Lean or lazy?

Facilities management (FM) companies have been a major part of the industrial scene for some years but largely at the periphery of the action. In areas like security, catering and cleaning, the argument for DIY lacks force. In most medium/large companies, FM providers can generally handle it better, cheaper and without the fag of remembering to get the clean overalls back for a Monday morning. But that is low-margin work and for some time FM providers have tried to break out of the mould and into the more complex, core areas of manufacturing that make more demands but also provide a greater return. This is where things get tricky. The FM companies may make a good case for moving onto the shopfloor, but UK manufacturing has an almost visceral reluctance to lose control of its core activities like maintenance and supply chain. Peter Varnsverry, head of manufacturing at Laing O'Rourke – parent company of Bison Manufacturing, Best Process Plant at this year's Best Factory Awards – has some trenchant views. "I have worked in many manufacturing companies and, speaking personally, I completely fail to understand why any one of them would contemplate outsourcing what should be their core business. FM on the shopfloor equals lazy management. I get cleaning and security – it's not central to what you do and it's possible that someone else could bring a value to it that you can't. But why on earth would you give maintenance of your equipment and plant to someone else to look after, when it's integral to everything you do?" He makes an exception for IT support and the specialised maintenance services like condition and vibration monitoring: "It makes sense, especially if it needs capital investment. I have outsourced lubrication in previous companies because it brought us technical solutions beyond our own expertise." He points out, however, that any company contemplating taking FM deeper into day-to-day operation needs to consider its impact on autonomous maintenance. This is one of the most productive of all improvement activities and distancing the shopfloor from first-level responsibilities will inevitably close off future opportunities. Varnsverry's accusation of "lazy management" poses questions. Do people outsource purely to save money, or to take an irritant out of their in-tray, or actually to bring something to the party over and above what they can do themselves? In his view, only the latter objective is acceptable. "Okay, we are in a downturn but if you outsource just to take the cost out, you run the risk of a very poor service. I think value is about taking the waste out of your process – not just hitting a supplier with a stick to take the prices down." He points out that there are risks for the FM provider, too, when cost is the only issue. He recalls when he was with Federal Mogul, he inherited an outsourced purchasing arrangement. "It was thought to give us cost savings through synergies. But when the contractual term was over, I cut out the middleman, dealt direct and kept a bigger percentage of the savings. Unless these arrangements are adding continual value, they have a limited lifespan in today's industrial world." So let's take a look at a couple of examples of the type of FM that fits squarely within Varnsverry's definition of "continual value". Initial Industrial Services has been working as Nissan's preferred cleaning partner at its Sunderland plant since it opened in 1986. Its contract covers all factory, offices and external areas – so far, so normal – but also covers specialised paint shop services. A full-time team of 145 work in two shifts to provide seven day week cover throughout manufacturing areas including body assembly, paint and final assembly. Ongoing production line cleaning takes place on a daily basis, while specialist maintenance cleaning occurs during operational downtime at the weekends. As well as cleaning waste paint from each of the six spray booths, Initial uses a fluidised bed to strip paint from slave tools, and ultra highpressure water jets to clean paint from the carriers that hold the individual cars during manufacturing. This is skilled work but not necessarily innovative. Recently, however, Initial has come up with something new – a waste management service aimed at reducing the need for disposal to landfill. As part of this, it has developed a recycling facility aimed at recovering far more waste material. It includes a dedicated picking line – believed to be one of only two operating in the UK – where waste is fed overhead and separated manually by operators. As the waste goes through the picking process, individual items are grouped together and then recycled including cardboard, paper, correx sheets, plastic bottles, plastic film, polystyrene, scrap glass screens, timber and ferrous material. The operation has increased annual recovery of recyclable materials by 30% and reduced waste disposal costs by as much as £70,000 per year. It has also contributed to revenues through the sale of associated scrap, while new waste streams have been identified that Initial hopes will lead to even more recycling in the future. It's worth speculating if this scheme owes its existence to the fact that the partnership has been in existence for so long. Would Initial have invested both its time and its ingenuity in developing a service of such undoubted value if it was treated merely as a 'you-too' supplier to be hammered by annual cost-downs? The second example comes from the consumer packaged goods company Kimberly Clark which outsourced the logistics operation at its Barton Mill centre – where nappies are made – to Unipart Logistics with the express intention of capitalising on the lean expertise of the FM provider. In so doing, it admits many of its notions of labour management and productivity have been