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World’s largest manufacturers lose $1.5 trillion a year to production outages

manufacturers

The cost of downtime to large manufacturers and industrial organizations has rocketed since 2020, according to a new report from Senseye, the AI-powered machine health management company.

Senseye’s True Cost Of Downtime 2022 Report reveals that unplanned downtime costs manufacturers at least 50 per cent more today than it did in the period 2019-20, due to spiralling inflation and production lines running at higher capacity. The cost of a lost hour now ranges from $39,000 for FMCG facilities to over $2 million in the automotive sector.

The cost of downtime has soared despite a 23 per cent reduction in production line failures. Major manufacturers now experience 20 monthly unplanned downtime incidents per facility, six fewer than two years ago. But with each failure taking longer to recover from, they have only gained two additional hours of production capacity each month.

Senseye estimates unplanned downtime will cost Fortune Global 500 industrial companies almost $1.5 trillion this year, 11 per cent of their annual revenues. Previous Senseye research from 2019 and 2020 put the cost to these companies at $864 billion a year, around eight per cent of turnover.

Robert Russell, cto at Senseye, said: “It’s clear from our findings that downtime is getting more costly – much more costly. In every sector surveyed, an hour’s downtime costs significantly more than it did two years ago. This is a drag on profits that businesses can no longer afford to ignore. However, digitization and predictive maintenance efforts are starting to have a significant impact, and most manufacturers have successfully reduced the number of incidents affecting production.”

The cost of downtime continues to be greatest in automotive, where major manufacturers now lose $646 million per facility each year – 40 per cent more than before 2021. Losses could have been worse. Big automotive manufacturers have limited them by reducing the amount of lost production time by 45 per cent in the last two years, more than any other sector. Adoption of predictive maintenance (PdM) has accelerated in automotive: the proportion of manufacturers with PdM teams increased from 11 per cent to 38 per cent in the last two years.

The cost of downtime to major FMCG manufacturers has increased by 36 per cent to just under $10 million per facility a year – less than any other sector. While the volume of production failures remained static at 27 outages per facility per month, large FMCG producers have reduced total downtime by 16 per cent over the last two years. More than half (60 per cent) of FMCG manufacturers see PdM as a strategic priority now, and seven in ten already conduct some form of condition-based maintenance.

Heavy industries have been hit hardest by the rising cost of downtime, with average annualized losses increasing by 145 per cent to $128 million per facility over the last two years. This was the only sector to see outage times increase over the period studied, rising by nine per cent to 25 unplanned downtime hours per facility each month. The number of mining, metals and other heavy-industrial companies doing condition-based maintenance almost doubled in the last two years (to 89 per cent), and the proportion with PdM teams increased from 13 per cent to 35 per cent as firms moved to limit their losses.

Rising prices contributed to a 76 per cent increase in downtime costs to large oil and gas firms in the last two years, with facilities averaging $149 million a year in outage-related losses. Digitization and PdM have helped limit losses, however, with oil and gas companies reducing the number of failures and the total amount of downtime by 25 per cent and 16 per cent respectively. The number of oil and gas companies with dedicated PdM teams increased from 29 per cent to 38 per cent over the last two years

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