Asset utilization measures how effectively a company uses its assets to generate revenue. Simple, right? In an industrial context, assets include machinery, equipment, tools, and even human resources — and how well the company uses them.
The interpretation behind this metric is plain-and-simple:
A high number indicates that these assets are being used efficiently to produce maximum output, while low asset utilization suggests underuse or inefficiencies.
In a factory plant, the assets can be:
- Machinery: Production lines, CNC machines, conveyors, pumps.
- Equipment: Forklifts, welding tools, compressors.
- Tools: Hand tools, diagnostic devices, software systems.
- Human Resources: Skilled labor, technicians, engineers.
Let’s imagine two factories, Factory A and Factory B, both manufacturing the same product. Here’s how they compare:
Scenario Breakdown
Factory A (High Utilization)
- Machinery: By operating at 85% capacity and maintaining regular service schedules, Factory A minimizes downtime and maximizes output.
- Equipment: With effective scheduling, equipment use is optimized, ensuring that no resource sits idle unnecessarily.
- Tools: Well-managed tools and quick access enhance productivity, allowing technicians to work without delay.
- Human Resources: Efficient allocation and ongoing training ensure that human resources contribute optimally to production.
Factory B (Low Utilization)
- Machinery: Operating at just 45% capacity due to frequent breakdowns, Factory B suffers from significant downtime, reducing overall output.
- Equipment: Poor scheduling leads to equipment sitting idle, resulting in wasted potential and increased operational costs.
- Tools: Mismanagement of tools causes delays and inefficiencies, hampering productivity.
- Human Resources: Without proper training and allocation, workers face bottlenecks and make errors, further reducing efficiency.
The Big Deal About Asset Utilization
The difference in asset utilization we’ve shown in our example highlights the critical role it plays in industrial operations.
High asset utilization leads to:
More efficient use of assets that translates to higher output.
Reduced downtime and efficient resource use that lowers operational costs.
Streamlined processes and well-maintained equipment that enhance overall workflow.
The Formula: How To Calculate Asset Utilization?
Now, what if you walk into your plant and see that a key piece of machinery is running at 65% utilization. Is this good enough?
Let’s break it down to understand what this figure really means.
The Formula
The most ‘basic” formula for calculating asset utilization is:
AU = (Actual Output / Potential Output) x 100
Where:
- Actual Output: The actual production achieved in a given period.
- Potential Output: The maximum possible production if the asset were used at full capacity without any downtime or inefficiencies.
Breaking Down the Case Example
Let’s take our hypothetical example of 65% asset utilization and reverse engineer it to understand the details.
- Potential Output: Suppose your machine can produce 1,000 units per day under perfect conditions, running 24/7 with no interruptions.
- Actual Output: On a typical day, the machine produces 650 units.
Plugging these values into the formula gives us:
AU = (650 / 1000) x 100
So… It’s clear that while the machine is operational, it’s not reaching its full potential. This gap signifies areas for improvement.
Deep Dive into Asset Utilization
But, in the real world, you’re never going to run into a situation where you need to calculate AU for a machine that runs 24/7 without any breaks.
So, you need to take a bunch of other factors into account.
Here are some of the most important ones:
Annual Planned Downtime
Determine hours equipment is scheduled to be unavailable (e.g., maintenance, holidays).
- Example: Your CMMS indicates 500 hours annually.
Lost Operations Time
Account for additional lost time like changeovers and inefficiencies.
- Example: Changeovers add another 300 hours.
Lost Production Hours:
Calculate hours lost due to factors like low sales or supply chain issues.
- Example: Adds up to 200 hours.
Unscheduled Downtime:
Add time lost to unexpected failures or accidents.
- Example: MMS shows 400 hours of unscheduled downtime.
Quality Losses:
Convert defective product production time into lost hours.
- Example: Yield loss equates to 150 hours.
Production Rate Losses:
Compare actual output with the theoretical maximum.
- Example: Slower run rates result in 300 hours of lost production.
Summing It All Up
Add all the lost, wasted, or otherwise unused hours:
500 (planned downtime) + 300 (lost operations) + 200 (production hours lost) + 400 (unscheduled downtime) + 150 (quality losses) + 300 (rate losses) = 1,850 hours
Subtract this from the total available hours in a year:
8,760 (total hours) – 1,850 (lost hours) = 6,910 hours
Finally, calculate the utilization percentage:
AU = (6,910 / 8,760) x 100 ≈ 78.9%
The Main KPIs To Correctly Measure Asset Utilization
Asset utilization is a vital metric, however, relying solely on it can be like shooting in the dark.
Efficient management pairs asset utilization with key performance indicators (KPIs) to gain a comprehensive understanding of operational efficiency.
The most important ones to track include Overall Equipment Effectiveness (OEE), unplanned downtime, product yield, and maintenance spend.
