In manufacturing, time is money. If you’re not producing parts efficiently enough, you might not be able to offset factory costs like labor, rent, and raw materials. Understanding machine utilization is key to improving capacity and operations so you can produce more and see higher profits. In this blog we'll cover everything you need to know about machine utilization, from benefits to calculations to relevant projects.
Simply put, machine utilization is a metric that measures your equipment’s productivity. It can be calculated by dividing actual operation time over scheduled available hours (more on this later). You can use this metric to understand how your factory is running, where you need to make adjustments to increase efficiency, or even to make more informed business decisions.
Utilization can tell you a lot about your operations by revealing trends in capacity and runtime. It can also serve as a baseline for your continuous improvement projects. The importance of measuring machine utilization relies on a simple truth: What gets measured gets improved. Without insight into how your equipment is performing, you’re making decisions in the dark.
By establishing your utilization baseline, you can make detailed plans to increase it and hold people accountable. Improving utilization leads to higher production, which in turn means higher profits as well as happier customers.
In the manufacturing industry, a world-class facility runs at 80% utilization or more. This is an incredibly impressive stat to achieve, considering it takes into account breaks, lunches, breakdowns, setups, changeovers, and more!
Where do manufacturers stand when it comes to utilization? An Amper customer survey revealed that most manufacturers assumed their utilization was around 50–60%. After tracking it, however, they discovered that on average utilization was only 26%. Yep—that’s it!
At the end of the day, what marks a good machine utilization rate depends on your particular business. It depends on your current baseline, your resources, and your tools. As you consider your next steps, it’s worth noting that 100% isn’t a realistic goal to set. Why? Because while some automated machines can run at 100%, most manufacturers have machines that require human intervention, and it wouldn’t be fair to expect that from your machines or your operators. It would be quite the feat for a factory to get close to 80% or even 70% utilization.
You may have heard the saying “If you’re not making parts, you’re not making money” floating around industry spaces. In other words, if your machines aren’t in use, then you’re not making anything—neither parts nor money.
Overall, having a high utilization rate indicates that you’re making the most out of your (very expensive) machines. High utilization leads to higher productivity and therefore higher profits, meaning you can afford to take on business costs (e.g. labor, utilities, raw materials), invest in new equipment (hello, increased capacity), take on new contracts, and delight customers with on-time delivery.
To make the best use of your utilization data, it’s best to plan how to use it for your projects before investing all your time and money into collecting metrics. But don’t worry—we’ll help with that right after the nitty-gritty calculation details.
So, what’s the formula for machine capacity utilization? It’s a simple one where PMH is Productive Machine Hours and SMH is Scheduled Machine Hours:
(PMH/SMH) x 100
It’s the actual time a machine is in operation within a specified time period divided by total number of available hours in that same time period multiplied by 100.
Example: A machine that is scheduled to run 16 hours a day (over 2 shifts) for 6 days a week is available 96 hours a week (Scheduled Machine Hours).
So, if a machine runs for 68 hours in a given week (Productive Machine Hours), it would have a utilization rate of 71%.
(68 hours/96 hours) x 100 = 71
Tracking numbers in real time is your biggest asset in the search for maximum efficiency. You need a tool that will give you these real-time insights while also empowering your operators to hit the goals you’ve set.
How might you empower operators? That might look like implementing a visual management tool that displays real-time numbers on the factory floor. At Amper, we’ve seen customers improve utilization by as much as 20% purely because of the Hawthorne Effect (the phenomenon where behavior changes because people are aware they’re being observed).
There are a number of solutions to achieve this: PLC integrations, additional sensors, and of course, Amper.
Check out this snapshot of our utilization scoreboard.
An easy tip is to display the scoreboard on a big screen on your shop floor. That way, everyone can see if they are winning or losing the day and course-correct accordingly.
Plus, if you’re still tracking your utilization manually, you’ll love the time savings involved with tracking software. You can try it for yourself at no risk with Amper’s free trial!
