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Thursday, July 29, 2010

2010

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Downtime Cost Calculator

This calculator can help you estimate the direct labor cost of machine downtime and the cost of tracking downtime using conventional methods, such as, paper reports or spreadsheets. Keep in mind that the labor cost is not the only component of downtime costs. At the bottom of this page, we present some of the other costs associated with machine downtime.

Modify the information in each of the following two tables and click on the 'Re-Calculate' button below.

Direct Labor Cost
	Number of employees at each machine
	Number of machines
	Minutes of downtime per machine in each shift
	Number of shifts per day
	Number of working days per year
	Average Labor Rate per hour (US$)
$6,760.00	Direct cost of downtime (US$ per year)

Downtime Tracking Cost (Conventional Methods)
	Number of employees tracking downtime and creating reports/shift
	Minutes per shift needed to create downtime reports
	Number of shifts worked per day
	Number of working days per year
	Average Labor Rate for indirect employee tracking downtime (in US$ per hour)
$6,500.00	Cost of downtime tracking (US$ per year)

Total Costs
$13,260.00	Total Direct Labor Cost and Tracking Cost of downtime (US$ per year)
What is the price of using DOWNTIMEdb.com?

Potential Direct Labor Savings Per Year
If you can reduce your downtime by	You can save (US$)
10%	$1,326.00
20%	$2,652.00
30%	$3,978.00
50%	$6,630.00

Other costs of downtime:

The cost of overtime: the previous model only considers the time lost during normal (straight) time, there might be additional costs if the downtime needs to be replaced with overtime.
The cost of additional inventories: machine downtime also brings higher inventories due to the difficulty of predicting machine availability. The inventories can be work-in-process and/or finished products. Inventory costs can be calculated by considering the opportunity cost of the capital used and calculating the loss from obsolescence and spoilage/breakage.
The cost of maintenance labor costs: additional maintenance personnel are sometimes used to fix the machines that are down and minimize downtime.
The loss of revenue: in situations where supply exceeds demand for the products and there is no excess capacity, machine downtime can produce a loss of sales. This can be observed when a customer’s order cannot be fulfilled because of the requested delivery date. The additional cost of downtime would be the lost revenue minus the reduced variable costs (energy, materials, etc.)
The additional costs needed to fix the machine: one example is air freight for spare parts needed to repair the machine.

Version: 2010