1. OEE (Overall Equipment Effectiveness)
OEE measures how effectively a manufacturing operation is utilized compared to its full potential. It breaks down into three components:
- Availability: The percentage of scheduled time that the equipment is available for production.
- Performance: The speed at which the equipment operates as a percentage of its designed speed.
- Quality: The proportion of good units produced versus total units started.
To calculate OEE, use the formula:
OEE = Availability x Performance x Quality
For example, if a machine runs 90% of the scheduled time (Availability), operates at 80% of its optimal speed (Performance), and produces 95% good quality products (Quality), the OEE would be:
OEE = 0.90 x 0.80 x 0.95 = 0.684 or 68.4%
So, the machine operates at 68.4% of its full potential, highlighting areas such as speed and quality where improvements can be made.
2. Unplanned Downtime
Unplanned downtime refers to any period when equipment is scheduled to operate but is halted due to unexpected failures or issues.
It can significantly impact productivity and efficiency, making it a critical KPI to monitor alongside asset utilization.
But how to reduce it?
- Predictive Maintenance: Utilizing technologies like TRACTIAN’s Smart Trac sensors to monitor equipment health in real-time and predict failures before they occur. This proactive approach can significantly reduce unplanned downtime.
- Regular Inspections: Implementing routine checks to identify and address potential issues early, ensuring equipment remains operational and minimizing unexpected stoppages.
- Effective Training: Ensuring that staff are well-trained in operating and maintaining equipment can prevent operational errors that lead to downtime.
Discover how TRACTIAN’s Smart Trac sensors can revolutionize your maintenance strategy. Learn more now!
3. Product Yield
Product yield is defined as the amount of product that meets quality standards divided by the total amount produced.
It’s a crucial KPI because it directly affects asset utilization. High product yield indicates efficient use of resources, while low yield suggests inefficiencies and waste.
Methods to Improve Product Yield
Start by streamlining production processes to minimize waste and enhance efficiency. This can include refining workflows, upgrading equipment, and adopting best practices.
Also, work on implementing rigorous quality checks at various stages of production to ensure defects are identified and addressed early.
This reduces the number of substandard products reaching the final stages.
4. Maintenance Spend
Maintenance spend refers to the total cost of maintaining assets, encompassing labor, materials, and downtime costs.
It plays a significant role in overall asset utilization, as excessive maintenance costs can indicate inefficiencies and misallocation of resources.
Influence on Asset Utilization
High maintenance spend can negatively impact asset utilization by diverting funds away from other critical areas and indicating frequent or severe equipment issues.
Conversely, well-managed maintenance spend reflects efficient asset management and contributes to higher utilization rates.
Ways to Optimize Maintenance Spend
- Implementing a cost-effective preventive maintenance program helps reduce unexpected breakdowns and prolongs asset life, thereby lowering overall maintenance costs.
- Ensuring maintenance staff are well-trained to perform routine checks and minor repairs can reduce reliance on expensive external services.
How To Optimize Asset Utilization In Your Plant
Here are some actionable strategies to enhance the utilization of your assets effectively:
Invest in Advanced Maintenance Technologies
What about investing in advanced monitoring tools?
TRACTIAN’s technologies offer real-time data analysis, predictive maintenance alerts, and performance tracking, enabling proactive management of assets.
By predicting failures before they occur, these solutions reduce downtime and extend the lifespan of machinery.
Unlock the power of real-time data with TRACTIAN. Start optimizing your asset management today!
Train Staff on Best Practices
Basic, we know, but continuous learning is key.
Implement ongoing training programs to keep your workforce knowledgeable about the latest industry practices and operational procedures — like how your IoT sensors work or how to better handle tools and machinery.
Regularly Review and Analyze Performance Data
Utilize performance data to identify trends, predict potential issues, and inform strategic decisions.
A regular analysis helps pinpoint inefficiencies and areas for improvement, allowing for more targeted interventions.
Promote Cross-Functional Collaboration
Foster a collaborative environment where maintenance, operations, and management teams work together towards common goals.
This integration ensures that everyone understands how their role impacts asset utilization and contributes to the plant’s overall success.
Continuous Improvement
Remember: asset utilization should not be seen as a static metric but as a dynamic one that needs continuous refinement and adjustment.
Establish regular review cycles to assess the effectiveness of utilization strategies and adapt them based on changing conditions and new insights.
Conclusion
Assuring effective asset utilization is key to your success.
By accurately measuring and optimizing how assets are used, companies can gain a competitive edge. However, without proper strategies and tools, achieving optimal asset utilization can be challenging.
Regular reviews and continuous improvement meetings are essential to keep utilization levels high.
Implementing advanced maintenance technologies, training staff, and fostering cross-functional collaboration can drive significant improvements.
Embrace the strategies and insights provided in this article to enhance your asset utilization practices and ensure your plant operates at its full potential.
Ready to transform your operations? Start today and see the difference.
