First I must thank Don Fitchett from Industrial Business Network www.DowntimeCentral.com for introducing me to the concept of ‘True Downtime Costing’ (TDC) and its power in finding the hidden losses in manufacturing downtime incidents.  DAFT Costing takes the TDC concept to any situation involving defect, error or failure.

In the chemical industry we are not surprised by failing equipment.  Our machinery and plant work in extreme environments with aggressive chemicals.  You have to expect failures from equipment in those sorts of services and duties.  If you accept that as ‘a truth’ then I will hazard a guess that your business is struggling and not making much money.  I also bet that you have a lot of ‘fire-fighting’ going on all the time.  Maybe I’m wrong, I hope that in your case I am, but my experience is that it’s the way that you think that gets you in trouble.

With this article I want to see if I can change your thinking into the sort of thinking that will make you serious money in the chemical game.

Let’s have a failure … and see what it truly costs you to fix it.  For simplicity we will have a centrifugal pump failure.  They are a common pump in the chemical game and most people know them well.  In this pump the inboard shaft bearing has collapsed.  A common enough failure and one that most of use would not be greatly bothered by, we would just go and get it fixed.  This bearing is on a 3 inch (76 mm) shaft.  It is a tapered roller bearing straight-off the shelf.

Let’s start adding up the cost of this failure in the table below.  We will assume the wages employees are an average cost to the company of $40 per hour and the more senior people are an average of $60 per hour.  The product costs $0.50 a liter to make and sells for $0.75 per liter.  Throughput is 10,000 liters per hour.  Electricity costs $0.10 per kW.Hr.  All product than can be made can be sold.

Action No.	Description	Time minutes	Labour Cost	Materials Cost
1	First the pump stops and there is no product flow.
2	The process stops.
3	The control room sends an operator to look.	10	7
4	Operator looks over the pump and reports back.	10	7
5	Control room contacts Maintenance.	5	3
6	Maintenance sends out a craftsman.	15	10
7	Craftsman diagnoses problem and tells control room.	10	7
8	Control room decides what to do.	10	7
9	Control room raises a work order for repair.	5	3
10	Maintenance leader or Planner looks the job over and authorizes the work order.	30	20
11	Maintenance leader or Planner writes out parts needed on a stores request.	15	10
12	Storeman gathers spares parts together and puts them in pick-up area. (Bearings, gaskets,	20	13	350
13	Maintenance leader delegates two men for the repair.	5	3
14	Maintenance leader or Planner organizes a crane and crane driver to remove the pump.	5	3
15	Repair men pick up the parts from store and return to the workshop.	10	20
16	Repair men go to job site.	15	20
17	Pump is electrically isolated and danger tagged out.	15	40
18	Pump is physically isolated from the process and tagged.	30	40
19	Operators drain-out the process fluid safely and wash down the pump.	30	120
20	Repair men remove drive coupling, backing plate, unbolt bearing housing, prepare pump for removal of bearing housing.	90	20
21	Crane lifts bearing housing onto a truck.	15	7
22	Truck drives to the workshop.	5	7
13	Bearing housing moved to work bench.	5	27
24	Shaft seal is removed in good condition.	20	120
25	Bearing housing stripped.	90	160
26	New bearings installed and shaft fitted back into housing.	120	27
28	Mechanical seal put back on shaft.	20	13
29	Backing plate and bearing housing put back on truck.	10	7
30	Truck goes to back to job site.	5	27
31	Crane and crane driver lift housing back into place.	20	80
32	Repairmen reassemble pump and position the mechanical seal.	60	80
33	Laser align pump.	60	80
34	Isolation tags removed.	10	20
35	Electrical isolation removed.	15	20
36	Process liquid reintroduced into pump.	30	20
37	Pump operation tested by operators.	15	10
38	Pump put back on-line by Control Room.	5	3
	TOTAL	755	$970	$350

To do the whole job took 12.6 hours at an apparent repair cost of $1300.  The downtime was clearly a disaster but the repair cost was not too bad.  Another fire successfully put out!  But wait … we haven’t finished adding up all the costs yet!  There are still more costs to be accounted for.

