 | |  | |  | |  | |  | |  |
www.escservices.com
 |  |  |  |  |  |
Copyright © 2008 ESC Services, Inc.
The Real Costs of Non-Compliance
By Mike Berkland – Mechanical Engineer / Project Manager
One of the major hurdles to be cleared when attempting to institute a world-class, comprehensive lockout
tagout program is that of funding. Those who approve budgets need to be shown that lockout tagout is a
necessity and that neglecting your lockout tagout program can bring costs far greater than those
associated with setting up and maintaining a lockout tagout program. The costs of not having a complete,
comprehensive, world-class lockout tagout program can come from four main sources. They are: lost
work time, lost production, OSHA Fines, and Employee injuries.
Lost work time comes from the increase in time an employee must spend to lock out a machine that does
not have a clear, up-to-date lockout tagout procedure complete with large pictures clearly showing
disconnect locations, detailed information including details such as breaker numbers, and energy
disconnect labeling. Often, especially in facilities constructed more than 20 years ago there are just one
or two electricians who know where every electrical disconnect is for even the least serviced machine. For
this reason it is important to document this knowledge. That way when a machine needs to be locked out
for servicing during 3rd shift, the onsite staff can easily locate the disconnect, verify it and then begin
work. The simple way of calculating the dollar value of the lost work time is to multiply the time lost by the
labor cost of that employee.
Along with lost work time as described above comes machine down time. Depending on the type of
machine, the cost of downtime can vary widely. Some reasonable estimates are $500/hr for a standalone
machine, $1000-$10,000/hr for a machine that is part of a cell or small line, and can range in the
$1000s/min for machines that are part of a large, high value line. Therefore, reducing the time it takes to
service a machine by even an hour or less can have a significant value.
OSHA fines can be another significant cost. As of the writing of this article lockout tagout violations were
the #1 most often cited violation by OSHA in the manufacturing sector. In the year from October 2006 to
September 2007 lockout tagout it was cited and average of almost 2 times per inspection for a total of
2,930 times totalling over $3,172,801. This is compounded by the frenzy that an OSHA fine can send a
safety office into weeks of paperwork and meetings.
"...the average cost of a fatal employee injury is $1,190,000
and the average cost of a non-fatal, disabling injury is
$38,000."
Perhaps the greatest cost is from a workplace injury. An injury that could have been prevented by lockout
tagout can have far reaching ramifications. It can impact not only the involved individual(s) but it can also
cause all other employees to question their own safety at the workplace thereby reducing moral and
productivity. Then there are the costs of the injury itself. According to the NSC (National Safety Council)
the average cost of a fatal employee injury is $1,190,000 and the average cost of a non-fatal, disabling
injury is $38,000. These costs can be much greater in situations where the employer either failed to
provide lockout tagout procedures and/or equipment or failed to properly train the effected individual(s).
In these cases where the employer is negligent, multimillion dollar lawsuits are not uncommon.
In these days lean manufacturing is not just a trend it’s a competitive advantage. It only makes sense to
have your maintenance costs be as lean as possible. This lean philosophy can easily be incorporated
into a world-class lockout tagout program by consolidating your tradesman knowledge, reducing down
times and keeping employees safe. In these ways safety can really have a positive impact on profitability
in both the immediate and distant future.
By Mike Berkland – Mechanical Engineer / Project Manager
One of the major hurdles to be cleared when attempting to institute a world-class, comprehensive lockout
tagout program is that of funding. Those who approve budgets need to be shown that lockout tagout is a
necessity and that neglecting your lockout tagout program can bring costs far greater than those
associated with setting up and maintaining a lockout tagout program. The costs of not having a complete,
comprehensive, world-class lockout tagout program can come from four main sources. They are: lost
work time, lost production, OSHA Fines, and Employee injuries.
Lost work time comes from the increase in time an employee must spend to lock out a machine that does
not have a clear, up-to-date lockout tagout procedure complete with large pictures clearly showing
disconnect locations, detailed information including details such as breaker numbers, and energy
disconnect labeling. Often, especially in facilities constructed more than 20 years ago there are just one
or two electricians who know where every electrical disconnect is for even the least serviced machine. For
this reason it is important to document this knowledge. That way when a machine needs to be locked out
for servicing during 3rd shift, the onsite staff can easily locate the disconnect, verify it and then begin
work. The simple way of calculating the dollar value of the lost work time is to multiply the time lost by the
labor cost of that employee.
Along with lost work time as described above comes machine down time. Depending on the type of
machine, the cost of downtime can vary widely. Some reasonable estimates are $500/hr for a standalone
machine, $1000-$10,000/hr for a machine that is part of a cell or small line, and can range in the
$1000s/min for machines that are part of a large, high value line. Therefore, reducing the time it takes to
service a machine by even an hour or less can have a significant value.
OSHA fines can be another significant cost. As of the writing of this article lockout tagout violations were
the #1 most often cited violation by OSHA in the manufacturing sector. In the year from October 2006 to
September 2007 lockout tagout it was cited and average of almost 2 times per inspection for a total of
2,930 times totalling over $3,172,801. This is compounded by the frenzy that an OSHA fine can send a
safety office into weeks of paperwork and meetings.
"...the average cost of a fatal employee injury is $1,190,000
and the average cost of a non-fatal, disabling injury is
$38,000."
Perhaps the greatest cost is from a workplace injury. An injury that could have been prevented by lockout
tagout can have far reaching ramifications. It can impact not only the involved individual(s) but it can also
cause all other employees to question their own safety at the workplace thereby reducing moral and
productivity. Then there are the costs of the injury itself. According to the NSC (National Safety Council)
the average cost of a fatal employee injury is $1,190,000 and the average cost of a non-fatal, disabling
injury is $38,000. These costs can be much greater in situations where the employer either failed to
provide lockout tagout procedures and/or equipment or failed to properly train the effected individual(s).
In these cases where the employer is negligent, multimillion dollar lawsuits are not uncommon.
In these days lean manufacturing is not just a trend it’s a competitive advantage. It only makes sense to
have your maintenance costs be as lean as possible. This lean philosophy can easily be incorporated
into a world-class lockout tagout program by consolidating your tradesman knowledge, reducing down
times and keeping employees safe. In these ways safety can really have a positive impact on profitability
in both the immediate and distant future.
Questions?
Feel free to call or e-mail us today for more information or a quote.
Feel free to call or e-mail us today for more information or a quote.