Equipment maintenance is tough work -- it's dirty, tedious and people-intensive (i.e., expensive). So it's no surprise many manufacturers have elected to focus on core competencies and outsource their maintenance work to service providers (SP), who promise to do the job better and at a lower cost. Often, the SPs are the same OEMs that manufactured that equipment in the first place.
"Maintenance is not something most manufacturers care to do. Very few young employees want to learn how to do maintenance," says Steve Roth, vice president of marketing for Indus International Inc. (Atlanta), an enterprise asset management (EAM) vendor. "As the older workers retire and the knowledge goes with them, companies are struggling with how to maintain the assets." Outsourcing promises to reduce the hassles and decrease the costs. It's not hard to see why so many manufacturers are handing off asset maintenance and management.
One effect of this trend -- going on for the past year or two -- has been the transformation of the enterprise asset management software space. Vendors of the popular EAM suites have evolved (or are in the process of evolving) their offerings to take a service management perspective. Indus, for example, has altered its focus to concentrate on what it calls "service delivery management" (SDM).
Where EAM vendors used to have to serve the needs of a single plant within a single maintenance organization within a single company, now they more often target highly decentralized, complex service organizations with multiple customers in distributed locations with disparate, mobile assets.
"Our whole model has changed. The application has had to adapt. Today, the assets are mobile, they are dispersed and there is multiple ownership of the assets. That meant a major shift in the way we approach the data model," says Hart Levy, product director, EAM solutions, for Indus.
The new generation of industrial equipment is costly and sophisticated. Electronics are making their way into presses and manufacturing lines. In many cases, it is no longer cost effective for manufacturers to take care of these problems themselves. They're looking outside the organization to the OEMs, who know the equipment intimately.
SPRINGING FOR SERVICE
For these OEMs, service has become a generous source of additional profit in an overall business climate that is less than forgiving. "Top line sales may not be stellar, so companies such as Pitney Bowes and EMC are looking at using service as a differentiator," says Michael Maoz, research fellow, service management, for Gartner Inc. (Stamford, CT).
Whereas customers are unwilling to pay for the better and more innovative products they're demanding, service is one area, so far, where their purse strings are not quite as tight. For example, Pitney Bowes (Stamford, CT), one the companies Maoz has studied, helps its customers identify and share maintenance and field service best practices across its plants, whether they're located in Hong Kong or Tallahassee. Innovations in service reflect its newfound prestige in the organization. "Service used to be done 'down there.' Now it's a C-level concern. These companies are taking this very, very seriously," says Maoz. Many CEOs view improving customer satisfaction through better service as the ticket to growth.
Most companies have already optimized their supply chain. For them, achieving the next level of process improvements and profit increases may well depend on how well they provide services. Using EAM software geared toward service management allows companies to manage by exception, reducing unnecessary routine maintenance tasks and optimizing the deployment of field service personnel and equipment. "Maintenance is one of the last untapped areas of process optimization. The goal is to turn it from a cost center to a profit center," says Maoz.
For some SPs, of course, service is already a profit center, since it is their only business. Take BASiC Energy Services LP (Midland, TX), for instance. With roughly 3,000 employees, the $400 million privately-held company provides well-site services to the oil and gas industry. With a fleet of 1,000 service vehicles ranging from bulldozers to trucks to servicing rigs, BASiC has concluded that preventing unplanned equipment downtime is paramount.
"These vehicles are all very maintenance intensive. They represent the revenue our company can produce. They are the point of service to the customer. Premature failure of any of the components results in a loss to us," says Mark Rankin, vice president of business development for BASiC Energy, which pays Indus "a few thousand dollars" every month to host its 50-user Asset Suite installation.
Preventive maintenance tasks had always been done by the local field operations. Rankin wanted to move to a centralized model with policies, procedures and best practices administered at a corporate level. BASiC Energy's senior management wants company practices to conform with Sarbanes-Oxley and other applicable federal regulations so it will be ready if and when it goes public.