Action No.	Description	Time minutes	Labour Cost	Other Cost/Loss
39	Control Room meets with Maintenance Leader.	10	20
40	Control Room meets with repairmen over isolation requirements.	10	20
41	Production Manager meets Maintenance Leader	5	10
42	Production Manager meets Maintenance Manager.	5	10
43	Production morning meeting discussion takes 5 minutes with 10 people management and supervisory present.	5	100
44	Production Planner meets with Maintenance Planner	5	10
45	General Manager meets with Production Manager	5	10
46	Courier used to ferry inboard bearing as only one bearing was in stock.		30
47	Storeman raises special order for bearing.	5	3	Included
48	Storeman raises special order for gaskets.	5	3	Included
49	Storeman raised special order for stainless shims used on pump alignment but has to buy minimum quantity.	5	3	250
50	Storeman raises order to replenish spare bearing and raises reorder minimum quantity to two bearings.	5	3	125
51	Storeman raises order to replenish isolation tags.	5	3	5
52	Crane driver worked over time.	300	200
53	Both repairmen worked overtime.	600	400
54	Extra charge to replace damaged/soiled clothing.			100
55	Lost 200 liters of product drained out of pump and piping.			100
56	Wash down water used 1000 liters.			10
57	Handling and treatment of waste product and water.	15	10	20
58	Pump start-up 75 kW motor electrical load usage.			5
59	13.7 hours of lost production at $2,500/hour profit.			32,000
60	Account clerk raises purchase orders, matches invoices; queries order details, files documents, does financial reports. Paper, inks, clips,	60	40	20
61	Storeman answer order queries.	20	13
62	Maintenance workshop 1000 watt lighting on for 10 hours.			150
63	Two operators standing about for 13 hours	750	1000
64	Write incident notes for weekly/monthly reports	30	30
65	Incident discussed at senior levels three more times.	15	30
66	Stocks of product run down during outage and production plan/schedule altered and new plan advised. Paper, inks,	30	30	10
67	Reschedule deliveries of other products to customers and inform transport/production people.	30	20	10
68	Ring around to customers to advise of delivery changes.	30	20	50
69	Electricity for lighting and air conditioning used in offices and rooms during meetings/calls.			50
	TOTAL OF EXTRA COSTS		$2,018	$32,905

You can see that the obvious cost of the failure was miniscule in comparison to the total cost impact of the failure across the company.  That is where your profits go when you have a failure; they get spent throughout the company handling the problems the failure has created.

The huge financial consequence of failure is why you must never let failures happen.  Stopping failures is also the way to get your costs down so you can compete with the best of your competitors from anywhere around the world!

Collating all the costs associated with a failure requires the development of a list of all possible cost categories, cost sub-categories and cost sub-sub-categories so that every charge, fee, penalty, payment and loss is identified.  The potential number of cost allocations is numerous.  An example of categories where costs can be incurred is shown in the list below.

·        Labour : both direct and indirect

§            operators

§            repairers

§            supervisory

§            management

·        Product waste

§            scrap

§            replacement production

§            clean-up

§            reprocessing

§            lost production

§            lost sales

§            off-site storage

·        Services

§            emergency hire

§            sub-contractors

§            travelling

§            consultants

§            utility repairs

§            temporary accommodation

·        Materials

§         replacement parts

§         fabricated parts

o           materials

o           welding consumables

o           workshop hire

§         shipping

§         disposal

§         design changes

§         inventory replenishment

§         quality control

·      Equipment

§         energy waste

§         start-up

§         shutdown

§         inefficiencies

§         emergency hire

§         damaged items

·      Additional capital

§         replacement equipment

§         new insurance spares

§         buildings and storage

·      Consequential

§        penalty payments

§        lost future sales

§        legal fees

§        loss of future contracts

§        environmental clean-up

§        death and injury

·      Accounting and Administration

§      reports and documents

§      purchase orders

§      meetings

§      planning, schedule changes

Each cost category and sub-category may receive several charges against them over the period of time being analysed.  All of these charges need to be captured in the analysis.

Best regards,

Mike Sondalini

www.lifetime-reliability.com