Industries Turning To Service Companies

For Maintenance Expertise

RG Liberty

While it has always been a simple matter to blame potentially unpopular decisions on prevailing economic conditions, the case of industrial companies opting for outside maintenance personnel over in-house staff, must be seen, in light of economic realities, as an obvious step toward fighting current economic downturn.

The necessity of out-sourcing maintenance and repair work has arisen from what has been variously called by some in the industry, downsizing, rightsizing, or sometimes, "dumbsizing." (Dumbsizing occurs when a company trims its personnel to the extent that it becomes too lean to function in an efficient manner.)

A large percentage of the industrial sector has been concentrating resources on production and downsizing or eliminating the maintenance aspects of its operations. It is simply less expensive, overall, to make use of off-site people than it is to maintain a permanent full-time staff.

There are immediate cost savings built into such an arrangement. The user company is not faced with the expenses of staff benefits, training and upgrading at a time when budgets are tight.

Taking Advantage of Resources And Expertise

Mike Coleman, of GE Canada Services, explains that the primary reason companies are taking advantage of out-sourcing is the resources and expertise inherent in the program, as well as the immediate cost savings.

"GE has access to all it needs in the way of skilled personnel, equipment and training to maintain a wide range of electrical and mechanical equipment including motors, turbines, switchgears and transformers," says Coleman.

"Because of the economic downturn many companies have had to scale down operations and cut staff in non-essential areas," he says. "It's no longer feasible for a company to keep a large in-house maintenance staff. Many who do could find themselves asking why, in light of the fact that it's simpler and more cost-effective to out-source ongoing maintenance and major repairs."

Coleman points out that companies are concentrating on doing what they know best and out-sourcing their maintenance requirements, getting the best possible return on their maintenance dollar. Although many have been working to keep repair work in-house and keep people employed, economic circumstances have been steadily forcing companies to turn to out-sourcing. These companies are retaining only those personnel who are key to their immediate business operations.

"We are working toward offering partnerships to companies, in the form of the Equipment Management Program" says Coleman. "GE will place an engineer on site who is backed up by all of GE's expertise, equipment and staff. We also offer long term contracts to maintain specific equipment."

Coleman says that those large companies with 100 or more motors, generators, etc., will benefit greatly from these long term contracts. So far, 30 companies throughout the U.S. are involved with GE's Equipment Management Program and the company is now moving into the Canadian market.

Providing Essential Maintenance Services

Mike Taylor, Westinghouse Services Division, explains that Westinghouse, too, has a program through which user companies pre-qualify for essential maintenance services on an ongoing basis. The pre-qualification, in the beginning of what is an open-ended informal contract, saves time and paperwork for the customer by discovering exactly what will be required during the completion of the contract.

Taylor says that many large, capital intensive industries are working to keep their costs in line and there has been a growing shift to the partnership idea. "Essentially," says Taylor, "these arrangements are made with existing customers who have a good focus on what their requirements will be, for a certain period. And since they are our own customers we know as well, in advance, what their potential needs will amount to. We are then, more readily able to meet those needs without interruption or delay."

Taylor points out that this type of arrangement, indeed any service contract for out-sourcing, increases the expectations of the customer, placing the onus for quality and reliability directly on the service company and its organization.

Explains Taylor, "We see our role as helping our customer make money or save money, by cutting unnecessary costs to his operation." For Westinghouse, he notes, this involves reducing the frequency of customer equipment failure, reducing equipment damage to failure and reducing the duration of outage should equipment failure occur.

Use Of Service Companies A Growing Trend

One of the largest growth industries is switchgear life extension, Taylor claims. Taking robust, existing equipment and upgrading it to today's standards of technology - without changing the equipment function or purpose. This involves much more than simple reconditioning; it involves increasing the reliability and the capability of the equipment in a costly manner.

Taylor points out that service companies are used to dealing with emergency situation on an almost regular basis and are, therefore, eminently qualified to handle them in stride. He says that Westinghouse and its power systems specialists grew to be respected in the industry by generating customer loyalty through quality of service, knowledge and capability.

"Our business is not to sell," admits Taylor. "It is to help our customers succeed in making and saving money."

