Even for the largest operations, the goal of maintenance remains simple, straightforward: Get the most value from your assets using the smallest possible investments of money and effort. The complicated part is finding reliably accurate ways to measure relative success. Asset management and utilization can help organizations understand how well they are doing, and then show them exactly where they can improve.
What is asset utilization?
Physical assets represent significant investments, and a large enterprise can carry extensive collections of assets spread out over multiple locations, including:
- Land
- Facilities
- Buildings
- Vehicles
- Equipment
- Machinery
- Tools
So, you need plans in place to generate the best possible returns. Asset utilization is a maintenance metric that shows you how efficiently you’re using your assets and how good you are at pulling value from them.
For every asset, there are several factors you need to consider when calculating utilization. To start, every asset is subject to a hard utilization upper limit of 8,760 hours, which is the total number of hours in a year. But no asset can run at full capacity all the time, so it’s always going to be somewhere below that. Other factors include scheduled maintenance and repairs, changeovers and operator breaks, rest periods, and even unexpected breakdowns.
When you’re calculating asset utilization, you need to account for all these factors to get actionable insights into the efficiency of your operations.
Why is asset utilization important?
In asset-intensive industries such as manufacturing, a higher asset utilization rate typically translates into increased overall efficiency and bigger profit margins.
Additionally, understanding your asset utilization can help you make decisions about whether existing assets can be used for longer or when you should replace them.
It can also help you reallocate underperforming assets and make better capital investment decisions. It tells you how well you’re doing now, when you should by retiring and replacing assets, and where you should be investing.
The more assets you have, the more important this metric becomes. Inefficiencies across a relatively small number of assets is not ideal, but for larger enterprise-level organizations, even small inefficiencies spread out over many assets quickly accumulate.
How do you calculate asset utilization?
Calculating asset utilization is fairly straightforward. There are a few steps involved, but each is relatively simple, and the result is worth the effort.
Step 1: Calculate the annual planned downtime
First, you need to determine how much downtime you expect for planned maintenance on your production-related assets. You can calculate the average across all your assets and add that up to get a total downtime figure for your facility.
Step 2: Factor in lost operations time
You then need to add your annual planned downtime figure to the total number of operational hours you lose each year due to holidays, breakdowns, and other causes of downtime. So, unless your assts operate continuously, include downtime as lost operation time.
Step 3: Include production hours lost
You must also calculate the number of production hours lost due to poor sales or bottlenecks. Include changes in plans and schedules driven by business decisions, seasonal variations in demand, and falling sales.
Step 4: Account for unscheduled downtime
As the facility manager, this is the first factor that’s under your control. Think about all the unexpected asset breakdowns and add the downtime they have caused to your running total.
Step 5: Think about quality losses
Next, factor in the production time that you have wasted producing units that are not fit for sale. Those defective units should be converted into the production time to produce them. Although these are not directly lost hours, they are still hours when your assets have not generated value for your organization.
Step 6: Include production rate losses
There are several reasons why your assets cannot operate at their full capacity all the time, and this should be logged in the same way as quality losses. For example, if your CNC machine is rated for 5,000 units per hour but has only been operating at 2,500 units for the last week, turn that 50% fall in output into a 50% reduction in operating time.
Step 7: Calculate your asset utilization
Now that you have all the figures, simply add the losses you have sustained together and subtract them from the total number of hours in a year (8,760) to get your actual asset utilization.
You can then turn that into a percentage by dividing your total operational hours by the total number of hours and multiplying it by 100. For example, if your assets operate for an average of 6,000 hours a year, divide that by 8,760 to give you an asset utilization rate of 68%.
Ideally, asset utilization should stay at above 70%. Anything less than that can drive the unit cost high enough that your business is no longer competitive.
How can you improve your asset utilization?
Now you know how to calculate your asset utilization, the next step is to think about how to improve it. The benefit of the seven-step calculation is that it enables you to identify the areas that are most in need of improvement.
There are several ways to improve low asset utilization rates, including:
- Investigating all asset failures thoroughly and taking action to prevent repeats
- Tracking mean time between failures (MTBF) and other crucial maintenance metrics to prevent downtime due to inadequate maintenance
- Improving your maintenance, repairs, and operations (MRO management) and spare part management
- Buying more reliable equipment, material, and spare parts and make fault tolerance a priority
- Providing better training for machine operators and maintenance teams to reduce downtime due to improper operations
- Switching to a preventive maintenance strategy to reduce the unplanned downtime that results from breakdowns and repairs
But all the items on the list require the ability to capture accurate data, share it in real team across the teams, and then leverage it into better decision-making. That means your first step is implementing modern enterprise-level facility and maintenance management software.
Post implementation, all your workflows are digital, removing slow, error-prone manual methods that make data unavailable, unreliable, and siloed between departments, teams, and technicians. Going digital means all the data you now automatically capture lives inside a single source of truth where everyone has instant access.
So, you now have reliable data you can leverage into actionable maintenance metrics and KPIs, including MTBF. From there, you can finally see which parts and materials work best for your assets, allowing you to drop problematic suppliers and cut costs both for inventory and repairs.
With accurate records on your assets and equipment maintenance and repair histories, you can set up and schedule an effective preventive maintenance program. And training is easier because every work order comes packed with instructions and checklists, ensuring technicians do the work right.
Taking control of the factors that directly affect asset utilization helps you increase overall efficiency for profit margins. The first step is capturing reliable data you can leverage into better decision-making across the enterprise.
By Jonathan Davis
Jonathan writes about asset management, maintenance software, and SaaS solutions in his role as a digital content creator at Eptura. He covers trends across industries, including fleet, manufacturing, healthcare, and hospitality, with a focus on delivering thought leadership with actionable insights. Earlier in his career, he wrote textbooks, edited NPC dialogue for video games, and taught English as a foreign language. He holds a master's degree in journalism.
