How do you calculate the cost of downtime?

Work out what one hour of downtime costs: the output lost for good (units per hour times the value of each unit), the labour paid to wait, and any overtime paid to make the output up later. Multiply by the length of a typical event and add the scrap made restarting to get the cost per event, then multiply by the number of events in a year.

Should I use margin or revenue per unit?

Use contribution margin, the selling price minus the materials and other variable costs you no longer spend, for the money the business actually loses. Revenue per unit shows the sales at risk and gives a bigger number. Either can be right for the question you are answering; say which one you used.

What if we make up the lost output later?

Then that output is not lost; you pay overtime to make it instead. Enter the share you make up in the overtime field. The calculator removes that share from lost output and adds the overtime, assuming the same crew needs as long to catch up as the line was down.

What does this calculator leave out?

Repair parts, maintenance labour, expedited freight, late-delivery penalties and the effect on customers. If you know what these cost per event, add them to the restart scrap figure, which is simply added to every event.

Does planned downtime count?

No. Planned maintenance, breaks and time with no orders are scheduled, so they are not downtime losses. Count unplanned stops: breakdowns, waiting for material or people, and changeovers that run over plan.

Where do the numbers come from?

Event counts and lengths come from downtime logs or machine data, and output per hour from the line's standard rate. Finance can give the contribution margin per unit and the loaded labour and overtime rates. Very short stops are often missing from the logs, so the real total is usually higher than a log-based estimate.

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Downtime cost calculator

The cost of unplanned downtime is everything a stop costs while the line is down and getting it running again: the output you lose, the people paid to wait, the scrap made restarting and the overtime paid to catch up. Price one hour first, multiply by the length of an event, then by how often it happens in a year.

Cost per hourequalsLost output + Idle labour + Overtime

Lost outputequalsUnits per hour × Value per unit × (1 − Share made up)

Idle labourequalsPeople idled × Labour cost per hour

OvertimeequalsShare made up × People idled × Overtime cost per hour

Cost per eventequalsCost per hour × Event minutes divided by 60 + Restart scrap

Cost per yearequalsCost per event × Events per year

Output made up later with overtime is not lost, so the share you make up moves from lost output to overtime. The overtime line assumes the same crew needs as long to catch up as the line was down.

Output lost

What the line makes in an hour when it runs

Value per unit

Contribution margin, or price if the sale is lost

People idled

Operators and others who wait while it is down

Labour cost

Per person, with benefits and taxes

Output made up with overtime

0% if the lost output is gone for good

Overtime cost

Per person, at the overtime rate

Restart scrap per event

Material and parts thrown away getting back to good

Average event length

Events per year

Currency

Pre-filled with the worked example. Count only unplanned stops; planned maintenance and breaks are not downtime losses.

Cost per hour of downtime

$1,920

While the line is down, before restart scrap. With scrap spread in: $2,187 an hour.

Cost per event

$3,280

1.5 h down + $400 restart scrap

Cost per year

$131,200

60 hours of downtime a year

Where each hour of downtime goes

Output lost for good$1,500

Idle labour$240

Overtime to catch up$180

How to calculate it

Price an hour, then scale it up

Output lost and value per unit are usually the biggest part. Use contribution margin for the money the business loses, or revenue per unit to show the sales at risk, and say which one you used.

People idled and labour cost cover the crew who are paid while they wait. Overtime covers any output you make up later: that output is no longer lost, but it costs overtime to make.

Restart scrap is the material and parts thrown away getting the line back to good product. Add any other cost you know per event, such as repair parts, to the same field.

Event length and events per year come from your downtime log. Breakdowns are one of the six big losses, and micro-stops rarely make it into logs at all. To see how downtime pulls down availability, try the OEE calculator.

Worked example

Illustrative numbers, not a benchmark

A line makes 120 units an hour at a contribution margin of $25 a unit. Six people at $40 an hour wait when it stops. Half the lost output is made up later on overtime at $60 an hour, each restart scraps $400 of material, and the line has 40 unplanned stops a year averaging 90 minutes.

1Lost output = 120 × $25 × (1 − 0.5) = $1,500 an hour.
2Idle labour = 6 × $40 = $240 an hour. Overtime = 0.5 × 6 × $60 = $180 an hour.
3Cost per hour = $1,500 + $240 + $180 = $1,920.
4Cost per event = $1,920 × 1.5 h + $400 = $3,280.
5Cost per year = $3,280 × 40 = $131,200, for 60 hours of downtime.

Unplanned downtime costs this line $1,920 an hour and $131,200 a year. Lost output is 78% of each hour's cost, so fewer and shorter stops matter far more than the labour line.

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<iframe src="https://www.theleansuite.com/tools/downtime-cost-calculator/embed" title="Downtime cost calculator by LeanSuite" width="100%" height="1440" style="border:0;max-width:1000px" loading="lazy" allow="clipboard-write"></iframe>
<p style="font:13px/1.4 sans-serif"><a href="https://www.theleansuite.com/tools/downtime-cost-calculator">Downtime cost calculator</a> by LeanSuite</p>

How LeanSuite helps

LeanSuite's Loss & Cost Management puts a cost on each loss, downtime included, and its Loss Prioritization Matrix turns that data into an action plan ranked by cost.

See Loss & Cost Management

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Downtime cost calculator: common questions

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