The cost of unplanned downtime for one hour on your line is two numbers added together: lost contribution margin (good units per hour at the bottleneck times price minus variable cost, counted only if that output cannot be made up later) plus incremental recovery costs such as overtime, expediting, restart scrap, contractors and customer penalties.
That is the number worth putting in a capex request. The numbers that usually end up there instead come from vendor surveys. Siemens' True Cost of Downtime 2024 report puts an hour of automotive downtime at up to $2.3 million. ABB's 2023 survey puts a typical industrial outage at close to $125,000 an hour. Both are real survey results. Neither describes a mid-market plant running one constrained line and two with slack. This explainer walks through how to calculate your own figure, what to leave out, and where the published benchmarks fit.
The two parts of a downtime hour
Every hour of unplanned downtime splits into two cost buckets, and most bad estimates come from mixing them up.
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Lost contribution margin. The profit you would have earned on output that is now gone for good. It applies only when the lost units cannot be produced later.
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Incremental recovery costs. Cash you spend because of the stop: overtime to make up volume, expedited parts and freight, scrap and rework from the stop and restart, outside service calls, and customer penalties or chargebacks.
Fixed costs, such as salaried staff, depreciation, rent and hourly wages you would have paid during the shift anyway, belong in neither bucket. They were going to be spent whether the line ran or not. Adding them turns a downtime estimate into an overhead allocation, and it inflates the number in a way finance will catch.
Step 1: Find the constrained line rate
Start with good units per hour at the bottleneck, not nameplate speed. If a filler is rated at 600 units per hour but the line averages 400 good units after minor stops, rate losses and rejects, then 400 is the output you lose when it goes down. Nameplate speed overstates the loss by the full gap between rated and demonstrated performance.
If the machine that stopped is not the constraint, the answer changes. A stop on a non-bottleneck machine with buffer ahead of the constraint may cost little or nothing in lost output until the buffer runs dry. Measure the stop by its effect on the constraint.
Step 2: Calculate per-unit contribution margin
Contribution margin is revenue minus variable costs, meaning costs that rise and fall with each unit made, such as materials and variable delivery costs. Fixed costs are excluded by definition (Corporate Finance Institute). Per unit:
Per-unit contribution margin = selling price minus variable cost per unit
Lost contribution per hour = good units per hour at the constraint × per-unit contribution margin
Decide up front how you treat hourly direct labor. Most plants pay the crew for the full shift whether the line runs or stops, so within a shift that labor behaves like a fixed cost. If you leave it out of variable cost here, leave it out of the downtime cost as well. Write the convention down so the next person who updates the model uses the same one.
Step 3: Apply the recoverability test
This is the question that decides whether your number is large or modest: can the lost volume be made up later?
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Constrained or sold-out line. The line already runs every available hour and customers take everything it makes. An hour lost is an hour of sales gone. Count the full lost contribution.
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Line with slack. There is an open shift, a weekend, or a second line that can absorb the volume. The sale is not lost, it is delayed. Lost contribution goes to roughly zero, and the cost moves into recovery: overtime, expediting and the risk of a late delivery.
Many lines sit in between. A line may be able to recover a stop in a slow month but not in peak season. If so, calculate both cases and use the one that matches the period you are budgeting for.
Step 4: Add incremental recovery costs, one line at a time
List each cost the stop actually causes. A reasonable set of line items:
| Recovery cost | How to price it | | --- | --- | | Overtime to make up volume | Hours needed × crew size × overtime rate. Under the Fair Labor Standards Act, non-exempt employees must get at least 1.5 times their regular rate for hours over 40 in a workweek (US Department of Labor). Treat 1.5x as the floor; union contracts and weekend premiums may be higher. | | Expedited inbound parts and rush spares | The premium over normal freight and pricing, not the full part cost if you would have bought it anyway. | | Expedited outbound freight | Premium freight to hit a ship date the stop put at risk. | | Scrap and rework from stop and restart | Units scrapped or reworked during the stop and warm-up, priced at variable cost plus rework labor. | | Outside contractors or OEM service calls | Invoice cost, including call-out and travel charges. | | Customer penalties and chargebacks | Contractual late-delivery penalties, or the expected value if a penalty is only likely. |
Note the overtime logic under the labor convention from Step 2. The straight-time wages paid while the line was stopped were a sunk shift cost. The overtime hours worked to recover the volume would not have been worked at all without the stop, so the full overtime pay for those hours is incremental, not only the half-time premium.
