The benefits of outsourced FM to manufacturing companies
Manufacturing companies can benefit from an outsourced facilities management services but often fail to see the opportunities despite demonstrating proven cost savings, as Jeremy Waud explains.
Jeremy Waud—September 2007
THE CUSTOMER BENEFITS FOR ORGANISATIONS that work with a FM company have been well documented and include lowering costs, improving service, streamlining administration and reducing headcount. It is a solution that appeals to companies and professionals, who have a clear business view of their company and are looking to save money and increase efficiency whilst maintaining key services. It can enable organisations to save money from non-core areas that do not affect the main running of the business, such as catering, and re-allocate this money where it is most required. In some cases cost savings can be achieved whilst the number of staff employed by the FM company can be increased and staff transferring can benefit from industry focussed training and substantial career development opportunities. Sectors that have embraced the outsourced FM concept include retail and property management, banking and leisure. However manufacturing companies have been slow to join the party. This is perhaps surprising given the economic pressure facing the sector as a whole.
According to the DTI, UK manufacturing output has been falling since December 2000. In its ‘Manufacturing Strategy’ the Government calls for the sector to improve productivity and competitiveness, thereby creating better paid jobs for manufacturing workers and higher returns for manufacturing investors. However, UK manufacturing companies continue to see a rise in input costs, with oil and energy price rises the main factors and have to continue to absorb most of the cost increases rather than pass them on to customers. The commercial reality of life is that most forms of manufacturing are directly affected by global markets and competition that are substantially influenced by wage rates and operating costs often in third world economies—competition is therefore tough if survival and expansion is to be on the UK manufacturers menu.
Whilst it would be ridiculous to suggest that FM is a panacea to all the issues facing the manufacturing sector, there is no doubt that there are cost and service benefits to be had. They are not traditionally big users of integrated FM companies with machine tool maintenance and allied supply chain arrangements for instance either undertaken by in house staff or specialist contractors, or indeed the original manufacturer for each asset.
The sector is immense. Manufacturing companies make up a fifth of our economy and employ four million people—one in seven of the workforce—and many more indirectly. This mainly untapped market has to be a good opportunity for FM companies, as the fundamental principles of the service remain the same whichever the sector. Smart FM companies should be able to apply their historic expertise in staff, and contract, financial and purchasing management to bring significant benefits to the manufacturing sector.
The food manufacturing sector seems more enlightened than the traditional heavy industry sector, with Birds Eye Walls, Sarah Lee, Campbells Soups and Gerber Foods all examples of companies who have exposed themselves to the benefits of facilities management outsourcing. At Incentive FM some years ago we invested months of work assisting Fox’s Biscuits, a division of the massive Northern Foods Group, to review its facilities management outsourcing cost saving opportunity. This sadly resulted in a board who even when presented with real savings options of over £1m across two factories decided that the perceived cultural upheaval and staff unrest, coupled with a lack of Trade Union support, was enough to remove their appetite for change. They decided to try and implement some of the new initiatives themselves as an in house activity with predictably poor results and hardly any savings at all.
Opportunities
Industry needs to grab the opportunities by the scruff of the neck and work with one of the many very able suppliers. Surprising and rewarding results are just around the corner if people can open their minds to what really is possible.
Pall Corporation, the largest filtration, separations and purifications company in the world has worked with us at Incentive FM since 2004. This highly unusual contract covers all machine tool maintenance at Pall’s manufacturing plant in Portsmouth. Pall manufactures £35m of shipments from this plant each year and any downtime is extremely expensive and damaging so the choice of maintenance partner is very important.
The decision to award the machine tool maintenance to us was designed to save money, increase production efficiency and reduce expensive downtime. As part of the tender process we introduced a detailed planned maintenance programme designed to support this.
We are responsible for the maintenance of all Pall’s machinery, which has an asset value in excess of £6m. Additional services include responsibility for all purchasing and some office support. All eight members of the existing inhouse maintenance team transferred to Incentive FM under TUPE regulations.
Some large specialist engineering companies exist who could perhaps undertake this wider role, indeed some were up against us during the tender process. We believe that this was the first time an FM company had been awarded work of this kind. We handled the transfer of staff seamlessly and the maintenance team working direct for us is now even more focussed to the output needs of the ultimate client. There has been an increase in production efficiency, and a lack of machinery downtime, all of which is measured and recorded.
Although we are relatively new to the specialist manufacturing sector, by combining our traditional FM skills with the 60 years cumulative specialist machinery knowledge that exists within the maintenance team we have been able to come up with a solution that supports our client’s objectives of achieving cost savings and increasing efficiency.
The programme has been sufficiently effective across the board to encourage Pall Corporation to review and subsequently award (again in competition) similar contracts at their Newquay and Redruth factories to Incentive FM in 2006 and 2007 respectively. The latter contracts utilise the same approaches to staff and maintenance alongside the web based asset management and PPM system that Incentive FM rolled out at Portsmouth. They have broadened their scope, however, to include the traditional infrastructure maintenance services associated more commonly with the FM industry (building fabric, main plant M&E, security, stores management, grounds and cleaning etc) whilst maintaining a key focus on core production plant and systems.
“There continues to be a great deal of interest in this concept within the manufacturing sector—notably at board level but a much lower level of acceptance from plant and production managers who frequently (perhaps short-sightedly) see this development as an invasion of their territory as opposed to an opportunity to focus on core business functions and issues of global competitiveness and differentiation.
At Incentive FM we are also looking at manufacturers outside the UK. We are currently mid-way through a European review of the FM structure at Delphi, the leading global supplier of leading automotive component suppliers. Incentive has already produced benchmarking reports and cost reduction suggestions for Delphi’s automotive component manufacturing sites in Romania, the Czech Republic, Slovakia and the UK and is now looking at sites in Turkey, Morocco, Portugal and Poland. The objective is to drive down costs whilst improving standards with particular emphasis on compliance, headcount and cost effective purchasing.
So let’s hope that the more enlightened companies like Pall Corporation and Delphi encourage a greater acceptance of what is possible in the highly competitive manufacturing sector and that some more heads come out of the sand!
Jeremy Waud is MD at Incentive FM
