The simple goal of maintenance is pulling as much value out of your assets as you can, but the complicated part is finding reliably accurate ways to measure how well you’re doing.
Asset utilization is one way to measure how much of a return you’re getting on your investments of money, time, and effort.
What is asset utilization?
Buying physical assets is expensive, so you need to generate the best possible return. Asset utilization is a maintenance metric that shows you how efficiently you’re using your assets and how good you are at pulling value from them.
For every asset, there are several factors you need to consider when calculating utilization. To start, every asset is subject to a hard utilization upper limit of 8,760 hours (the total number of hours in a year). But no asset can run at full capacity all the time, so it’s always going to be somewhere below that. Other factors include maintenance and repairs, changeovers and operator breaks, rest periods, and unexpected breakdowns.
When you’re calculating asset utilization, you need to account for all these factors to get important insights into the efficiency of your operations.
Why is asset utilization important?
In asset-intensive industries such as manufacturing, a higher asset utilization rate typically translates into increased overall efficiency and bigger profit margins.
Additionally, understanding your asset utilization can help you make decisions about whether existing assets can be used for longer or when you should replace them. It can also help you reallocate underperforming assets and make better capital investment decisions.
How do you calculate asset utilization?
Calculating asset utilization is fairly straightforward. There are a few steps involved, but each is relatively simple, and the result is worth the effort.
Step 1: Calculate the annual planned downtime
First, you need to determine how much downtime you expect for planned maintenance on your production-related assets. You can calculate the average across all your assets and add that up to get a total downtime figure for your facility.
Step 2: Factor in lost operations time
You then need to add your annual planned downtime figure to the total number of operational hours you lose each year due to holidays, breakdowns, and other causes of downtime. If your assets do not operate 24/7/365, then include the inactive hours as lost operations time as well.
Step 3: Include production hours lost
You must also calculate the number of production hours lost due to poor sales or bottlenecks. Include changes in plans and schedules driven by business decisions, seasonal variations in demand, and falling sales.
Step 4: Account for unscheduled downtime
As the facility manager, this is the first factor that’s under your control. Think about all the unexpected asset breakdowns and add the downtime they have caused to your running total.
Step 5: Think about quality losses
Next, factor in the production time that you have wasted producing units that are not fit for sale. Those defective units should be converted into the production time to produce them. Although these are not directly lost hours, they are still hours when your assets have not generated value for your organization.
Step 6: Include production rate losses
There are several reasons why your assets cannot operate at their full capacity all the time, and this should be logged in the same way as quality losses. For example, if your CNC machine is rated for 5,000 units per hour but has only been operating at 2,500 units for the last week, turn that 50% fall in output into a 50% reduction in operating time.
Step 7: Calculate your asset utilization
Now you have all the figures you need, simply add the losses you have sustained together and subtract them from the total number of hours in a year (8,760) to get your actual asset utilization.
You can then turn that into a percentage by dividing your total operational hours by the total number of hours and multiplying it by 100. For example, if your assets operate for an average of 6,000 hours a year, divide that by 8,760 to give you an asset utilization rate of 68%.
Generally speaking, your asset utilization should stay at above 70%. Anything less than that can drive the unit cost up to such an extent that your business is no longer competitive.
How can you improve your asset utilization?
Now you know how to calculate your asset utilization, the next step is to think about how to improve it. The benefit of the seven-step process is that it enables you to identify the areas that are most in need of improvement.
There are several ways to improve low asset utilization rates, including:
Investigating all asset failures thoroughly and taking action to prevent repeats
- Tracking mean time between failures (MTBF) and other crucial maintenance metrics to prevent downtime due to inadequate maintenance
- Improving your maintenance, repairs, and operations (MRO management) and spare part management
- Buying more reliable equipment and spare parts in the first instance and make fault tolerance a priority
- Providing better training for machine operators and maintenance teams to reduce downtime due to improper operations
- Switching to a preventive maintenance strategy to reduce the unplanned downtime that results from breakdowns and repairs
Another way to improve maintenance scheduling overall by using enterprise asset management (EAM) software.
How can ManagerPlus EAM software help?
If you want to get more from your assets, EAM software like ManagerPlus® can help you keep your critical assets running better for longer.
It helps you leverage the Internet of Things (IoT) to gather and track valuable data on your assets so you can improve your maintenance strategies and deliver intelligent reports on their performance. You can also discover operational inefficiencies that can harm your utilization and have an in-depth look at how each asset is performing.
ManagerPlus can help you increase your uptime by planning and scheduling preventive maintenance efforts and enable you to perform inspections and critical maintenance operations within hours, not days.
Want to find out how ManagerPlus EAM can help you get more from your assets? Then book a live demo with one of our experts or get in touch so we can answer your questions.
Asset utilization is a metric that allows you to measure how efficiently you use your assets. A higher asset utilization rate typically translates into increased overall efficiency and better profit margins.
Calculating asset utilization is a straightforward, seven-step process. Generally speaking,
your asset utilization rate should stay above 70%. Anything less than that can drive the unit cost up to such an extent that your business is no longer competitive.
There are a few ways to improve underwhelming asset utilization rates. One is to use EAM software like ManagerPlus. It can help you gather and track valuable data on your assets and discover operational inefficiencies that can harm your utilization rates.