By Joe Lazzara, Scientific Technologies Inc.


Machine safeguards are designed to protect a company’s most important assets – its employees. The use of proper safeguarding methods and safety devices are required by regulations, but more so it simply makes moral and common sense to provide a safe working environment. The same equipment that reduces the severity or prevents an injury also provides an opportunity to make a positive impact on a company’s bottom line.

Nobody wants an injury, and employers usually do not want to think about the "what ifs" associated with an injured employee – let alone calmly analyze an accident in terms of dollar costs and the financial benefits associated with machine safeguards and an active safety prevention program. As a result, examining and analyzing the costs of an injury is typically limited to totaling the direct out-of-pocket expense associated with each specific injury, usually taking the form of what the insurance company reports. Developing a complete picture of an injury and all associated costs and activities will reveal a better understanding of machine safeguarding practices and its impact on operations and the bottom line.

Total cost of an injury
The cost of a work-related injury goes beyond hospital and medical bills. The cost of an injury cascades throughout the company on the plant floor as well as in the area of support functions. Costs include immediate and deferred direct and indirect expenses. Immediate direct costs begin with the loss of the worker’s time resulting from the injury or illness. Medical expenses, such as hospitalization costs, x-rays, drugs, doctor bills and the cost of transporting the injured worker to a doctor or hospital are further examples of direct costs. Even when covered by workers compensation or disability insurance, these costs will still have a financial impact on the company through future rate increases.

Deferred direct expenses include the cost of rehabilitation of the injured employee, and would include expenses such as physical therapy, use of medical devices and follow-up medical treatment. In many injury cases, retraining of the injured worker for other job functions is a necessity for them to re-enter the workforce. For example, an injured machinist maybe trained to be a computer or NC programmer.

Indirect Expenses
Indirect expenses are costs resulting from the accident, other than those directly attributable to the injured worker. For example, additional lost time includes that of the employees involved in helping the injured worker such as a company emergency response team as well as those who stop to see "what happened?" Considerable supervision and management time will be spent in resolving a number human resource, accident investigation and production difficulties brought about as a result of a lost time injury.

It is also easy to extend these costs to include lost time or throughput of the machine or production process involved in the injury. If the machine is idle because of the injury, the costs of an injury will extend to the lack of production of the related production equipment that further process the material from the machine involved in the incident.

Lost production time can necessitate the need for overtime expenditures to resume production and restoring the plant back on schedule. In addition, it may be necessary to train a new or transferred worker to perform the work of the injured operator during his or her absence.

Besides production costs, an injury that results from improper use of a machine can, in some cases, also result in damage to the machine. In this case, the accident adds repair costs and more machine downtime. It may be necessary in some machining operations to consider the cost of a damaged workpiece or tooling, which may be a considerable investment and actually belong to the customer. The repair or replacement will lead to further expenses and lost production.

Regulatory Costs
Additional indirect costs include the expense of investigating the injury and complying with statutory requirements such as filling out forms for OSHA or your state safety agency. In any instance, a company will have to contend with insurance and worker’s compensation claim forms, as well as accident investigation forms. The costs of an injury may also include possible litigation.

An injury can influence costs, even outside the company. An injury can affect insurance rates, and may result in fines from OSHA and state regulatory bodies. Penalties from OSHA can range from nothing to as much as $70,000 per machine, if a willful violation occurs. And then, there is always the expense in retrofitting the necessary safety equipment to help prevent an injury from recurring.

The cascading impact of an injury
Clearly the complete shock of an injury goes beyond financial matters. The emotional impact to the injured employee and co-workers is significant, and can result in a loss of pride, trust and security in the employer. When employees, a company’s most valuable asset, are not able to work, they will feel less an integral part of the company’s success.

After analyzing all costs associated with an injury and considering its total financial impact, it is not unusual to realize that the actual total cost of an injury can run from four to ten times the immediate, visible, direct costs as may be stated by a company’s insurance company. When considering all of the details of the cost of an injury, including direct and indirect costs, it is apparent that the total influence on the bottom line is significant. Often those safety projects which you just never seem to be able to get around to are often the ones you cannot afford to be without.

Until next month, be safe out there!

"Lazzara on Safeguarding" is a monthly column written for Plantautomation.com and Safetyonline.com

Joseph J. Lazzara is President and CEO of Scientific Technologies, Inc ("STI"), the largest provider of automation safeguarding solutions in North America.

Joe began his career with Hewlett Packard in 1973 where he had responsibility for safety and environmental issues for one of HP's largest divisions. After several other positions at HP in environmental, process and engineering management, Lazzara joined Scientific Technologies, Inc. (STI) in 1981 as Vice President and became President in 1989 and then
President and CEO in 1993.

He has a Bachelor of Environmental Engineering degree from Purdue University and a Masters in Business Administration degree from Santa Clara University.

Joe is the Chairman of the Safety, Health and Environmental Committee for the Association of Manufacturing Technology (AMT). He is also a member of the Board of Directors of the American Electronics Association (AEA), the nation's largest high-tech trade association.