You might think that a concept like asset and equipment utilization would be rather straightforward and easy to understand at a glance. The idea that the use of assets & other equipment should be optimized is not exactly groundbreaking. At the most basic level, it’s simply a question of how much output you get (X) as a percentage of the capacity you have available (Y). You don’t need a team of management consultants to tell you that, for example, lots of machines sitting idle might not be the best for your company’s bottom line. So is “asset and equipment utilization” just more business jargon that sounds good without meaning much, like “thinking outside the box”?
No, not at all. In fact, it’s a much deeper and significant concept than the name might suggest. Getting a grip on just how (in)efficiently you’re using physical assets is fundamental to a long list of business metrics that you need to follow in order to stay on the right course. You can even go a step further and say that the way the physical assets of a manufacturing or production processes are used is among the most critical factors affecting the profitability of the entire operation. You can have every other aspect sharpened to perfection, but chronic over-capacity or equipment shortages will always drag your numbers in the wrong direction.
Let’s look at what goes into getting that balance right and staying at the sweet spot of full and constant efficiency.
We could take a deep dive into math-based analytics, but let’s stick with a broad definition of asset utilization as how well an operation uses the assets it needs to do what it does. Smart use of those resources drives per-unit costs down, frees up money otherwise frozen in excess inventory and makes full use of the capacity of machinery or whatever kind of equipment applies. Letting things get too fat or stretched too thin cuts into competitiveness and profitability.
While there are multiple methods for calculating asset utilization rates used in various industries and spaces, there are a few universal factors that affect measurements everywhere.
First of all, no one gets a perfect score of 100% utilization, or anything close to it, because it’s impossible. Downtime due to planned maintenance, lost operating time due to limited hours (anything less than 24/7/365 operation), holidays, operator breaks, reductions in production because of seasonal demand and other factors chip away at the time assets are fully deployed. Basically, any time that a machine isn’t moving at full steam ahead counts against the asset utilization score.
In addition to the factors that reduce available production time, the different methods and formulas used to measure asset and equipment utilization typically plug in variables like total output, yield per unit, quality measures and more. As a general rule, anything above around 70% utilization is considered to be acceptable. The higher, the better, of course.
Ok, so you’ve got your asset and equipment utilization score—what now? Measuring asset and equipment utilization is just the first step. You need to understand what’s negatively impacting your figures, identify room for improvement, and make changes where possible. Some factors that depress your score can’t be changed (Are you going to start 24-hour shifts on Christmas day or get machines that never break? Good luck with that!) but visibility into the causes of interruptions in asset deployment are key to improving operational efficiency and planning future investments.
Identifying those causes of lost production time—apart from those that are unavoidable—can inform decisions on strategic and financial matters that are most likely to deliver immediate impact.
It’s also time to convert the lost utilization into dollars and cents. How much did you lose in profits due to equipment that wasn’t producing as it maybe could have? Assigning a value to lost profit opportunities also illustrates that amount you can spend to boost productivity and still be assured of coming out ahead.
Everything about measuring asset and equipment utilization is dependent on good data, and the more accurate that data is, the more precise the utilization rate is. IoT solutions are ideal for delivering data inputs that are at once more varied and detailed than ever before. They’re better at showing peaks and valleys in asset utilization, delivering automated reports and generally more nuanced representations of the performance of any connected asset.
Asset utilization has become a standard use case for IoT applications, making it easier to identify issues in machine availability, performance and job quality. Stakeholders also get real-time visibility into machine location, settings and environmental factors that may affect performance.
Historical data gathered via IoT solutions informs decisions about future improvements and modifications to equipment to make it better suited for purpose. Data can also be used for predictive maintenance purposes, extending the useful life of the machinery while reducing maintenance costs and reducing unexpected downtime.
IoT’s power to collect, compile and analyze asset performance data far exceeds the limitations of conventional manual reporting. Software that presents this information in the form of actionable insights is making it easier than ever for managers to achieve marginal improvements in performance that translate into significant cost savings and increases in production.