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Do you know your way around an SLA?

June 6, 2017
David Berger says service-level agreements forge solid partnerships with external and internal customers.

One of the key challenges for asset managers is building a strong partnership with external service providers for achieving common goals. A two-way service level agreement (SLA) formalizes the relationship by establishing the type and level of service expected from the outsourcer, and the quality of input required from your operations department. To achieve performance targets outlined in the service-level agreement, internal and external resources must clarify roles and responsibilities.

This really should be no different if maintenance work is done totally in-house. In fact, a service-level agreement between internal asset managers and operators, complete with performance bonuses and penalties, should be considered no less than mandatory to ensure that expectations are clear and not taken for granted given that everyone is working for the same company. This seems more obvious for formal, third-party, external relationships, but in practice, it should be equally applicable to internal service departments.

A CMMS is critical for developing a plan for executing against the service level agreement, and monitoring progress towards attaining service goals. Most packages at least accommodate measurement of service-level achievements and target variances on a batch basis. More-advanced packages collect service-level data such as downtime and response time in real time and integrate data with condition-based maintenance functionality.

Described below are the key components of a two-way service level agreement with operations. This can be used as a template for developing your own SLA.

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Glossary of terms

Different terms mean different things to different people. For example, to maintenance, “downtime” most likely means the time a machine is down due to a breakdown. To operations, downtime may mean the total time a machine is not working due to machine breakdown, scheduled preventive maintenance, lack of parts, lack of operators, and so on.

Furthermore, the start and end of downtime can be controversial. Suppose it takes operations 10 minutes before informing maintenance of a breakdown. Perhaps the breakdown was intermittent. In either case, the start of downtime depends on your definition. Similarly, if operations does not react immediately when told by maintenance that the machine is repaired, then when does downtime officially end?

Thus, the service-level agreement must clarify key terms in the document so that both parties have a common understanding.

Service description

This section of the SLA describes the various services offered by the internal or external maintenance function to operations. Three examples are as follows:

  • Use-based maintenance. Administer program of routine maintenance on each asset (e.g., lubrication, adjustments).
  • Condition-based maintenance. Monitor the health of all equipment on a regular basis in order to identify repair work required. For example, collect data from key assets to determine trends in component wear. Repair or replace components trending outside acceptable control limits.
  • Reliability management. Track the problem reported, the root cause, and the action taken for every case reported. Use data to better maintain the asset base. For example, identify recurring problems, eliminate high-cost root causes, and fine-tune the failure tree to quickly determine the best course of action for a given problem.

Service goals

The maintenance and operations departments share common goals, such as minimizing downtime. Historically, however, efforts to set performance targets for the internal/external maintenance function have been rather one-sided, made without regard for the dependency on operations. To minimize downtime, for example, maintenance requires timely and accurate reporting of the problem.

The SLA must be two-way to be truly effective. Therefore, operations should be given performance targets for quality of input, for example as it pertains to the state of preparedness of the equipment to be serviced.

Let’s look at what maintenance and operations might agree on for, say, emergency repair work on critical assets. The service goal is to respond as quickly as possible to a breakdown and restore the equipment to good working order with minimal interruption.

Outlined below are the performance targets for both maintenance and operations in support of this goal. A good CMMS with condition monitoring and an automated shop-floor data collection system interface is the ideal means of tracking many of these measures.

Maintenance. The target response time for maintenance in answering an emergency call will be within five minutes for class ‘A’ equipment (i.e., critical equipment), 100% of the time. For less-critical equipment, the performance target is within 15 minutes, 95% of the time. Service time for emergency repair of critical equipment will be within 20 minutes, 98% of the time.

Other possible performance measures are the time taken by maintenance to inform operations that the job is complete and the percentage of work orders logged as “emergency.”

Operations. Possible measures for establishing performance targets are how quickly operations notifies maintenance that emergency service is required, the accuracy and completeness of the work request, the time taken to begin production after notification by maintenance that servicing is complete, and the percentage of times the root cause of the breakdown is operator error.

Roles and responsibilities

The following are sample statements that might appear in this section of the service level agreement:

Operations is responsible for ensuring that operators are fully trained in how to set up, use, and clean their equipment and conduct minor maintenance functions such as making adjustments, adding lubrication, and performing inspections. Maintenance will assist in developing, delivering, and updating course material.

Operations and Maintenance will share responsibility for developing annually an asset care strategy, complete with five-year plan and budget (e.g., capacity planning, major equipment repair/replace schedule).

Maintenance is responsible for ensuring that contingency, business recovery, and disaster plans are established and tested to ensure minimal disruption to operations.

Measurement and escalation

If performance targets are not met by either maintenance or operations, then both parties must agree to a process by which issues will be resolved. For example, a review committee or service quality team can be formed to resolve problems, with group members drawn from across the organization.

The CMMS is used to report regularly on service levels and performance target variances. More-advanced CMMS packages provide sophisticated root-cause analysis tools to better identify improvement opportunities.

A survey should be conducted at least once a year to determine both parties’ satisfaction levels with the SLA. The survey results, coupled with service-level reports, will provide important input when reviewing the effectiveness of the service level agreement each year.

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About the Author

David Berger | P.Eng. (AB), MBA, president of The Lamus Group Inc.

David Berger, P.Eng. (AB), MBA, is president of The Lamus Group Inc., a consulting firm that provides advice and training to extract maximum performance, quality and value from your physical assets, processes, information systems and organizational design. Based in Toronto, Berger has held senior positions in industry, including for two large manufacturers, and senior roles in consulting. He has written more than 450 articles on a variety of topics such as asset management, operations management, information technology, e-commerce, organizational design, and strategy. Contact him at [email protected].

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