This category is a one time entry of a constant, updated annually, exported from your existing computer systems. Your existing method of calculation need only meet the TDC recommendations below.
It is quite common for daily management decisions related to equipment downtime to be made based primarily on labor cost. Of course, production demand is also right up there on the priority list. When deciding a course of action related to downtime, the number of idle workers and man-hours to repair is thought to be the total labor cost.
With the True Downtime Cost (TDC) methodology, we pre-determine the TDC cost using all the metrics, not just labor and lost production. Even looking at just labor through a TDC perspective can be very enlightening. We will learn that the indirect affected labor cost is always greater than the more apparent direct labor cost.
The key to realizing greater savings by more informed management decisions is to predetermine the "True" labor cost for each profit center category. (As should be done for all TDC metrics) For example all should be aware of the hourly cost per machine, cell, department, area, facility, etc.
Sometimes in more apparent bottleneck cases like air compressors, or corrugators, directly affected idle workers will be realized from six to an entire facility.
As mentioned above, with bottlenecks, all downstream employees should be considered in downtime labor cost. (you may consider them direct or indirect, and may be only a percentage of their hourly cost for reduced production scenarios) There should be four primary categories for indirectly affected people by downtime.
Some may state, "that is covered in our overhead calculations" or "that is covered in our labor per product calculation". That is great as long as those previous methods includes the indirect labor listed below. You will then realize the cost savings, where as those general "Overhead" numbers may not point out a particular cost reduction area.
While each individual's involvement may only be minutes, they all add up. Also keeping in line with obtaining the "True" cost, the hourly wage should be calculated from an accounting stand point. That is, how much the employee costs the company per hour, not how much they are paid.
(A maintenance manager who does a lot of the leg work that could have delegated to his subordinates, may spend 30 minutes supporting the repair of a machine. TDC would show this, and amplify the cost savings to resolve. His base pay may calculate out to $20 per hour. But with insurance, retirement plans, and other benefits, he may actually cost the company $30 per hour.
That 30 minutes of one manager can easily equal the cost of one machine operator. As you move up the management chain, and add all indirect labor, the true labor cost could have been over $100 instead of $15 for one employee.
Regional Survey to Determine the Significance of Human Error in