In or out?24 April 2013

Can outsourcing give you anything more than you can get from your own maintenance department?

Is it safe to allow anyone other than your own engineers to maintain your core production equipment? For a long time, industry drew a sharp distinction between non-essentials, like HVAC and security – which could confidently be handed over to third parties – and plant that is critical to the production process and therefore hugged tightly to the collective factory chest.

Not any more. As economic belts tighten, management teams are increasingly wondering what gives them the best deal: investing in their own maintenance teams and systems, or outsourcing the whole shooting match to someone contracted to provide an agreed service at a predictable price?

It's not an easy decision to make. Some of the most highly skilled names in manufacturing – many of them winning entrants in the Best Factory Awards – have weighed the odds and come to different conclusions. Take just a few of them. Superb in-house maintenance skills are fundamental to Camfil Farr, 2011's Best Engineering Plant.

This company has such profound understanding of its equipment that it can coax performances from it that are often beyond even the manufacturers' most optimistic assessments. And its engineering workshops, stores and documentation are managed with a precision that make the average RN submarine look untidy. A third party would have to go some to do it better.

In the same vein, Entek – the 2012 Best Process Plant – regards TPM (total productive maintenance) as the platform that supports its entire operation, allowing it to double its productivity in three years. In-house engineering expertise is fundamental to its success. On the other hand, Saint-Gobain Glass UK (SGGUK), previous winner of both Best Factory and Best Process Plant, adopted a halfway house in its lean, highly automated plant, where vibration checks alone are made at over 3,000 points on each line.

This plant happily combines routine, on-site monitoring by its own craft teams with more detailed reports from a specialist, using thermography, vibration or oil analysis. And, as we shall discuss later, household names such as Tate & Lyle and Mars are among those choosing to totally outsource their maintenance.

In essence, craft skills are an insurance policy against failure. But, like any form of insurance, nothing attracts certain disaster more swiftly than cancelling the policy. However, there is no doubt that qualified maintenance technicians and engineers are in short supply and don't come cheap. What's more, even when the business has recruited good ones, there's no guarantee they are being used properly.

Terry Wireman, maintenance guru and author, asserts that most internal maintenance groups are only 33% productive. That figure is open to dispute – and I know a lot of very good engineers whose opposition would be neither quiet nor passive – but it is still worth considering the alternatives.

Engineering services company Peme maintains production assets worldwide, often supporting production lines that it has previously installed on a project basis. "There are two drivers that make plants come to us," says managing director Ashley Maile. "Typically, their maintenance costs are out of control or they are just convinced that more can be done for less. Increasingly, however, they come because they need our scientifically-based services to get more throughput from their assets. Maintenance is our core business and we are better at it."

The contract scope varies, but Peme can replace in-house maintenance teams entirely. It has, for example, been the sole maintenance resource for three Mars plants for more than 26 years.

In general, however, Maile says that full outsourcing occurs more frequently in organisations controlled by venture capitalists, or lined up for eventual sale, where showing high levels of asset utilisation are as important as employment costs. Most companies prefer to take a more gradual approach: "Some clients have good people that they don't want to lose, so they need to create roles for them," he explains.

Often, as with Mars, the Peme team will include people transferred from the client under TUPE regulations and "trained to be our people". Tate & Lyle took a different approach, looking after the reactive maintenance itself but outsourcing all the planned maintenance to Peme, including populating its computerised maintenance system and co-ordinating preventive work with production. "It gives them a safety blanket that they still have technical knowledge in their organisation – they are not totally reliant on us," explains Maile.

But he believes there are other advantages when companies adopt this route. "When most organisations start talking to us, they are in the break it/fix it loop. They want to stop that continuous loop and the answer is planned maintenance – but their guys keep getting dragged off that to do the reactive stuff."

By taking over the planned elements, Maile says Peme can gradually impact upon the loop through introducing improved maintenance techniques. "There are many factors that go into breaking the loop, but identifying them will ultimately reduce the amount of reactive time hugely."

He is no fan of dividing the maintenance effort into specialised compartments: "You can't separate things like condition based monitoring (CBM) or thermal imaging from the everyday tasks. You need to make them part of your maintenance provision. Until you can be sure that the guy actually tightening up the nut and bolt understands those techniques and the science behind them to make daily decisions, you will never truly get the benefit of predictive maintenance."

He's on dangerous ground – there are plenty of factories, like SGGUK's, which dovetail specialist services with their own deep in-house expertise. But Maile is adamant that there are real risks in disconnecting services that aren't high value but are fundamental to preventing breakdowns. "There are several considerations that need to come together to know why something keeps failing," he explains.

