Understanding Unplanned Downtime Costs in the Chemical Industry
In the manufacturing industry alone, over $50 billion is lost annually due to unplanned downtime.1 The chemical industry represents a major segment of manufacturing and contributes significantly to this downtime loss number.
As a relatively mature industry, many chemical companies utilize advanced operating processes and have adopted a computerized maintenance management system (CMMS) and other technologies that combat unplanned downtime when used properly. This being the case, why does unplanned downtime continue to cause such a heavy financial impact?
The answer is complex, but can be partly understood by examining the comprehensive effects of downtime in the chemical industry, which are:
- Lost or Slowed Production
- Transition and Off-Quality Losses
- Maintenance Repair Costs
- Customer Satisfaction Issues
By looking at each of these in more detail, it becomes easier to understand the major interruption that an unplanned downtime event causes in a chemical plant.
Lost or Slowed Production
When a major piece of equipment breaks in a chemical plant, at best it slows production and at worst it can cause a partial or even a complete shutdown. Depending on the type of process, a shutdown may be isolated to a particular unit or production line.
If the plant is continuous, however, and a common area such as distillation or utilities goes down, the entire plant may go offline. For batch processes, there may be an alternative reactor, or other ways to reduce the impact, but it still presents less than ideal production conditions since it goes against plan.
For plants that are operating at capacity, the slightest wobble in production can put them behind schedule, with few alternatives for making up the ground.
Transition and Off-Quality Production
In many chemical plants, stopping and then restarting processes can mean a certain amount of off-quality production.
Take a High-Density Polyethylene (HDPE) plant as an example. When the plant is restarted, it can take anywhere from hours to days to produce quality product that meets all requirements to be considered right-first-time material. This transitional product in some cases is scrap. In other situations, it can be sold as off-quality, but at less than premium product.
The delta between what premium and off-spec product sell for is part of the financial loss directly resulting from unplanned downtime.
Maintenance Repair Costs
Negating production losses, the maintenance and repair costs themselves are also a major contributor to the high financial impact of downtime. Labor, parts, tool rental, etc., are all elements of maintenance repair costs. When an equipment outage is planned, these costs exist, but can be managed. When unplanned downtime events occur, there can be extra costs.
For example, if a pump impeller breaks and there is not a spare in inventory, it will likely be necessary to expedite the part. This rushed delivery can be costly. The larger and more custom a piece of equipment, the higher these costs can be.
Labor costs also tend to rise in unplanned situations. The repair may require paying overtime or involve securing contract labor with little notice, which once again can increase costs. Another labor consideration is that maintenance resources are often diverted from other maintenance tasks that are important as well. Depending on the situation, these delays in other work can create operational issues.
The final area where unplanned downtime can have a high-impact is customer satisfaction. While some of the other cost areas listed above are more obvious, this one is just as important.
The global chemical industry is competitive, and customers have high expectations for on-time, quality delivery of products. Most chemical company customers have commitments to their own clients that require them to meet schedule and delivery expectations. When a chemical company fails to deliver on schedule, this can prompt dissatisfied customers to go to competitors. The long-term financial impact of losing a customer can be huge.
Not every unplanned downtime event will lead to missed production schedules or the loss of customers, but the risk is always there, and it is a costly proposition when it does occur.
Limit the Unexpected
The battle to reduce unplanned downtime is one which chemical companies cannot afford to lose. Measuring and reporting maintenance performance creates awareness and is a critical first step. Strong preventive maintenance programs are another key strategy that leading chemical companies use to decrease equipment downtime.
Technologies like a CMMS are foundational to driving these programs and moving chemical companies from reactive to proactive maintenance, lowering the costs associated with these unplanned downtime events.
1. Aberdeen Group, Asset Performance Management: Blazing a Better Path to Operational Excellence, November 2017.