Cost Considerations When Outsourcing Maintenance and Engineering Tasks

As if outsourcing wasn’t tough enough, the COVID-19 pandemic has further complicated the decisions maintenance and engineering managers must make

By Andrew Gager  
OTHER PARTS OF THIS ARTICLEPt. 1: Outsourcing: The Inside Story of Contracting Maintenance and Engineering TasksPt. 2: Outsourcing: Assessing In-House Technician SkillsPt. 3: This Page

Cost reduction or avoidance is another issue managers must consider when discussing the possibility of outsourcing. We are all striving to reduce costs, optimize our resources, work smarter not harder, and do more with less. The pressure that managers and their staffs face every day in carrying out their duties is tremendous.

When  the goal is to reduce costs, top executives in organizations tend to look first at labor. They don’t look at resource utilization or process improvements first. I’ll talk about those later.

With that said, cost reductions and avoidances can take many shapes, such as recruiting, training, payroll, and health and retirement benefits. They enable the facility to take the services of highly experienced and trained experts to execute their work in a more efficient and effective form.

In my February 2019 column I wrote about trades utilization. I’ve also made several presentations at NFMT conferences about the true cost of maintenance. The typical maintenance technician spends 24-26 percent of the day walking to and from the job site and another 18 percent looking for parts and tools. Those activities amount to almost 50 percent of a day spent not doing what the organization is paying him or her to do. Several factors contribute to those numbers, but the fact is that no operation in the world can function cost-effectively at that utilization rate.

So managers must determine if there is an internal issue with processes or people and, if so, whether outsourcing will provide a more cost-effective return on investment. Managers need to keep in mind that the organization is paying for technician expertise, and one expectation in that scenario is that the technician brings along best practices. I’m willing to pay for quality service, but I’m not willing to pay 100 percent for 50 percent of service.

Tech talk

Investments in technology and innovation also come under close scrutiny when discussions turn to outsourcing. Although technology continues to advance rapidly, so do the associated costs. Many operations either do not have the funds available to invest, or they lack the skill set to maintain the installed systems.

Take the internet of things (IoT) and the network of accessible devices — thermostats, sensors and actuators, among them — that a facility can use to monitor and manage energy use. Advances in HVAC systems can be particularly expensive, especially when applying smart technology to reduce heating and cooling costs substantially. These sophisticated systems need highly competent people to maintain them cost-effectively and efficiently.

Drones also are becoming more common in and around facilities. Some are basic, while others are extremely advanced in their use of technology, such as the capability to perform infrared imaging. Outsourcing to companies that specialize in this technology or advanced innovations can be beneficial.

The most successful organizations capitalize on capability, partnerships and innovation resourcing, according to a recent Forbes article, which uses the term capability sourcing. As discussed earlier, managers across all industries face a shortage of competent talent, and using outsourcing expertise can enable them to tap into a rich pool of resources to compensate for this shortage.

When managers decide to outsource, they are also committing to a partnership, and they should view these partnerships as strategic relationships. In my February 2020 column, I mentioned that an outsourcing contract should include three elements: key performance indicators, a communication plan, and a process for resolving conflicts. In the outsourcing relationships I’ve seen fail, one of these three elements — or all of them — was missing from the contract.

Maintenance and engineering managers considering outsourcing maintenance activities must weigh both internal and external considerations in making the final decision. The impact on facilities of the coronavirus has only made the decision more complex.

Whether the decision is to retain maintenance and engineering work in-house or to outsource the activities, managers need to consider all the possibilities in determining which option is best for their departments and organizations. 

Andrew Gager  — a.gager@nexusglobal.com — is managing director for North America with Nexus Global Business Solutions. He has more than 28 years of facilities and manufacturing experience, ranging from warehousing operations to plant management. He is a registered CMRP, CPIM, CRL, and Six Sigma Green Belt, and he is formally trained in change-management principles.

Continue Reading:

Outsourcing: The Inside Story of Contracting Maintenance and Engineering Tasks

Outsourcing: Assessing In-House Technician Skills

Cost Considerations When Outsourcing Maintenance and Engineering Tasks

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  posted on 6/19/2020   Article Use Policy

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