"Sometimes, when you carve the services up, you put a barrier into that information flow and therefore into improvement. Suddenly, you wonder why you have been living with recurrent problems for six years – and it probably comes from the fact that several contract companies haven't been talking to each other."

Maile also makes a good case for the added value that comes through a single-supplier relationship. Take this example. One customer was using a Sweetland filter press to remove waste water from slurry to produce a dry cake – much cheaper to dispose of than the wet version. It's a massive piece of equipment and every time its efficiency levels dropped – which was often – it had to be shut down and stripped to find the leaks.

Each time, it took two engineers up to four hours, and then another two hours to change the membranes. And every time it was stripped, every gasket and plate that was removed couldn't be reused, because they wouldn't reseal properly.

This had been going on for 10 years and was costing tens of thousands of pounds. Peme investigated a lot of alternative, less intrusive strategies, using CBM techniques. By experimenting with ultrasound equipment, it developed a predictive technique for finding leaking membranes, which means they can be replaced before the problems stack up. And it now takes under five minutes to monitor condition as part of the normal press cycle. That has cut maintenance time from a whole shift to around two hours. Less engineers' time, less spend in spares and uninterrupted production flow – what's not to like?

Full outsourcing will remain contentious: many companies will always regard it as losing control of the most important part of their business. Less contentious is outsourcing the management of maintenance inventory. Spares can constitute as much as 60% of maintenance spending and it is a constant gripe among manufacturers that the volume and costs are way out of control.

It's easy to understand why: no one wants to be caught short without the right replacement part when the production manager is breathing down your neck. So they err on the safe side – after all, adding up the money buried in just-in-case components is not really centre of the day job.

Multi-million pound savings
It's a different story for suppliers whose whole focus is on usage rates and sharp procurement. Tata Steel Europe (TSE) is a good example; its partnership with Brammer has brought it more than £2 million in cost savings.

TSE's acquisition of Corus in 2007 was the catalyst for major change in its UK stores operations. With 20 UK production sites, including two manufacturing hubs in Port Talbot and Scunthorpe, it felt that standardised processes in its stores could deliver all-round time and cost savings. After an 18-month benchmarking study, it appointed Brammer to supply MRO inventory and services for bearings and other engineered products.

It was no sinecure. UK MRO stores management had been decentralised so multiple descriptions were sometimes used for the same item across different sites. As a result, employees didn't know whether the item they needed was in stock at another location and would often resort to ordering a new one if it didn't appear to be available locally. The inevitable result was high inventory levels, in excess of 700,000 SKUs, with a combined value of more than £400m, and variable stock accuracy.

Brammer's brief was not just to cut costs but to add value. The first challenge was to engage staff in work areas and in stores, making the case for change with both inventory and engineering TCO (total cost of ownership) projects.

The firm dedicated 4,000 man-hours to the project, beginning with a full audit of every stores operation. Focusing on bearings, the team viewed 26,000 SKUs and validated every item with a clear and consistent description. After a joint TSE/Brammer quality assessment, obsolete bearings or those no longer fit for purpose were sold or scrapped to free up space. Brammer also identified 2,500 SKUs available within 2–5 working days, meaning they did not necessarily have to be kept in stock.

Its engineering support team included six continuous improvement (CI) specialists, all of whom had trained in major OEMs. They implemented a TCO programme prioritised by return on investment, closely aligned with TSE's own group procurement initiatives and engineering excellence programmes. It centred on whole life cost analysis of assets rather than simply on initial expenditure.

So far, £2.2m of cost savings have been identified across more than 160 individual projects. Centralised master data management minimises confusion and duplication for the stores in each plant, and vendor consolidation means much sharper pricing. Barcoding and real-time data management are being rolled out across all stores.

Chris Ditton, TSE's programme manager for stores transformation, says that "feedback from staff is that stores are vastly improved, which can only impact positively on production". He believes that the £2.2 million is just a start: "Due to the sheer scale of our UK operation, we estimate that in the last two years, we've extracted only around 20% of potential cost savings."

Checklist
Is maintenance one of your core competencies? According to factory maintenance specialist Advanced Technology Services (ATS), if you answer 'no' to two or more of these, outsourcing may be right for you.

- Have you got the time, resources and experience to develop a planned preventive maintenance programme?

- Can you find, train and keep technically competent maintenance personnel?

- Are you good at analysing maintenance problems, finding the root causes and driving continuous improvement?

- Do you already analyse repairs, procurement, management, ownership,warranty administration and total cost of ownership issues?

- Can you maintain low inventory levels and still have the right spares when you need them?

- Do you stay a step ahead of technology demands?

Annie Gregory

Related Companies
Advanced Technology Services UK Ltd
Brammer UK
PEME

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