Outright decision

At Exeter-based precision engineering subcontractor UK Precision, the maintenance of much of the company's extensive range of CNC multi-axis machining centres and other advanced machine tools has been outsourced to third party specialists. "We have maintenance contracts in place on all our main production machines, as well as on our air compressors," says managing director Andrew Warren (right). That said, it's a policy that has its downsides: a cancellation fee is payable if planned maintenance is cancelled at short notice, which in a jobbing subcontract machine shop is an ever-present possibility. And as cancellation fees go, the hit isn't inconsiderable: a whopping 50% of the cost of the maintenance visit - which, as Warren concedes, "is big enough to give us pause for thought". But the benefits of outsourced maintenance outweigh such drawbacks. A firm believer in the virtues of regular maintenance, Warren is happy to concede that the business would struggle to service the equipment to the same standards at any kind of equivalent cost. "We don't have enough skills in-house to do the job ourselves - and we don't have enough of the machines to warrant the recruitment of a full-time service engineer," he says. "Outsourcing is a much more cost-effective solution." A couple of hundred miles to the north, at Cheltenham-based bathroom shower manufacturer Kohler Mira, buyer Ellen Dallimore faced the difficulties of sourcing a seemingly far less demanding skill set: catering. The company's headquarters building and adjacent factory had long found the provision of catering to be "a complete nightmare," she explains. The problem? A combination of high and unpredictable costs, coupled with the provision of an offering that saw very limited levels of take up. And that, she stresses, was when using contract caterers, rather than attempting to do the job in-house. "We were seriously wondering about the viability of offering an on-site service at all," she concedes. Writ large, the experiences of Kohler Mira and UK precision cut right to the heart of the debate surrounding the outsourcing of such basic facilities management services. From cleaning to catering, and from security to maintenance, the facilities required to run a modern manufacturing business can these days all be outsourced. In short, the outsourcing boom that was the 1990s has seen a competitive and high-quality marketplace evolve to deliver virtually any facilities management service that a manufacturer might require. But while all of these services are part and parcel of an effective operation, some are more vital than others. Equipment maintenance, for example, can soon bring a business to its knees if not performed properly. Just ask railway operator Railtrack - now Network Rail - which was forced to bring track maintenance back in-house in the aftermath of the 2000 Hatfield train crash, which was blamed on poor maintenance by outsourcing contractor Balfour Beatty. And just as evidently, some outsourced facilities management services are more complex than others. Outsourcing something like maintenance is one thing - outsourcing something like catering quite another. From perimeter security to cleaning, it's not difficult to identify aspects of facilities management that appear neither especially taxing nor expensive to handle in-house, rather than pay a third party to handle. So why do so many businesses choose to outsource, rather than handle facilities management in-house? And what can be done to render that outsourcing process as effective as possible? The familiar arguments in favour of outsourcing, of whatever nature, still hold sway. As with any form of outsourcing, there's considerable sense in a business being free to focus on its core competencies. Design; manufacture; sourcing; marketing; logistics - all these things deliver real added value. Facilities management, even in high-tech industries such as pharmaceuticals or semiconductor manufacture, fails to offer the same strategic leverage. And outsourcing facilities management also holds out the prospect of improved cost efficiencies, too. While it primarily outsourced its cleaning to ensure compliance with strict food industry cleanliness standards, Carlisle-based can manufacturer Crown Bevcan was certainly open to both absolute cost savings as well as opportunities to achieve a better cleaning performance for the same cost - through the use of alternative cleaning materials and equipment, for instance. And a contract with Essex-headquartered Sodexo Facilities Management offered just that. Sodexo was originally a contract catering business, explains Jeff Brades, marketing director for cleaning at the company, but the company increasingly found itself being asked to bid for cleaning contracts. "The logic appealed to us, because we could leverage two of our own core competencies: purchasing efficiencies - through economies of scale - and skills and tools in labour management and rostering," he notes. "Our focus isn't on driving down costs through paying people less: it's about managing their time better, and using checklists and monitoring tools to make sure that cleaning is being done optimally, and to the right standard, and that customers are getting what they're paying for." A similar point is made by Tony Bobath, finance director of contract caterers Catermasters, engaged by Kohler Mira to take over its on-site canteen. "It's about value for money, and delivering quality food at the right price, but also about cost avoidance, too, through using well-trained staff to minimise waste, and the correct observance of health and safety procedures," he says. Outsourcing also offers cost-avoidance opportunities in other ways. Nissan's car assembly plant in Sunderland, for instance, has used Initial Industrial Services for cleaning since the plant opened in 1986, but recently harnessed Initial's capabilities to reduce its waste emissions, by