This is a list of the potential categories of costs you could face before, during and after an unexpected system failure. These cost are not apparent because they are dispersed throughout your organization and spread out over day, weeks or even months.
This is why these costs are not well understood. The massive surge of costs and accumulation of losses that occur throughout a business when equipment fails is tremendous. The list has more than 60 business-wide defect and failure costs that can arise by forced because of unexpected stoppage.
Since most of these costs are hidden from view by the cost accounting practices in use today, they are overlooked. Normal financial accounting practices do not recognize these costs for what they are; unnecessary waste and loss. Because many of the costs of failure are unseen, little is done to stop them, yet they continually rob you of vast profits.
It’s unbelievable how much money is wasted all over the business with each failure. The most unusual one is the time lost matching invoices against purchase unneeded work orders caused by the failure. Now your accounting team is working on the failure!
While some of these cost items are industry specific, most apply to every business. What is most interesting but not surprising, is that in many cases the subsequent and indirect costs are higher than the fix.
- Labor: Direct & Indirect
- Operators
- Repairers
- Supervisory
- Management
- Engineering
- Overtime/penalty rates
- Product Waste
- Scrap
- Replacement production
- Clean-up
- Reprocessing
- Handover/hand-back
- Lost production
- Lost spot sales
- Off-site storage
- Environmental rectification
- Services
- Emergency hires
- Sub-contractors
- Traveling
- Consultants
- Utility repairs
- Temporary connection
- Materials
- Replacement parts
- Fabricated parts
- Materials
- Welding consumables
- Workshop hire
- Shipping
- Storage
- Space
- Handling
- Disposal
- Design changes
- Inventory replenishment
- Quality control
- Equipment
- OEM work
- Energy waste
- Shutdown
- Handover
- Start-up
- Inefficiencies
- Emergency hire
- Damaged items
- Capital
- Replacement equipment
- New spare parts
- Buildings and storage
- Asset write-off
- Consequential
- Penalty payments
- Lost future sales
- Litigation and legal fees
- Loss of future contracts
- Environmental clean-up
- Death and injury
- Safety rectification
- Product recalls
- Administration
- Documents and reports
- Purchase orders
- Meetings
- Rooms and building
- Facility services
- Stationary
- Planning and schedule changes
- Investigations and audits
- Invoicing and matching
- Lost Value
- Equipment
- Materials
- Labor
- Resources
- Services