1 Minute = $32,000?
So where does this figure come from?
It was based on information from a few customers in the United States. While the exact values will vary by product type, industry, material purchasing power, etc. the basic concept is the same. If your company is in a condition where extra production can be sold, the financial benefits of reduced down-time are significant and can be used to justify a wide variety of capital expeditures.
Assumptions:
- Machine output rate (when running): 200 feet/minute
- Working days: 240/year
- Incremental revenue per foot: $0.67 ($2.00 selling price/foot minus $1.33 material cost/foot)
Incremental revenue/minute/year = 200 fpm X 1 min/day X 240 days/year X $0.67/ft = $32,160
If you are in a situation where you cannot sell your extra output, the financial savings are then based on cost reduction or cost avoidance. In this case, the savings are typically less.