Unplanned downtime and product recalls can significantly drive up costs in the manufacturing industry; yet, because the causes of these adverse events are not easy to predict, they are difficult to prepare for. One solution to mitigate the consequences of unplanned downtime and product recalls is to streamline communications.
In 2005, Nielsen Research conducted a survey of 101 executives in the automotive industry on behalf of Advanced Technology Services Inc. (ATS). The objective of the survey was to determine how many businesses would benefit from outsourcing machine maintenance to ATS in order to reduce the number of machine breakdowns and increase productivity. One of the questions asked was how much unplanned downtime cost the manufacturers - and the response was a staggering $22,000 per minute.
Bearing in mind the survey is nearly fifteen years out of date, the actual cost of unplanned downtime per minute is now likely to be much higher. Furthermore, due to an increased reliance on software systems to keep production lines running, software glitches and cyberattacks against businesses in the manufacturing industry can cause just as many stoppages as machine failures - and these types of stoppages can often take longer to resolve because you can´t just replace a piston to stop a cyberattack.
It's not only machine breakdowns, software glitches, and the actions of malicious actors that can cause unplanned downtime. A survey in 2017 (registration required) found that 23 percent of all unplanned downtime in manufacturing is the result of human error; compared to an all-industry average of 17 percent and rates as low as 9 percent in some industries. With this range of adverse events responsible for unplanned downtime, it is difficult to comprehensively prepare for every possible eventuality.
Product Recalls Can be Even More Expensive
The cost of unplanned downtime in manufacturing can pale into insignificance when compared to product recall costs. In December 2017, the global corporate arm of the Allianz insurance company - AGCS - analyzed 367 product recall insurance claims between 2012 and mid-2017. Analysts found (PDF) that the average cost of a large product recall across all industries was $11.7 million once indirect costs are taken into account (i.e. litigation, regulatory fines, lost sales, loss of reputation, etc.).
Not only did AGCS' analysts find that the scale of product recalls is increasing, but also their frequency. The analysts attributed the increases in scale and frequency to five contributing factors:
- Consolidation in the supply chain means that, whenever a product is recalled from the chain, the “ripple effect” extends far wider than before.
- The enforcement of tougher consumer protection regulations - and whistleblower protection in the U.S. - has resulted in manufacturers coming under greater scrutiny.
- There are more product recalls attributable to undeclared allergens caused by labeling errors, toxins, and environmental contamination.
- Economic pressures has resulted in businesses not fully testing their products before going to market or sourcing cheaper components from unreliable sources.
- As social pressures increase against (for example) slave labor and child labor, some businesses have recalled products to protect their reputations.
Social pressures can have a considerable impact on the scale of a product recall - and its costs. The report's authors note that the scale and cost of a poorly-managed product recall can be exacerbated if social media learns of a potentially harmful product; and that the key to limiting reputational damage is “timely and honest communication” - not just with end users, but also with other businesses throughout the supply chain, the media, and regulatory agencies.
How to Mitigate the Consequences of Adverse Events in Manufacturing
Timely and honest communication is not only important during the product recall process, but also when unplanned downtime occurs. Employees and businesses further up the supply chain need to be told what is going on and how likely it is going to last. It might also be necessary to communicate quickly with suppliers to prevent the delivery of manufacturing components coming into the business - especially in the food industry where manufacturing components may only have a limited lifecycle.
The best way to achieve timely and honest communication is with a streamlined approach. Communication platforms such as a mass notification system can be integrated with digital signage systems to alert workers in a noisy environment about a machine breakdown or other event (i.e. severe weather) and how long it may take to resolve. The same platform can be used to alert businesses up and down the supply chain of unplanned downtime, and - in cases of emergency events - to alert emergency services.
During unplanned downtime, a geotargeted polling feature can be used to warn employees who have not yet started their shifts to delay coming to work, or - when the issue causing the downtime has been resolved - to connect with employees in order to see who is available for extra shifts. If the cause of the unplanned downtime is the business's ERM system, mass notification can also be used as a plant-wide communications platform in order to maintain production while the ERM system is fixed.
The ways in communication platforms with geo-poll features can accelerate product recalls and mitigate the consequences are discussed in this article, and it is also suggested businesses in every industry review our whitepaper “7 Essentials to Break through the Clutter” which includes a business-critical communications checklist that covers events such as unplanned downtime and product recalls.