How to Calculate Cost Savings in TAT of Broken or Dirty Equipment

Six Sigma – iSixSigma Forums Industries Healthcare How to Calculate Cost Savings in TAT of Broken or Dirty Equipment

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    Hello everyone!

    I am a Lean Manager at a hospital and would appreciate some input on what to consider when calculating cost savings as it pertains to TAT to dirty equipment being cleaned and returned to use and broken equipment being fixed and returned to use.

    I know I need to consider the downtime piece of these items but how do I pin a cost to it? It can delay patient care slightly but usually a replacement is on stand by.

    Any ideas?

    Thanks in advance!



    Hi Kimberli. Just to kick off the discussion, I would suggest keeping the calculation as simple as possible to see if that suffices, and only factor in additional complications if necessary.

    Consider the broken equipment to start. Let’s assume you never lose revenue as a result of broken equipment because “usually a replacement is on stand by”. Taking lost revenue out of the equation makes the calculation easier. Now, all you need to do is to calculate (1) the cost of the incremental equipment; and (2) the cost of servicing the broken equipment (= labor + parts/materials).

    The cost of incremental equipment is really just the cost of the equipment you needed to purchase because you need stand by equipment as a result of your breakdowns. If you can get by with 10 pieces of equipment as long as none of them breaks down, but you need to have 14 pieces because of the breakdowns, then your capital costs have increased by the cost of 4 pieces of equipment.

    The cost of servicing the broken equipment should be relatively easy to figure out as it’s just the labor and materials (spare parts, etc.) that you need to pay for.

    Your question concerns TAT. You can see that the TAT drives the cost in the above two sets of factors. First, a higher repair TAT means that you will need more stand by equipment than would be required for a lower repair TAT. A higher TAT presumably also increases the labor cost of repair.

    So that’s the repair cost. Cleaning might seem a bit different, but it’s actually not. If you start with the premise that you COULD have equipment that didn’t need cleaning (e.g. maybe all parts that are able to get dirty could be disposables/consumables) you can still calculate the cost by using the same reasoning as above, perhaps only substituting cleaning supplies for parts in the cost.

    I’m sure there are other ways of doing the calculations. You can think in terms of TAKT times, operator and instrument cycle times, etc. But I think the approach above could be a straightforward way to start.

    Good luck!

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