Zero Downtime Does Not Equal Zero Waste

What is the true cost of failure?

This is a question we asked our Managing Consultant, Richard Fathers. In true form, he had a bit of a story to tell…

The definition of ‘breakdown’

I find it very interesting in industry that many businesses focus on ‘breakdowns’. What is the definition of a breakdown? Usually when the line has stopped and is not producing, I guess that’s it in most cases. There may be many reasons for a ‘breakdown’ but that is a whole different area for discussion!

I think what should be focussed on is ‘failure’. That is the failure of an asset or piece of equipment, to perform a function that it is required to perform.

The function of an asset

Assets are required to perform numerous different functions depending on the environment they are working or operating in. Consider a passenger lift at an airport, its main function is to transport a certain number of people from one floor to another. But is that enough? No, it must also do it:

smoothly
at a certain speed
safely

and if it’s a passenger lift, it has to be in good condition or pleasing on the eye to enhance their experience.

In manufacturing the same thing applies. A piece of equipment may be operating in production and it is running, it hasn’t broken down. It only stopped for 1 hour this week, that’s good isn’t it? Not if it has been running all week and producing sub standard product, it isn’t! In fact, you may have had to reprocess 50% of the produced items.

Zero waste?

I visited a business (which will remain unnamed!). Upon arrival I asked, ‘how much waste do you get each week from your process?’ I was told, by a very happy manager, that there is zero waste from the process. Wow I thought! So, I said, let’s go and have a look at the production line then and off we went.

About half the way along a very large fully automated production line, I noticed that the product was being diverted off the line. I asked, ‘what is happening here?’. I was told that the product was out of specification and was being recycled. The asset had failed to produce the required specification. With this process the out of specification product had to be chopped up by additional machinery, it had to be melted back to liquid form and it had to be held in liquid form before being reintroduced to the base product at the beginning of the process. The blade cost was high for the chopping machines, the energy cost to melt the product was extremely high, plus the cost to hold the liquid at the desired temperature. 20% of the product produced was out of specification. 20%! This was all fed back to the start of the line. There was an extremely high cost of asset failure, or should we say - waste.

The True Cost of Failure — The true cost of failure

Out of specification

On a different occasion I asked the same question, when visiting another business. I received the same answer, ‘We don’t have any waste’. Again, we took a walk into the production area. This time I noticed a complete production line set up to recycle out of specification product. The line ran two shifts everyday, continuously recycling out of specification product. If the business could reduce this, to only running one shift or less, what would be the benefit? Here are just a few to think about:

reduction in labour costs to run the recycling line
reduction in energy costs to run the recycling line
reduction in maintenance costs assigned to the recycling line
less depreciation of the assets on the recycling line
less packaging waste associated with the recycling requirement

So, what was the true cost of failure? The production equipment demonstrated a high availability and, as far as this business was concerned, it was reliable too.