November 30, 2023

The hidden (and obvious) costs of poor service performance

The Hidden (and Obvious) Costs of Poor Service Performance

The average manufacturing company faces around 800 hours of equipment downtime every year. Keeping their operations to production schedules and target rates depends on regular machine maintenance and servicing. For this reason, manufacturers employ large maintenance teams to service their equipment.

Machine downtime or malfunction is often due to irregular maintenance and sub-optimal aftermarket service programs offered by industrial equipment manufacturers. Downtime leads to a loss of productivity and higher product costs. During major breakdowns, manufacturing companies need the assistance of machine experts to diagnose and troubleshoot the underlying problem. Research outlines machine failures cause large manufacturers to lose about $1 trillion yearly.

It suggests a service standard crisis that should have industrial equipment manufacturers crying for help.

Business Costs of Poor Service Performance

Service standardization enhances the efficiency and quality of service delivered by engineers, installers, and contractors. Most importantly, it’s the way industrial OEMs keep field service calls as consistent as possible for on-site service operations, such as pre-call preparation, diagnosis, troubleshooting, and documentation. Good field service standards increase performance and decrease service delivery costs—reducing resolution time and ensuring high uptime.

Conversely, inadequate standards lead to poor service performance, but the challenges and impact differ for industrial OEMs and their clients. We will first look at them from the perspective of OEMs.

Operational Costs- Poor service standards lead service engineers to repeat visits for the same issue. Good preparation is hard enough given limited information and is more difficult when customers’ equipment issues are communicated second-hand through the OEM’s channel partners. These costs of repeat visits keep escalating when OEMs or their channel partners lack digital tools to enhance field service delivery on-site. Automation helps standardize scheduling, dispatching, and work order management and is typically in place. This standardization is missing on-site when an engineer is diagnosing an issue or troubleshooting.

Poor Customer Satisfaction - Poor service standards are directly associated with plummeting customer satisfaction. Consistency is king when establishing a trusted relationship with customers. Beyond their expertise with the equipment, field service engineers can win a customer's confidence when they show up prepared and well-resourced to fix issues every time customers call. When service doesn’t meet the mark, customers might ask for a different service engineer or look to switch vendors. They can even share negative reviews and limit future engagements. If problems with service persist, OEMs will lose future sales.

For industrial manufacturers and their equipment customers, the business impact of poor service performance comes with production disruptions. Some of these costs are detailed below. They are important reminders to field service teams that their work, when delivered consistently according to standards saves their customers millions of dollars.

Higher Product Costs - No matter the products produced, poorly maintained equipment raises the production costs. It becomes hard to meet ambitious production goals and delivery schedules. Failing on these fronts in today’s competitive market impairs competitiveness, reduces the company's profits, and leads to higher overall product costs.

Overhead Costs - Equipment downtime can indirectly and directly add to overhead costs in the form of:

  • Idle machine operators
  • Low productivity costs
  • Wasted raw materials
  • Labor costs

For instance, production shutdowns can consume up to 10% of the available production time. It's challenging for manufacturers to recover from this loss of productivity, especially if the service efficiency is low.

Lower Overall Equipment Effectiveness (OEE) - OEE is a metric that helps determine the overall efficiency of manufacturing operations. It's the product of availability, performance, and quality. For example, 90% availability, 95% performance, and 99% quality deliver a total OEE of 85%.

An OEE of 100% is ideal and indicates high-quality and fast processing times without downtime. Typically, manufacturers target an OEE of 60% and above. Anything below 40% OEE is "low or poor." Low OEE translates to lower production rates and quality, which costs manufacturers' business. It cuts into their revenues and productivity while increasing variable cost structures.

High Replacement Costs - Poor service performance also increases the frequency of equipment replacement. When equipment needs replacement, lines stop, and production halts. Downtime requires proper planning, so if equipment fails unexpectedly before the end of its useful life, the costs to replace it are much higher than routine maintenance costs.

The problem further compounds when we consider that companies don’t assign pre-allocated budgets for replacements. As a yardstick, companies must account for around 2-5% of the total replacement asset value for maintenance. It’s more prudent to replace the equipment when companies spend more (than this percentage) on upkeep.

Occupational Hazards - Inadequate maintenance and service performance can also add to workplace injuries and occupational hazards. According to the International Labor Organization (ILO), around 2.3 million workers face work-related injuries every year. The US Bureau of Labor Statistics reported 1,062,700 nonfatal injuries in 2021.

Poor equipment performance and limits on when and how service is done pose a risk to its operators. Safety standards in manufacturing facilities should include well-maintained production equipment to avoid injuries. These occupational hazards result in lost productivity and high compensation claims.

The Benefits Realized from Improved Service Standards and Performance

When costs skyrocket, field service teams who deliver superior service will stand out. It presents a significant opportunity for industrial manufacturers to differentiate themselves from their peers. If they can improve their field service performance, they can improve profitability, sustain and even enhance their reputation, and increase customer satisfaction. By using a comprehensive platform for service standardization, they can start to deliver immense benefits for equipment manufacturers, including:

Improved Operational Efficiency - With remote assistance, OEMs can improve response time to a major breakdown by delivering vital troubleshooting and diagnostic information before dispatching a service engineer. Remotely located engineers can also benefit from the same information in the form of guided procedures on-site, so they can guide onsite facility teams to diagnose and troubleshoot any machine problem efficiently.

Optimized Performance - Service standardization tools provide access to real-time service delivery data. These service details give an OEM’s field service teams a record of service performance step-by-step, not just what was done to maintain or fix the equipment. This data helps maintenance teams—including OEM and maintenance teams onsite—to plan their maintenance work in the future by allowing them to understand what worked and what didn’t.

Platforms for service standardization can elevate operations by empowering anyone who maintains industrial equipment. They take care of the repeatable parts of maintenance work, thus freeing up the OEM service staff to address more complex or nuanced issues. For the production floor teams, this means greater control and flexibility. For the OEM, this means improved productivity and resource utilization.

Additionally, companies evaluate their maintenance team performance across various safety and efficiency tasks—learning and adjusting standard procedures to establish a consistent process for continuous improvement.

Maximized Equipment Uptime - When downtime data is available in real-time, the field service team can put service standards to work and perform a root-cause analysis of the problem. They can take the appropriate actions to prevent the problem from cropping up again. For instance, equipment-related data like operating temperature, vibration levels, and operational parameters can be inputs to standard procedures that compare them against any abnormalities or deviations from the "normal" data patterns. Such insights can be valuable for improving the overall service efficiency when potential deviation causes and procedures for troubleshooting them are also a part of the standard procedures.

The Atheer Advantage

At Atheer, we believe all manufacturers deserve to make quality products and deliver amazing service. Our platform connects field service personnel, contractors, partners, and everyone in the service ecosystem with the technical expertise needed to elevate customer service. Here's why Atheer is the all-in-one choice for industrial service teams:

  • Troubleshoot equipment issues through remote assistance and support
  • Automate and standardize service delivery workflows and deploy them - no code required
  • Connect with third-party systems and external business processes for seamless operations
  • Provide real-time visibility into service performance on a centralized platform

Are you ready to elevate your service performance and stand out in the industrial equipment crowd? Schedule a no-obligation product demo today!

Micki Collart

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