The cost of downtime in manufacturing can be very significant and cost a company millions of dollars. This is why it is critical to understand the cost of downtime, and find the right data acquisition system that enables you to monitor and mitigate downtime in production.

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