challenged. With 35 manufacturing sites and sales in 150 countries, Kimberly Clark's supply chain is no picnic. According to Peter Surtees, European supply chain director, the company is in the process of introducing lean thinking across the whole of the value stream. Keen to enhance its understanding, it chose a partner with a formidable reputation in this area. Although the company's origins are rooted in the automotive sector, Unipart Logistics has used its own brand of lean thinking – the Unipart Way – to expand into other sectors, including retail, high tech, aerospace & defence, and now consumer goods. It took over the running of the 370,000 sq ft Barton Mill distribution centre in November 2009 under an initial labour-only contract to manage the storage of finished goods, along with the loading and unloading of inbound and outbound transport. Since then, its role has grown to involve services from laboratory work to consultancy within the manufacturing plant. Unipart was confident it could use lean methodology to take waste out of the operation with both parties sharing the gains. Kimberly Clark was looking for a relationship that went beyond the traditional cost-plus approach to logistics outsourcing. Surtees says he wanted a company that would "challenge us on what we were doing, advance lean in our supply chain and drive improvements in our processes". In under a year, gain shares from improvements to processes, productivity and people management have already been signed off. Eighty staff were transferred under TUPE. They had previously provided a continuous 24/7 operation through a pattern of 12-hour shifts, working four days on and four days off. Keith Robson, operations and account director at Unipart Logistics, explains: "Absentee levels were up to 10% prior to our taking over. So we looked carefully at why people were going absent. A great number didn't like the shifts and the overtime." Employee engagement and individual development are core aspects of Unipart Logistics' management principles. It has a stepped approach that leads the individual through five levels of role development – see, learn, do, teach, coach. It encourages staff to work in teams and to constantly monitor and question the efficiency of the tasks they perform. They meet on a daily, weekly and monthly basis to review performance against key performance indicators (KPIs). A series of standard lean tools – like process mapping, visual management and feedback boards – are used to streamline processes, eliminate waste and drive performance. They are also encouraged to research solutions to problems using modules available on the company's intranet, enabling best practice to be shared across the organisation. Unipart Logistics has introduced a set of its own KPIs to measure performance alongside Kimberly Clark's own. It has moved cost-per-lift down by 44% in the last three months. By focusing on standard work methodology, it has improved labour cost and substantially reduced agency labour. "It's early days, but it's been a very promising start," says Surtees. "We understand that a lot of the improvements will take time, as it's very much a people and cultural drive." Unipart Logistics is adamant that very competitive contracts, common in the consumer packaged goods sector, can deliver value to both parties when staff engagement and lean processes are deployed. These two partnerships illustrate clearly that there is far more to FM than cleaning buckets and cooking pans. One established compliance specialist, however, sounds a warning note. Michael Slade, MD at Bibby Consulting & Support, stresses that it's only too easy to overlook health and safety compliance in outsourcing. He points out that it is the organisation engaging the subcontractor who can be held ultimately responsible for that contractor's failure to exercise a proper duty of care. "Last year, 35 workers were killed and there were more than 31,000 serious injuries in the [manufacturing] sector. A quick search on case histories revealed a significant number of prosecutions involving host companies using outsourced contractors," he explains. "For example, food giant Walkers Snack Foods was in the headlines recently when it was fined £200,000 after a worker from its chemical supplier Omnichem died as a result of inadvertently mixing up the hoses on the tanks while transferring the two chemicals from the lorry he was driving. The pertinent fact in this case is that Walkers Snack Foods was prosecuted under both sections 2 and 3 of the Health and Safety at Work Act 1974. It failed to safeguard both its subcontractors and its own employees: the driver wasn't properly trained and nor were the proper safe systems of work put in place." He is adamant that competent people – including specialists like Bibby – must be employed to ensure that proper controls are in place to reduce risks. "Compliance with health and safety legislation is no easy task, particularly when it comes to outsourcing areas such as maintenance," he says. "Ultimately the key to outsourcing compliance is in good contractor management – the law demands this and so does your business." Among the safeguards he suggests are auditing contractors' health and safety qualifications and training as part of the tendering process; ensuring risk assessments are carried out before work starts; and regularly monitoring their work to make sure they are still compliant. "The important thing to remember is that many companies will promise the earth to win your business, especially in the current climate. In reality however, they often fall short of expectation. This is a bad enough scenario for business in general, but it's deadly for health and safety compliance. Sound practice is to expect the worst and ensure that there are systems in place to prevent this from happening."