The long term trend of Purchasing Managers Index – a key indicator of the health of UK manufacturing – is now consistently above the 50 point mark which signifies growth, a clear demonstration that the sector is in good health. There are a number of reasons behind this outlook. While short-term factors like the oil price will inevitably have a positive impact, the UK is now reaping the benefit of sustained investment over many years, in part fuelled by low interest rates. This has enabled manufacturers to invest in new state-of-the-art plant and machinery which has increased overall efficiency, productivity and competitiveness.
However, while the UK’s manufacturing success is cause for celebration, in each factory, process plant and industrial site there are vital contributors to this success who are, once again, being overlooked.
“The maintenance teams who keep this equipment working deserve a lot of credit for helping deliver these numbers in often exceptionally difficult circumstances,” says Alan Whetstone, managing director of ERIKS UK. “As industrial technology has taken giant leaps forward over the last decade, our maintenance teams have been stretched ever thinner.”
Outsourcing maintenance is increasing
The primary driver of this is the complexity of the technology used in modern machinery. In fact, a number of surveys recently have made the point that outsourcing maintenance for complex machinery is increasing because of the impracticality of maintenance teams being able to do the job themselves. “While there can be little doubt that the maintenance engineer’s job has got more and more challenging, there is little evidence that production departments are creating the ideal conditions for maintenance to succeed,” Whetstone says.
One of the oldest arguments in industry is between production and maintenance, with those responsible for maintenance, repairs and operations (MRO) wanting access to machines in order to perform essential service and repair work while production is unable to release machines because of the inevitable impact on output. “This is the root of the problem, namely maintenance and production teams, which should be on the same side, being pulled apart by conflicting objectives,” Whetstone continues.
That brings us on to the question of whether to outsource this maintenance or manage it with the internal workforce. Many companies recognise that maintaining the efficiency of their assets is not a core activity for any manufacturer. The obvious conclusion drawn from that is that everyone would be best served by handing this function over to a specialist outsourcing company for whom maintenance is a core activity.
“The complexity of many modern manufacturing facilities often means internal engineering maintenance teams spend significant time dealing with immediate requirements to keep production lines running,” Richard Raybould, head of site-based services at Brammer, explains. “This means they may have little time available to focus on other, more strategic maintenance-related projects which can add real value to operational efficiency and therefore profitability.”
There are several reasons that manufacturers consider outsourcing maintenance; chief among these are staff retention, lack of knowledge and cost savings. “The inability to recruit and retain engineers is a problem because they are becoming increasingly scare,” Wayne Pheasey, of maintenance outsourcing specialists PEME explains.
“Lack of maintenance knowledge among the engineering workforce in terms of how to improve reliability is another factor. But, more often than not, it comes down to a decision that maintenance of the assets is no longer a core activity for a manufacturer. In the same way that they outsource the management of their facilities, a lot of them are looking at outsourcing the maintenance of the assets.”
Pheasey spends a lot of his time visiting manufacturers. Often, their first response when he broaches the subject of maintenance outsourcing is that they are not interested. “During the course of the conversation we can talk about their problems and often it is an ageing engineering team, a maintenance plan that has been around for decades and if we’re lucky a computerised maintenance management system (CMMS) that has probably not been updated since it was first implemented,” he explains.
“In effect they are not really carrying out any maintenance, simply operating a run to failure situation. They cannot see a way their team can deliver a meaningful maintenance regime without someone else managing and upskilling that team.”
Pheasey explains that cost reduction is rarely a factor in the final decision. “If you can make it cost neutral it is easier to sell to the finance director, but it is very rare that a company come to us with cutting costs as a reason for maintenance outsourcing. It is normally because they can’t recruit and retain or their current maintenance function cannot deliver a word-class service.”
One of the challenges when considering outsourcing maintenance, or indeed any other function, is the TUPE regulations. TUPE is an acronym for the Transfer of Undertakings (Protection of Employment) Regulations. They were first passed in 1981, but overhauled in 2006.
TUPE is a significant and often tricky piece of legislation adopted by the UK in order to implement the European Acquired Rights Directive. Its purpose is to protect employees if the business in which they are employed changes hands or decides to outsource their work. Its effect is to move employees and any liabilities associated with them from the old employer to the new employer or outsourcer by operation of law.
“When you do a full outsource you have to TUPE across the existing team comes across with pay levels rights and benefits set,” Pheasey adds. “You inherit that cost and need to add gross profit to it so the only way you can deliver a cost reduction is to get a greater utilisation from that team and losing them by natural wastage, but also by sweeping more functionality into the team.
“What we would typically do is look at what other activities they currently outsource to another provider, such as PAT testing and see if there is the capacity to bring that into the in -house team and save costs that way.”
Key to any effective maintenance regime is access to the right replacement components when and where they are needed. Best practice in this area is therefore focused around both optimising inventory held on site, which should be routinely profiled to ensure accuracy and alignment with key component consumption, and a focus on standardising key products and technologies throughout the plant.
Harness available business advice
“An increasingly common tendency among manufacturers is to harness the independent advice available from professional MRO distributors in both of these areas,” Raybould adds. “Whether it is identifying the best product that can deliver efficiency benefits, such as extended life, faster changeover, reduced maintenance intervals or reduced energy consumption – and so reduce total cost of ownership. Or providing real-time analysis of spares demand patterns to enable stockholding to be optimised and any issues to be identified on the shop floor, a professional MRO distributor can add real value.”
The service can even go as far as establishing a dedicated MRO supplier facility on the premises, geared entirely to meeting the customer’s needs in terms of inventory and opening hours, but also able to support in-house teams by, for example, collating component kits for common maintenance tasks and delivering to lineside if required.
“Further value can be added in scenarios where the manufacturer may not even know there is a problem or that an improvement could be made, and this is where an independent external view can once again be invaluable,” Raybould explains. “For example, an audit of compressed air equipment can often reveal significant sources of leakage which could be costing the company thousands of pounds a year given the high price of generating compressed air.
“These leaks may not even have been known about, but the implementation of repairs or installation of new, leak-free components recommended through such an audit can pay for itself very rapidly, often within a matter of a few weeks.
“Similarly, a supplier able to offer guaranteed repair for components such as pumps and gearboxes within a pre-agreed time can become an invaluable partner to a manufacturer operating components from multiple OEMs who may not wish to deal with several suppliers for repairs of this kind. And it goes without saying that reducing the supplier base for different areas of MRO products and service supply will reduce the costs associated with administration while benefiting from a more strategic, partnership-based approach and the greater buying power of a larger organisation.”