unscheduled downtime

The True Cost of Unscheduled Downtime Due to Electrical Equipment Failure in Your Warehouse

Modern warehouses and distribution centers rely heavily on their electrical equipment. This machinery helps move products from the shelf to the shipping area. The more efficiently that movement happens, the lower your costs are, and the better your bottom line. But when that electrical equipment fails, that unscheduled downtime can translate into significant losses for your company. According to The Manufacturer, 46% of unplanned downtime is due to hardware failure and malfunction. That means the operational integrity of your electrical equipment plays a significant role in both the productivity and profitability of your warehouse.

The real costs of unscheduled downtime are both direct and indirect. Along with the expenses, there can be long-term repercussions for your business that can impact you for months or even years. That includes shaken customer trust and a surge of opportunities for your competitors, both of which take a considerable amount of effort to overcome. And it’s all caused by something as small as a stopped conveyor system.

So how much money is your business losing to unscheduled downtime? And how can you help prevent it from happening? Let’s break it down.

The Direct Costs

These costs are directly associated with faulty electrical equipment. You can usually tie these expenses to a specific episode of downtime, and they’ll have an immediate impact on your bottom line.

  • Repairing the machinery. The first and most obvious cost of an electrical equipment failure is the cost of getting the machinery back up and running. This expense will vary based on the equipment, the replacement parts needed, and the cost of an outside repair technician if required.
  • Loss of productivity. The longer those repairs take, the higher this particular expense is going to go. Depending on the machinery, work may not stop entirely, but it’s sure to slow down. That means fewer orders going out the door and less money coming in.
  • Canceled orders. Customers now expect their orders to arrive in two days or less. If your warehouse can’t deliver on those speedy expectations, then you can expect some customers to cancel their orders.
  • Operational costs. While downtime prevents money from coming in, it does nothing to stop money from going out. Your business will continue to pay for the overhead costs of simply existing. That includes heating, lighting, and labor charges. Those are unavoidable expenses, but they aren’t being offset by any income when your warehouse is at a near standstill.

The Indirect Costs

Indirect costs tend to be more long term in nature. They may not be directly tied to an incident of unscheduled downtime but can have an impact on your business’ future.

  • Loss of customer trust. When equipment isn’t working in a warehouse or distribution center, then customer orders aren’t fulfilled. While that can lead to direct costs like canceled orders, the indirect cost of eroding customer loyalty can be an even bigger expense. If customers aren’t getting their orders on time, they are much more likely to choose another supplier the next time. For B2C warehouses, it can lead to negative online reviews too, which could scare away potential customers in the future.
  • Boosts the competition. The more you drive away your customers with delayed shipments, the better it is for your competition. If their operation is sailing along without a hitch, then you’ll be at a big disadvantage in the market.
  • Risks to employee health and safety. Most electrical equipment has the benefit of taking the physical burden off of your workers. They don’t have to walk as far, lift as much, or put orders at the risk of human error. When the equipment is down, though, the human labor force has to pick up the slack. That can increase their on-site risk of injuries and accidents, and this leads to more expenses for your business through worker’s compensation claims.

The Bottom Line

The expenses are adding up when equipment is down. But what are the real monetary impacts on your bottom line when your warehouse is at a standstill? It’s going to be different for every business, based on operational expenses and productivity rates. But it’s going to happen. One survey found that organizations experienced an average of two periods of unscheduled downtime over the past three years. Aberdeen’s study on Asset Performance Management found that the average cost of unplanned downtime was anywhere from $10,000 to $250,000 per hour. Those costs are on the rise too, meaning decreasing downtime year over year is fundamental to the success of a business.

So how much time is your business losing to unscheduled downtime? Turns out, most companies don’t know. More than 70% of companies fail to track their as a metric. The International Society of Automation estimates that most manufacturing businesses lose about 5% of their productivity when production lines are slowed or halted, while others may be losing as much as 20%. If you are one of those warehouses failing to track these incidents, there is a good chance you are underestimating your losses. Tracking this downtime can lead to a clearer understanding of the problem, while also providing some cues to possible solutions.

Preventing Electrical Equipment Failure

There are two primary ways of avoiding electrical equipment failure on your warehouse floor: investing in quality equipment and giving it the right preventative maintenance.

A small price tag may lure some warehouse managers into buying discount electrical equipment for their distribution center. While the upfront costs may be appealing, the long term cost of low-quality equipment can be devastating. Investing in quality conveyor systems, solenoids, and pallet systems can be an expense that pays for itself. Not only will the equipment last longer, but the decrease in unscheduled downtime can lead to far greater productivity within the warehouse itself.

Secondly, and perhaps even more importantly, is the issue of preventative maintenance. Making sure you clean and maintain your equipment regularly will go a long way to ensuring it stays up and running. Make sure you keep a schedule of when significant equipment is due for maintenance and replacement, so nothing falls through the cracks. Analyzing downtime and maintenance schedules can help you build predictive maintenance plans too, that way you can anticipate potential breakdowns and work to prevent them before they happen.

While calculating the costs of unscheduled downtime can be difficult, it’s an undeniable necessity for your warehouse. That data can help you increase your bottom line in a big way. Knowing how severely your warehouse is impacted by faulty electrical equipment will be the first step in keeping those expenses down. Looking for better electrical equipment to power your warehouse? From motors to solenoids, talk to our team to learn more about how we’re helping distribution centers like yours keep their systems running.

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