Asset utilization is a measure of a facility’s efficiency in using its assets. When you acquire an asset, you must ensure that it provides the maximum return on your cost in acquiring it. Every facility aims to achieve high asset utilization.
Asset Utilization Definition
Asset utilization is a ratio of the actual utilization of an asset to its potential utilization. In simple words, asset utilization is the ratio of an asset’s actual hours of use and the maximum possible hours it can be used.
To illustrate, a machine that can run three 8-hour shifts daily has a potential utilization of 24 hours a day. Its actual utilization, on the other hand, is the number of hours it was actually in use. The asset utilization is calculated by dividing the actual hours used by the potential hours.
Actual utilization is always lower than potential utilization. Daily operations including start-up, operator breaks, scheduled inspections, etc., can lessen the hours of using an asset. Events like holidays and monthly or yearly maintenance schedules can also reduce actual utilization.
Every facility aims to keep actual utilization as close to the potential as possible. Calculating and monitoring asset utilization provides valuable insights into your operations. These insights can help you improve your process and get the most out of your assets.
Key Metrics for Calculating Asset Utilization
There are four key metrics to consider when calculating asset utilization:
Product yield measures the number of usable units that the machine was able to produce compared to the amount planned. These usable units are those that passed standards and are fit for sale. The units that had defects but went through a rework process to make them fit for sale are also considered usable units. But, what does this have to do with asset utilization? Well, when you look at both metrics, you can identify assets that are not reaching the asset utilization goal and also failing to produce usable units.
Overall Equipment Effectiveness (OEE)
Overall equipment effectiveness (OEE) is considered a gold standard in measuring productivity. OEE accounts for the following factors that measure asset productivity:
- Availability – This factor is the percentage of actual production time from an asset over its planned production time. A 100% availability means that the asset was able to run as planned for 100% of a certain period. Planned and unplanned stops decrease the availability of an asset. The higher the availability, the lower the downtime of the asset.
- Performance – This factor is the percentage of the actual speed of an asset in completing its function over the estimated speed. A 100% performance means that the asset ran as fast as estimated. A high performance indicates that slowing down or short stops are minimal as the asset was in operation.
- Quality – This factor is the percentage of the good units produced by the asset over the total planned units. A 100% quality means zero defects in the batch that the asset produced. The higher the quality, the fewer defective units or units unfit for sale.
Multiplying all three factors gives you the overall equipment effectiveness. Low OEE can mean inadequate maintenance, inefficient operations, time-consuming processes, and overall unoptimized equipment or assets. Furthermore, assets with low OEE will often have low asset utilization as well.
Unplanned downtime includes all the instances an asset stops running when it is expected to be in operation. The immediate causes of unplanned downtime are asset breakdown or mechanical failure. But, analysis would show that many maintenance or operational issues are the root cause of unplanned downtime.
Poor management of maintenance operations further increases unplanned downtime hours. These operations that prolong downtime include ineffective maintenance scheduling, a slow and error-prone work order process, and poor stock control of spare parts or repair materials.
Maintenance spend gives you an idea of the cost of maintenance with respect to the output of an asset. To compute an asset’s maintenance spend, you take all the money spent to maintain it and divide it by the money received through the sale of the asset’s output.
Calculating and monitoring an asset’s maintenance spend should tell you whether maintaining an asset equates to high sales and profit. If you spend too much on maintenance without a significant and positive effect on sales, then maybe it’s time to retire this asset.
Tracking Asset Utilization in Your CMMS
Asset utilization is an important gauge that helps you evaluate and improve the efficiency of your operations. However, asset utilization involves several calculations using data gathered through operator records, inspection or monitoring, and reports. A CMMS like Redlist is your all-in-one tool for quickly and effectively measuring asset utilization. With its easy digital data collection, inspection results are recorded instantly. Cloud-based data storage lets you keep data and results in a secure but accessible location, ensuring you always have real-time data at your fingertips. Finally, Redlist’s powerful computing abilities can analyze and provide actionable reports with a swipe of a finger.To find out more about Redlist and asset utilization, feel free to send us your questions. Better yet, request a free demo now!