Outsourced maintenance impacts production and profitability

March 26, 2014

Equipment reliability is critical to a plant's capabilities, but should it be a core competency or contracted?

Production capacity is ultimately a plant’s most valuable asset. That capacity depends on a variety of factors, including employees, engineering, utilities, and machine uptime, not to mention management of materials inventory. Any dip in the quality of these will have an impact on production, and therefore profitability.

So, how does a plant control equipment availability and production, especially in circumstances where maintenance is not a core competency and it’s outsourced to another organization?

“The relationship needs to be a partnership where both organizations trust in each other,” says Joe Bruno, director, training and development, SKF USA (www.skf.com/us). “The plant manager should see the contract organization as an extension of the maintenance department and manage the relationship as such. The contracted organization should realize the company they are working for is why they are in business and act as a partner.”

Mark Cox, director of technical training and advanced systems, Advanced Technology Services (www.advancedtech.com), believes a plant actually has greater overall control when the maintenance function is outsourced. “It’s important to define the term, ‘control,’” he says. “Does control mean dictating what maintenance does every day and how they must do it? Or does it mean making sure critical machines have top priority? Ultimately, control can be defined in terms of activities and results. If you aren’t achieving maintenance objectives, do you really have control? It’s absolutely true that some direct control of maintenance tasks is lost; however, control of maintenance results is significantly improved. Without data, results can’t be driven proactively. A third party must present performance metrics to justify the contract and demonstrate continuous improvement. Data allows fact-based decisions about root-cause problems, machines that require excessive maintenance dollars, and when to upgrade or replace. In the right relationships, the outsourced on-site leader sits on the plant manager’s staff and the outsourced provider is aligned with the plant manager’s goals and has developed maintenance strategies to aid him to meet them.”

Prior to awarding a contract, clear expectations should be defined and agreed upon between plant personnel and the contracting organization, recommends Andy Ginder, principal, Allied Reliability Group (www.alliedreliabilitygroup.com). “The agreement should cover fees, resources, methods, expected results, and how performance of the contractor will be measured,” he advises. “The performance indicators need to be established upfront, and the contractor should be evaluated against them on a regular, systematic basis, such as monthly. A small steering committee consisting of key site and contractor management should jointly review the indicators periodically, in a conference call or physical meeting, and identify both good and subpar performance, developing and installing corrective action plans to resolve the latter.”

Sanjay Karve, director of innovation and transformation group, manufacturing, Tata Consultancy Services (www.tcs.com), agrees that clear expectations and agreements set the course for collaborative success and control. “Plant managers can retain superior control of equipment reliability, and hence availability, by a stringent service-level-agreement-based approach,” he explains. “Depending upon the selection process for contracting organizations, some businesses have in fact gained better results from outsourcing than doing these activities in-house. Many large organizations with decades of experience in manufacturing and servicing plant equipment are expanding their services business to encompass not only their own products but also competitor products. For example, a large global power equipment manufacturer has expanded its offerings in plant maintenance to include competitive products in addition to its own to offer these services. When coupled with specialization on analytics and specific equipment technologies, these service providers are providing better results than stand-alone in-house maintenance.”

Joint partnership is the key requirement, says Kevin Starr, Research and Development Manager for Process Automation Lifecycle Services, ABB (www.abb.us). “Key performance indicators that accurately depict service activity that both parties can agree to are needed to ensure that service is being done to advance the customer’s production, quality, and performance,” he advises. “Couple these KPIs with a service delivery tracking system, as well as a performance monitoring system, and the building blocks are then set to establish programs that work toward continuous improvement.”

Production capacity has a huge business impact on capital-intensive sites, says Stanley T. Grabill, CMRP, principal industry consultant, reliability and maintenance, Honeywell Advanced Solutions (www.honeywellprocess.com). “Ultimately the business needs to decide what parts of its business are considered core,” he explains. “For example, Honeywell Performance Materials and Technologies does not turn over operations and maintenance to outside contractors among its 39 plants worldwide. In this case, they consider operations, technical, maintenance and reliability as part of their core. What this means is that contracted maintenance services do not control reliability, stores, planning, and scheduling. Rather Honeywell SMEs and supervision in the organizational roles ensure a seamless work environment. And the blueprint for contracted maintenance services essentially follows the process above.”

This particular model works for Honeywell. “With a rigorous management system of driving OEE improvement and having OEE as a key operations KPI, the organization was able to tie it directly to business results growing the aggregate OEE over 12% OEE basis points,” says Grabill. “For other organizations, it comes down to the decision of what is considered core to their business and where the division of responsibility lies. The particular model, as outlined for Honeywell Performance Materials and Technologies, is a testimonial on keeping operations and maintenance as core to the plants and the business.”

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