Idle time is the time that company pays to employees or workers, but they cannot complete works due to other reasons beyond their control. It is the time when employees have nothing to do during the working hour, they are not able to do the work because of various reasons. For example, there are two workers in the restaurant, the chef and waiter. It is an idle time when the waiter waits for the chef to cook food. It is similar to Machine idle time which is the time that machines do not break down, but they are not being used.
Identifying and reducing idle time is very important for businesses, especially manufacturers because it is very costly. We still pay for employees even they do not involve in any productive activities. Depreciation yet charges even those machines do not use. Huge unutilized time shows that the company has underutilized its resources. The longer it takes, the more expensive the company needs to spend on its production cost.
Idle Time Formula
Idle time formula will help us to calculate the percentage of idle time compared to a total working hour. In other words, it is the time which company wast due to unutilized time.
To calculate idle time, we simply deduct the actual working hour from the total standard hour, the difference is idle time. It shows the number of hours which company spends without getting anything done.
We can calculate idle time per employee, by the departments, or a whole company. Management should calculate idle time by department or processing stage which easies to find causes and solutions.
Idle Time Example
Factory ABC produces T-Shirts and sells them to the market.
Based on company standard costing, one T-Shirt requires 5 working hours.
On November 202X, ABC has produced 8,000 T-shirts and spend 45,000 hours.
Calculate the idle time ratio.
Total working base on standard costing:
8,000 unit x 5h/unit = 40,000 working hour
ABC was supposed to spend only 40,000 hours to produce 8,000 units, but they spend 45,000 hours instead. We have investigated and found that there are many machine breakdowns during this month. The employee spends 5,000 hours waiting for a machine to be fixed. So it means that there are 5,000 hours of idle time (45,000 – 40,000). It is the employee idle time, not the machine idle time.
5,000/45,000 = 11%
It means that 11% of the total time was idle, the company still pay them without getting work done. However, we need to double-check if the standard cost is prepared accurately. The actual time spent may be higher than estimation so it also creates this gap.
Cause of Idle Time
There are two kinds of idle times:
– Normal Idle times
– Abnormal Idle times
Normal idle time happens due to normal business operation, which is not under the control of management, staff, or company. It is the idle time within manufacturing cycles, such as worker have to wait for machine breakdown or regular maintenance. It can be the idle time during working hours due to worker personal breaks such as tea or toilet break. They are normally happening in the production process, which cannot avoid, but we have to ensure that they are within a manageable level.
The main cause of Abnormal idle time is a process work arrangement in factoring, which causes by the bottleneck in production workflow. For example, the product needs to go through the setup and assembling steps. The assembly team can assemble 100 units per day, but the setup team can only complete 50 units per day. It limits to assembly team to 50 units as well because they have to wait for the setup team to complete their job. For the solution, management needs to consider increase workers in setup teams, so the assembly team will be able to reduce their idle times.
No business can run 100% efficiency, but as the management, we try to minimize the idle time to the lowest level.
Accounting Treatment :
For a normal idle time, it should classify as the overhead cost, which will be absorbed into finished product cost by any method such as ABC, AC, Job costing.
On the other hand, Abnormal idle time will classify as indirect labor which is part of overhead cost. It shall be recorded into a separate line in Income Statement for management review. As it is the avoidable cost, it is under control by the production manager, so it must closely monitor. It can be a KPI (Key Performance Indicator) for the responsible managers.
There are several solutions to this issue, which may vary due to the actual circumstance. Please check below:
|The solutions to idle time|
|Involvement from employees on workflow design||Employees should involve in workflow design because they are doing it every day. There are some techniques that they know more than managements. We can assign employees representatives in each assembly line to share their experience in the workflow design. In case of unexpected idle time, employees in that station are the first one need to be discussed. They know the reason and be able to share more appropriate and practical solutions.|
|Analyzing work station||Managers have to ensure that every work stations can produce a similar quantity so that there will be no bottleneck. On the other hand, some work stations may have too many resources (machines or workers), so that they do not work at their maximum level. So they should allocate some resources to other stations. However, the company may face other forms of downtime, each assembly line should document them in a proper file.|
|Decrease Transit time||The material supposes to move from one station to another without any interruption. We should record the time spend from moving material from one location to another. Any movement which takes longer than usual must be double-checked to find out the root cause. The location of each assembly line should place next to each other based on workflow; the movement area should be free from the obstacles.|
|Proper production planning and flexibility||Management needs to have an appropriate plan which can increase utilization to the maximum level. However, the actual situation will be different, so we have to flexible to respond to those changes. We may provide overtime for a short time to allow bottleneck station to catch up with others and reduce other stations’ idle time. Increasing working shifts may be useful as well.|
|High-quality material||The Purchasing department has to ensure that materials’ qualities are within acceptable standards. If we buy cheap and low-quality material, it may require long time processing. In the end, we will spend more on direct labor (both processing time and idle time), and customers return.|
|Repair and maintenance machines||If machines are frequently breakdown, we should prepare an inspection of machines’ condition. If machines’ capacity is too low, we need to consider conducting a full repair (overhaul). The broken spare parts need to replace to improve their condition. The inspection and repair must perform outside working hours to prevent any additional idle time. Even machines are in good condition; technical teams need to be on-site and be ready for unexpected broken and reduce downtime to the minimum level.|
|Provide Training||The company has to do regular training for all staff to ensure that they have standard quality and speed. When teams have higher technical skills, they will be able to work faster, reduce the risk of error, and not cause a bottleneck for the next work station.|
Idle time is the unproductive time that company spends without producing anything. It is the cost that spend without providing any benefit to the company or customers. The company needs to pay the worker even they have nothing to do and it is not under their control. It happens due to the workflow design, material, and any other unexpected breakdown. The company needs to take action very seriously to reduce idle time to the minimum level.
Even we take action to solve it, idle time still exists in the production process. We cannot eliminate it 100 %, however, we have to ensure that it is under control.