A conveyor system is crucial in various industrial and manufacturing processes, and downtime can significantly impact a business's overall productivity and profitability. That's why companies need to understand the costs associated with it.
The direct costs of downtime include lost production, missed deadlines and delayed deliveries. Let's take a closer look at them.
Lost production is a direct cost that occurs when a conveyor system goes down and the production process is interrupted. This disruption can delay the completion of orders and reduce output, leading to lost revenue and reduced profitability. Here's an example of lost production:
Suppose a manufacturing company produces 1,000 units of a product per day using a conveyor system. The cost of producing each unit is £10, and the company sells each unit for £20. If the conveyor system shuts down for 2 hours, the company will lose production of 83 units (1,000 units per day divided by 24 hours multiplied by 2 hours of downtime).
This loss of production would result in a direct cost of £830 (£10 price per unit multiplied by 83 units).
It's also imperative to consider that, during downtime, raw materials can be lost, and products unable to reach the end of the production line might have to be discarded.
Expedited shipping charges and potential penalties for missed deadlines are some of the direct costs that a company may incur due to a conveyor breakdown. These costs can arise when an organisation cannot fulfil orders on time due to a delay in production caused by a conveyor system failure.
When a company cannot meet the agreed-upon delivery date, it may need to expedite shipping to meet the deadline, which can be more expensive than regular shipping. The cost of express shipping can vary based on the distance, weight and urgency of the shipment. In some cases, the cost of expedited shipping can be significantly higher than the regular shipping cost, resulting in additional expenses for the company.
The business may also face penalties for missed deadlines. These fines can vary based on the agreement terms between the company and the customer. For example, the customer may require compensation for the delay, or the supplier may pay a penalty fee each day the shipment is late.
Additionally, if the delay damaged the customer - who may have had to interrupt his production line, for instance - the supplier may be required to pay for these losses. This is the case, for example, of a pharmaceutical company that did not receive the necessary inputs to produce a particular medicine. The damage can be incalculable and even cause an endless and costly court battle.
When a conveyor system goes down, employees may need to work overtime to catch up on lost production and complete orders on time. This extra work can result in an increase in labour costs for the company.
Overtime pay is typically calculated as time and a half or double-time, depending on the company's policy and the employee's contract. The cost of overtime pay can vary depending on the number of employees required to work overtime, the duration of overtime hours, and the overtime pay rate.
For example, if a company has ten employees who need to work an additional four hours of overtime due to a conveyor breakdown, and the regular hourly wage is £20, the cost of overtime pay would be £1,200 (£20 hourly wage x 1.5 overtime rate x 10 employees x 4 hours). If the company experiences frequent conveyor breakdowns, the cost of overtime pay can add up quickly and significantly impact the company's profitability.
In general, the cost of emergency maintenance is considerably higher than conveyor preventive maintenance due to the urgency and unpredictability of the repairs.
In addition to direct costs, there are also indirect costs associated with conveyor system downtime. The most obvious one is inactivity.
This lack of work can result in the following:
Moreover, downtime can also impact the quality of the products being produced. If a conveyor system failure results in damage to products or materials, there may be more costs associated with scrap, rework or replacement.
Downtime is the primary cause of lost production for most manufacturers. However, over 80% of companies are unable to calculate their actual downtime costs correctly. According to Aberdeen Research, 82% of companies have experienced unplanned downtime in the US over the past three years, which can cost a company as much as $260,000 an hour! On average, these outages lasted four hours and cost $2 million. Furthermore, over 70% of respondents aren't fully aware of when their equipment is due for maintenance, upgrade or replacement.
Regular maintenance is critical to keeping your conveyor systems operating efficiently and preventing unexpected faults that can harm your bottom line. However, if a malfunction does occur, Joloda Conveyor Services offers a comprehensive breakdown service to quickly diagnose and repair any issues with your conveyor system. Our experienced technicians can help you minimise downtime and limit the economic fallout of lost production, ensuring that your operations get back up and running promptly. Contact our team to schedule a free on-site assessment.
We are a unique service provider, focused 100% on repairs, maintenance and refurbishment of conveyor systems. Our team of conveyor carers are experts because they are not distracted by lots of additional bolt-on services; when your equipment needs attention, we’ll carry out conveyor troubleshooting and fix the problem to get you back operational as quickly as possible.
Learn more About Us and how we can help to keep your, and the nation's conveyors rolling, by preventing and fixing common conveyor belt problems.