The best thing your utilization data can do for you is justify continuous improvement projects. Having hard numbers (e.g. your current actual utilization rate) to justify your ideas will set you and your team up for success. After your team makes improvements, you can also quantify your efforts to measure impact.
Not sure where to start with your projects? Keep reading for a few ideas.
Generally speaking, production data won't help you "sell" more products. But, it could be used to make more informed decisions around sales and what products you run in your plant.
One way to use your data is to target sales. Review the data to see which machines are least utilized and then focus your resources on selling more of the products that run on those pieces of equipment. If you can only sell products that run on equipment with high utilization, it may be time to consider a CapEx purchase.
Another way to use your data is to insource your work back to certain machines. If over the years your company has outsourced work to different internal sites or outside companies, you can use your data to review which machines might be able to handle a higher workload. Then it’s all about bringing jobs back into your plant. This can save you overall costs of goods as well as transportation.
To see this insourcing strategy in action, take a look at our Leer, Inc. case study. Leer used Amper data to justify new equipment purchases and consequently stop outsourcing panels, which resulted in the insourcing of $300,000 in purchased parts.
If you’ve been worrying about having enough capacity to fulfill a big sale or think you might need more machines but can’t prove it, utilization data is your best friend here. In fact, sometimes you need to justify not buying a machine—and data is still your best friend here. (Belden Universal, for instance, was able to delay buying two machines thanks to their Amper data, saving $50,000 in annual interest expenses alone. Check out the full case study!)
Say, for example, you’ve just signed a new deal for a large recurring order. First, determine how many parts you’re expecting to run (e.g. 100,000 pieces/year) and multiply that by the expected cycle time per week/month/year (3,333 hours at 2 min/piece).
Then, see how much time you have available to run on the machines by looking at utilization data. If you don’t have enough available time on the machines that need to run the job, you can proceed to justify new equipment purchases. Finally, determine how much a new machine would cost and how much revenue the new business is worth and calculate the ROI on the new machine.
Example: Say you’ll sell 100,000 pieces at $5/piece. That’s $500,000. If you buy a used Mazak for $100,000, that’s a 400% ROI with a payback period of 2.4 months. Happy buying!
Running your machines within the given shift time is essential. To maximize uptime and profit margins, you'll want to avoid unnecessary late starts and early stops of your equipment. By measuring them, you can see, on average, how much time you’re losing each week, month, and year.
Tracking late starts and early stops is fairly easy and highly impactful. To make improvements, first collect and review your data. Then, calculate opportunity cost by looking at data over a month and extrapolating it to calculate how many hours you’re losing per year and how much it costs using your hourly cost of production.
Follow your calculations by determining the root cause of your issues, whether it’s operators not coming in on time, cleaning requirements, long machine warm-up times, or something else. Once identified, discuss appropriate solutions with an internal project team. Continue to review data and hold your team accountable with daily or weekly reports.
OEE (Overall Equipment Effectiveness) is a metric that helps you determine the machine potential in your factory or production lines. By tracking OEE, manufacturers can discover where losses may be occurring and then take the necessary steps to correct issues.
Usually, the primary OEE loss comes from availability. (Availability = Run Time / Planned Production Time. This is basically utilization). Increasing utilization will have the biggest impact on improving your OEE, and it is oftentimes the easiest factor to improve out of the 3 OEE components (availability, performance, and quality).
For more on OEE, check out OEE Calculation: Why It’s an Important KPI & How to Calculate It.
By now, you’ve read the benefits of tracking machine utilization and saw our scoreboard and now you’re totally sold on adopting a utilization monitoring solution. Now what? Production monitoring software is one of the best ways to examine, analyze, and find solutions to improve utilization.
At Amper, we provide machine monitoring and digital factory tools that give you answers, helping you elevate your factory’s efficiency. There are no complex integrations, no implementation fees, and installation only takes 15 minutes on most machines. That means you can implement a new solution at a low cost and with minimal interruption to your operations.
For best results, we recommend monitoring machine utilization across your entire factory. That way, you get real-time visibility into every corner of your facility, enabling the most accurate decisions and most successful projects.
Ready to discover what Amper can do for your business?