Understanding asset utilization and how to calculate it

Aug. 29, 2023
To get the most out of your investment, you need to make sure your assets are running optimally and that you are avoiding unexpected breakdowns and unplanned downtime.

Asset utilization refers to how effectively and efficiently your organization is using equipment. It is a great way to measure whether you are getting the value out of your assets — as well as the costs, time and effort you’re expending to maintain those assets. That is why knowing your asset utilization is so important. Physical assets are expensive, so getting the most out of each asset is key. Understanding your actual asset utilization can help you gain insight into your efficiency — and how to improve it.

Why asset utilization matters in plant maintenance

In a manufacturing setting, physical capital is expensive. To get the most out of your investment, you need to make sure your assets are running optimally and that you are avoiding unexpected breakdowns and unplanned downtime.

While no asset can run at full capacity 24/7 and 365 days per year, assets that experience extended downtime or are otherwise frequently idle likely are not delivering the value needed from the investment.

To understand asset utilization, maintenance teams should start by calculating the annual planned downtime for each asset across their facility. Then, they need to consider any production time that is lost each year due to holidays, seasonal fluctuations, inactive time, unexpected breakdowns and anything else that results in downtime.

Quality losses also need to be factored into the equation, through the documentation of wasted parts so they can be quantified in terms of production hours lost producing these defective, unsaleable parts. Once there is an understanding of all the losses, they should be added up and subtracted from the resulting number of hours from the total number of hours in a year.

How to calculate your asset utilization

The most basic asset utilization metric takes the total losses in hours and subtracts those losses from the total number of hours in a year (8,760). The maximum possible asset utilization for each asset is 8,760 hours in a year period. If an asset experiences a total of 2,803 idle hours in that year period, the asset utilization is 68%. In other words, the asset is in use 68% of the time. In general, asset utilization scores below 70% can indicate that plants are not getting the necessary value from that asset to justify its cost.

While asset utilization is a helpful metric, it should be paired with other key performance indicators (KPIs) to gain a clear understanding of where, how and why losses are occurring (and more importantly, how to fix them). These metrics include product yield, overall equipment effectiveness (OEE), unplanned downtime and maintenance spend, and can be calculated in the following ways.

Product yield

This equation has three variables: Number of planned units (P), percentage of functional units in a batch (G) and percentage of subpar units in a batch (R).

Y = P*G + P*(1-G)*R

Overall equipment effectiveness (OEE)

OEE evaluates how effectively your equipment is running by measuring equipment against three factors: availability, performance and quality.

Availability: How long was the process running relative to the planned production time? Were there any planned and/or unplanned stops? An availability score of 100% means the machine ran continuously throughout the planned production time without stopping at all.

Performance: How fast is the process relative to your ideal cycle time? Was the process slowed down by any slow cycles or small stops? A performance score of 100% means the process ran as fast as possible relative to its ideal cycle time.

Quality: Were there any production defects? Did any parts require rework? A quality score of 100% means there were no defects in any parts produced.

Each of the individual scores above then rolls up into the overall OEE score, which considers the losses experienced in each area. An OEE score of 100% means that the machine ran as fast as possible, with no downtime and no defects.

Unplanned downtime

Unplanned downtime happens when an asset is shut down unexpectedly, typically due to equipment failure. Unplanned downtime can become extended when maintenance teams do not have the inventory or resources on hand to repair the problem quickly.

Understanding the total duration of unplanned downtime for each asset can help pinpoint the root causes and find the best solution. For example, it might enable the consideration of implementing 24/7 condition monitoring and a predictive maintenance approach for critical assets that are experiencing excessive unplanned downtime. Adoption of a connected reliability framework that integrates those sensors and software with CMMS and other business systems is another consideration. Maintenance teams may also consider keeping extra spare parts in inventory for parts that fail frequently and lead to lengthy downtime and leverage a CMMS to automate the spare parts inventory management.

Maintenance spend

Finally, maintenance teams need to understand what they’re spending on maintenance for each asset. Older assets often cost more and more to maintain as they age, so tracking maintenance costs can help determine when it is more cost-effective to retire and replace an asset versus continuing to repair it.

Improve asset utilization KPIs with a CMMS

These KPIs will help get to the bottom of underutilization, and start getting more from assets. These metrics can also be used to quickly identify assets running below their expected capacity, so the issues can be diagnosed and resolved before they lead to more production losses.

While managing all of this might seem overwhelming, a CMMS like eMaint makes it easy to track the right KPIs, manage asset lifecycles, automate inventory management, prioritize work orders, streamline preventive maintenance activities and more.  

Greg Perry is a Senior Capacity Assurance Consultant with Fluke Reliability. He is a Certified Reliability Leader and CMRP with nearly two decades of experience in maintenance and operational best practices. 

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