Worked example: the same stop on two lines
All figures below are hypothetical round numbers for illustration. They do not describe any real plant.
A bearing failure stops a line for one hour. Demonstrated rate at the constraint is 400 good units per hour. The product sells for $50 and carries $30 of variable cost, so per-unit contribution margin is $20. The restart scraps 60 units. The crew is 12 hourly operators at $28 an hour.
| Cost line | Line A: sold out | Line B: has slack | | --- | --- | --- | | Lost contribution (400 × $20) | $8,000 | $0 (volume recovered) | | Recovery overtime (12 × $28 × 1.5 × 1 hour) | $0 (no hours to recover into) | $504 | | Restart scrap (60 × $30 variable cost) | $1,800 | $1,800 | | OEM service call | $2,500 | $2,500 | | Expedited bearing | $1,200 | $1,200 | | Expedited outbound freight | $0 | $900 | | Cost of the hour | $13,500 | $6,904 |
Same failure, same repair, and the cost on the sold-out line is roughly double. On Line A, the lost margin is the largest item. On Line B, the repair bill and the restart scrap outweigh everything else. The same logic tells you which line should get the vibration sensor first.
Neither figure comes close to $125,000. That is not because the survey is wrong. The survey is measuring something else.
Common mistakes that inflate or hide the number
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Counting fixed overhead. Dividing annual plant overhead by operating hours and calling it a downtime cost adds money that is spent whether the line runs or not.
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Counting idle wages twice. If hourly labor is treated as fixed within the shift, do not add idle straight-time wages on top of lost contribution.
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Using nameplate speed. Use demonstrated good output at the constraint.
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Counting lost sales on a line with slack. If the volume comes back on Saturday, the cost is Saturday's overtime, not the margin.
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Forgetting restart scrap. Warm-up, purge and first-article rejects after a stop are real and repeat on every event.
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Ignoring frequency. One hour is the unit. The annual exposure is cost per hour times hours lost per year, and that is the figure that ranks projects.
How the published benchmarks compare
The survey figures are useful context about direction and scale. They should not stand in for your own figure.
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ABB, Value of Reliability (2023). A Sapio Research survey of 3,215 plant maintenance decision-makers in July 2023, across sectors including energy, chemicals, food and beverage, metals, and oil and gas, found a typical business loses close to $125,000 per hour of unplanned downtime (Reliabilityweb). The US-specific figure from the same survey was about $103,000 per hour (RoboticsTomorrow). The survey also found that more than two-thirds of industrial businesses have an unplanned outage at least once a month, 21% still run to failure, and 60% plan to increase reliability investment over the next three years.
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Siemens, The True Cost of Downtime 2024. Unplanned downtime costs the world's 500 largest companies about $1.4 trillion a year, or 11% of revenue. An hour of automotive downtime costs up to $2.3 million, up 113% since 2019, against roughly 19% US price inflation over the same period (AEMT summary).
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Fewer stops, higher cost per stop. Siemens found large manufacturers averaged 25 downtime incidents per facility per month, down from 42, and lost 27 hours per plant per month, down from 39 (Plant Services). Plant Services also reports that heavy-industry downtime costs rose 319% from 2019.
Two caveats apply to all of these. They are self-reported, and they skew toward large companies with high-value, tightly scheduled lines, where lost output is rarely recoverable. A 150-person contract manufacturer with an open third shift has a very different recoverability profile. The trend is the transferable finding: stops are getting less frequent and more expensive each, so the cost per event is the number to watch.
Using the number
Once you have a defensible cost per hour for each line, it does three jobs:
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Ranking maintenance capex. Multiply cost per hour by expected hours avoided for each project. A rebuild on the constrained line often beats a larger project on a line with slack.
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Sizing spare-parts inventory. Compare the carrying cost of a critical spare with the expected downtime hours saved by having it on the shelf instead of on an expedited truck.
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Justifying condition monitoring or IIoT sensors. Put sensors where an hour costs the most, which is usually the bottleneck on a sold-out line. The recoverability test tells you where that is.
Calculate your own number
ManufacturingMag's free downtime cost calculator keeps the two buckets separate. Enter your demonstrated line rate, per-unit contribution margin, whether the volume can be recovered, and your recovery costs line by line. You get a per-hour figure for your plant rather than one borrowed from a survey.
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