Keeping Up With New Technologies

Dan Cashmore of Schneider Canada Services believes that out-sourcing is a trend that will continue in the face of ever expanding high technology. "It's becoming difficult for the average maintenance electrician to deal with computerized equipment," he says. "Users need expert help."

Although documentation and training are provided with the sale of equipment, the maintenance personnel may not have occasion to work on the part until many months after purchase. Retaining and upgrading that training knowledge may not be possible in all cases and instead of the user tinkering with a piece of equipment to get it on line again, he should contact the experts immediately.

"The initial hourly cost of out-sourcing repairs is far outweighed by the potential for lengthy and costly down-time," he cautions.

Cashmore recommends that users rely on the manufacturer and the supplier of the equipment for maintenance and major repairs. "They are the first source that should be investigated."

He says there are also a growing number of third-party services in the marketplace who have sterling reputations in the field. But, there are also some that do not. It may become a sore point in the future and the user is cautioned to beware of the unknown.

Cashmore says the customer must use common sense and look at the track records and references of a potential servicer. All reputable third-party service companies will supply references and other pertinent information upon request. Those who do not are to be strictly avoided.

Combining Strengths

PowerServ Pacific of B.C. is in a unique position within the out-source service industry, in that it was formed two years ago by ABB Power Apparatus Service and B.C. Hydro.

Martine Chartrand, of PowerServ, explains that the joint venture was entered into to make greater use of an existing B.C. Hydro 80,000 square foot shop that wasn't being utilized to full effect. And she says that since B.C. Hydro is a crown corporation and disallowed from bidding in the private sector, the best way to make use of the enormous space was through combining strengths and serving the market by making greater use of both. The combination now boasts 130 employees and contracts throughout Canada, as well as an international foray into the U.S and Mexico.

PowerServ garners a large percentage of its business from the maintenance, repair and reconditioning of switchgears, transformers and generators, as is the case with many other service companies interviewed. In fact PowerServ is in pursuit of ISO 9002 registration because more customers are focused on the quality of the services they require for their critical equipment.

"I think that the need for our services will grow in the future as our customers continue to strive to reduce their operating costs in many ways, including out-sourcing." PowerServ has been very active locally and internationally in working with their customers' out-sourcing needs.

Of course she admits the service out-sourcing business fluctuates in its demands, between preventative maintenance and emergency repair work and the success lies in being ready for either, or both.

Not A Major Trend Yet

Mel Wilson of ABB Power Apparatus Service says he hears a lot of talk about out-sourcing, but he has not seen it as a major trend yet. He says, however, that although it may not be a trend yet, it will continue to grow gradually until the industry will notice it as the norm, rather than a trend or fad.

Wilson says that industrial and commercial enterprises seem to be ignoring their present needs in favor of economic streamlining. Some have reached a point where even the most basic maintenance jobs, like changing lights bulbs and fuses are being contracted out. He sites this as a form of dumbsizing. He predicts that those companies that continue to ignore their own needs will find themselves badly lost somewhere down the road.

He explains that when a company lays off well-trained, necessary personnel, it's usually true that when they finally miss them it's because they need them desperately and realize it too late. That's when he sees a definite increase in the use of service companies.

Wilson says that industry is suffering badly because of economic conditions. His division is doing work it never did just a few years ago. Jobs like major refurbishing and rebuilding were relatively unheard of in the recent past. When things broke down on such a large scale, companies usually replaced them. Now, however, costs of replacement are becoming prohibitive. The intelligent thing is to repair and reuse for as long as is possible and cost-effective.

He says this kind of mind set is likely to continue at least until the economy allows for mega-dollar purchases again, if it does, and then the trend may well reverse itself. Until then,"You do what you're good at and do it well. Look for your niche in the marketplace and grow with the business," he says.

Wilson believes service companies will succeed as long as they know what their customers wants and give it to them at a reasonable cost. And if the current trend should reverse itself in the future and the economy begins to grow again, those companies now performing out-sourcing work will likely look to greener pastures and move into other areas of greatest need to their customers.

However, if the system of out-sourcing proves a more efficient and cost-effective method of performing user maintenance functions, it may also prove to be more than simply another economy based industry, and survive future economic growth as a winning and viable concept.