Business Industrial Network

1. Business Industrial Network www.DowntimeCentral.com True Downtime Cost

2. Cost Factors (Definition:) • 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. TDC – True Downtime Cost www.DowntimeCentral.com

3. 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. www.DowntimeCentral.com

4. How we view cost (RAV) • Return Asset Value • There are five phases in the life of a piece of equipment: design, construction, start-up, 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. www.DowntimeCentral.com

5. = EVA . _ . TPE = Operations & Maintenance, O & M Value Cost Administrative Operations Producer Value Model X Net Assets Interest rate Income from Finished Goods Cost of Raw Materials Conversion Costs After Tax Operating Profit Taxes Cost of Capital = Price of Finished Goods OEE Production Yield Quality (actual) Production Rate (actual) Availability (actual) Conversion Cost (objective) Quality (objective) Production Rate (objective) Availability (objective) Conversion Cost (actual) Market Conditions Safety,Environmental Utilities; electric, water Waste Disposal Maintenance PM, PdM, parts, labor efficiency

6. 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) www.DowntimeCentral.com

7. The operative word is… OverallEquipment 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. TrueDowntime Cost TDC brings focus on where ever an issue may be, with equipment, manpower, procedures, departmental, etc. www.DowntimeCentral.com

8. 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. www.DowntimeCentral.com

9. A Quick Look at TDC metrics Overhead www.DowntimeCentral.com

10. 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. www.DowntimeCentral.com

11. 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. www.DowntimeCentral.com

12. 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. www.DowntimeCentral.com

13. 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) www.DowntimeCentral.com

14. 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. www.DowntimeCentral.com

15. 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. www.DowntimeCentral.com

16. 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” www.DowntimeCentral.com

17. 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. www.DowntimeCentral.com

18. 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. www.DowntimeCentral.com

19. 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. www.DowntimeCentral.com

20. 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?” www.DowntimeCentral.com

21. 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 1,000units 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.” www.DowntimeCentral.com

22. 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. www.DowntimeCentral.com

23. 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. www.DowntimeCentral.com

24. Business Industrial Network TDC represents the final bottlenecks to a fully integrated and auditable approach to maintenance strategy development / justification. TDC • Click the link to learn more about • TDC Data Source • TDC Overview www.BIN95.com www.DowntimeCentral.com