Page 46 - MetalForming March 2014

The Hidden Costs of
Accidents
The hidden, or uninsured, costs of an accident
can be four to 10 times greater than the dollar amount covered by insurance. Reducing accidents through
an effective loss-control program is like having
an additional salesperson on your team.
Protect Profits Through Loss Control
While profits are negatively impact- ed by the cost of work accidents and injuries, loss-control efforts remain frequently overlooked as a means of protecting the profits of manufacturing companies. When competition is fierce and profit margins become squeezed, an improved safety record with reduced accident and injury costs might just have a greater effect on profits than the best salesperson.
The amount of sales required to pay for hidden accident costs varies inverse- ly to the profit margin. The chart below illustrates the dollar sales required to pay for accident costs at varying prof- it margins.
A well-written, compliant and pub- lished loss-control/safety program can help protect a business from hid- den costs by improving worker per-
The hidden costs of accidents occurring in manufacturing plants can be due to:
• Lost time by the injured employee
• Economic loss to the injured employee
• Lost time by coworkers
• Loss of efficiency due to breakup of the crew
• Lost time by the supervisor
• Selecting and training a new employee
• Damage to tools or equipment
• Loss of production capacity of damaged equipment
• Failure to fill orders
• Deductibles
• Customer dissatisfaction
• Damage to property
• Disruption of cash flow
Hidden costs can have a sizeable
impact on a business’s profitability. A business with a 4-percent profit margin must sell an additional $125,000 in products or services to pay for just $5000 in hidden accident costs.
When you consider numbers like these, it becomes apparent how reducing accidents through an effec- tive loss-control program is like hav- ing an additional salesperson on your team.
Sales Dollars Required to Pay for Direct and Indirect Costs of Accidents, $
Accident Cost, $
Profit Margin
1 percent
2 percent
3 percent
4 percent
5 percent
$1,000
$100,000
$50,000
$33,000
$25,000
$20,000
5,000
500,000
250,000
167,000
125,000
100,000
10,000
1,000,000
500,000
333,000
250,000
200,000
25,000
2,500,000
1,250,000
833,000
625,000
500,000
100,000
10,000,000
5,000,000
3,333,000
2,500,000
2,000,000
44 MetalForming/March 2014
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