GETTING IT OVER WITH
The process of justifying the investment in Indus was highly informal and spearheaded by the goal of cost reduction. "We scribbled a few things on the back of an envelope. My boss told me he had five requests for expenditures for premature engine rebuilds sitting on his desk. If we can eliminate just one of those, the system will pay for itself," says Rankin. BASiC Energy has just finished a pilot and will finish the rollout by the end of the year.
Rankin believes the project will give his organization visibility into which components are failing prematurely and which manufacturers make those components. "We'll be able to look at the data geographically. Do we have issues in one location that we don't have in another, and why? We'll capture best practices and use them," he says.
Extensive visibility and best practices enable companies to meet the performance levels defined by their service-level agreements (SLA), which, if you're in the services business, are critical. "For most organizations that hire an outsourcer, their expectation is to meet certain service levels they were not able to meet on their own. We have to demonstrate that we can do that," says Satya Vellore, director of field consulting services for Unicco Service Co. (Newton, MA), a $700 million provider of facilities services.
SPs must have a reliable way to prove how they are doing against the all-important SLA. Unicco uses the Maximo EAM software suite from MRO Software Inc. (Bedford, MA). Data from the customer's Maximo system feeds that company's MyUnicco portal, which lets the customer's managers see at a glance whether Unicco is performing as specified. If not, Unicco has to refund its customer's money.
Tracking performance against SLAs is one of the top reasons SPs purchase Datastream and Databridge EAM software from Datastream Systems Inc. (Greenville, SC), according to Marty Osborn, vice president of product strategy for the company. "The service providers need 100% compliance with their SLAs. The heart of their business is the work order and asset. Our products were designed with multi-company and multi-site requirements in mind," he says.
Datastream includes a flexible reporting tool in its EAM packages so managers can judge their performance at a glance and drill down into problem areas. "We can trend this data along with data from outside sources" such as how your competitors are doing or industry benchmarks, he adds.
IT'S ALL ABOUT TREND DATA
FMC Technologies Inc. (Houston), a $2.8 billion provider of services to the energy, food processing and transportation industries, uses Datastream 7.8 to manage its provision of airport services. "We use it to track all cost, material and labor associated with maintenance for over 20 airport locations right now," says Stephen Tatton, IT manager for FMC.
Tatton has been able to reduce maintenance costs on equipment by analyzing the trend data to determine whether it makes sense to continue preventive maintenance for a particular component or piece of equipment. "We've also saved money by reducing the number of people needed to do a job, the time it takes to do a job and seeing information that tells us how we've done in the past," he says.
But different vendors are taking different approaches to meeting the needs of service providers. To be sure, not every company has decided to outsource maintenance -- many internal organizations are still thriving. Rather than catering to third-party SPs as Indus does, MRO, for example, is now shipping a new version of its flagship Maximo suite. Maximo Enterprise Suite enables internal groups (such as an in-house maintenance organization) to formalize their agreements with the other internal departments they serve.
STILL KICKIN'
"This is about formalizing and codifying the agreements that have grown up between departments about the reliability and performance of those assets," says Rich Kaplow, director of product marketing for MRO. Being able to define and demonstrate performance against SLAs will help shield maintenance organizations from being targeted as an area ripe to be outsourced. "If [these manufacturers] have decided they want to stay in the asset management business, we allow those departments to act as third-party maintenance providers," says Kaplow.
When a manufacturer realigns itself to become an external service provider, there can be unforeseen consequences. Some OEMs have reorganized to place field service under sales and marketing. So, rather than being off to the side in heads-down maintenance mode, the field service rep is getting busy finding out what his customer really needs. "The field service person is the eyes and the ears on the ground. Usually that person is trusted more than the sales guy, who is just there to re-up you on the contract. Instead of being gearheads, [the field service reps] are out looking for leads, talking up new product innovations while they do their regular jobs," says Maoz.
In the future, the most successful equipment manufacturers will be those who recognize that service is in fact their product, far more than the product itself. "They're not selling the product. They're selling performance. The tire company is selling miles traveled. The elevator company is selling the idea that this thing will go up and down and the doors will open," says Maoz. In the final analysis, all any company can sell is a relationship that goes along with its product and service. Says Maoz: "Successful durable goods makers have already made this shift." And it's likely the new class of service management-oriented EAM software enabled them to do it.