building a dedicated waste sortation and picking line. As the waste goes through the picking process, explains Initial's commercial director Donnie McCoy, individual items are grouped together and then recycled - including cardboard, paper, plastic 'correx' sheets, plastic bottles, plastic film, polystyrene, scrap glass screens, timber and ferrous material. And the impact has been considerable. The operation has increased annual waste recovery of recyclable materials by 30%, and reduced waste disposal costs by as much as £70,000 per year. In addition, added revenue has also been generated from the sale of the associated scrap, while new waste streams have been identified that should lead to greater recycling results in the future. And the cost efficiency of an outsourcing solution to facilities management can be amplified by careful selection of providers, and the implementation of best practice procurement contracts. Procurement specialist BuyingTeam, for example, specialises in the outsourcing of indirect services, and reckons that direct cost savings of 8-10% are readily available, says its head of facilities management, Don Welch. What's more, those are 'hard' cash savings, he stresses, calculated before taking into account improvements in service delivery. And the bigger the manufacturer, the greater the opportunities for such savings. Current client, Maidenhead-headquartered Allied Bakeries, for example, was able to look at rationalising an annual £5 million locally-procured spend on building services - plumbers, painters and small builders - spread over the company's 11 UK bakery sites. But despite the obvious attractions, outsourcing isn't always an easy option. Take Akzo Nobel, for instance. One of Europe's largest process manufacturers, the company took the decision to outsource the management of the giant servers in its global data centre to Wipro. Yet it did so after a period of dissatisfaction with the company's previous outsourcing partner, praising what it saw as Wipro's more responsive attitude, high-calibre personnel, and the ease of doing business with the Indian outsourcing specialist. Famously, too, cement manufacturer RMC brought its multi-million pound logistics operation in-house. Outsourced to logistics specialist TNT, and employing 380 staff, the operation operated 190 vehicles and moved 3.5 million tonnes of goods each year. "Going in-house," said the company, "will enable us to achieve better control, react more quickly, and also make cost savings." But thankfully, such stories seem the exception, not the rule. Melton Mowbray-based cheese manufacturer Tuxford & Tebbutt, for instance, employs specialist duct cleaning firm Ductbusters to clean the ducting in its cheese maturing stores - a 40-year-old building in a manufacturing site that goes back to 1780, in which cheeses are left, open to the air, to age and mature for a period of months. "Air quality is a very important factor in producing cheese," says factory manager Alan Whiston. "We thought about doing it ourselves, but quickly recognised that there was bound to be better external expertise than we had in-house." The problem, as Ductbusters' managing director Dermott Quinn explains, is simple: once installed, air ducts need specialist equipment to access their convoluted nooks and crannies, especially if the cross-sectional area is square or rectangular rather than circular. And sometimes, dismantling is required before cleaning can take place. Access is another problem - and Ductbusters' personnel required several visits to the site before the job was done, explains Tuxford & Tebbutt's Whiston. "They worked around us, fitting in with our requirements," he says. "We'd create a gap by moving some cheese, and they'd come and clean the ducts they could gain access to, from the space that we'd created." And such flexibility is essential if outsourcing is to make commercial sense, adds Mick Saltzer, managing consultant at Luton-based maintenance consultancy Mainnovation. "There isn't a 'one size fits all' solution," he stresses. "It depends on the organisation, and the company to which it is outsourcing the task: even in situations when the job can be undertaken in-house, outsourcing can make sense - due to resource constraints, specialist equipment, workload peaks or the need to fit in around production schedules and capacity constraints." Sodexo's marketing director Jeff Brades makes the same point. Just as cleaning a factory differs from cleaning an office block, different factories requires different cleaning regimes. "In terms of the desired outcome, the method of cleaning and the system of monitoring, factories have very different requirements," he stresses. "The type of cleaning, the frequency of cleaning and the nature of the cleaning materials and equipment that are used can differ widely." And back at Kohler Mira, the flexibility offered by incoming contract catering outsourcing specialist Catermasters has transformed the entire catering operation, adds Kohler buyer Ellen Dallimore. Catermasters has actively sought suggestions from on-site personnel via surveys, for instance, and put on the menu dishes that proved popular. A breakfast trolley also tours the site, catering for people on the production lines. A roast dinner costs around £3, and a bowl of soup with a piece of bread around 70 pence - indisputable value for money, and which has seen uptake soar. Previously, the canteen might have catered to between 20 and 30 people a day: now, numbers are between 200-300. And from a commercial point of view, Catermasters' ability to offer a fixed price contract has proved very welcome, as well. "Previously, the payments varied - which in practice meant we were paying for the waste," she notes. "Now, we're paying a fixed amount, and there's very little waste." In other words, as in all good outsourcing deals, the end result is a 'win-win' for both parties. And what could be better than that?