The Internalization of the Maintenance Function – A Strategic Vision

Pedro Viegas1

(1) Reliability Maintenance Engineer and Project Manager – O&M Asset Management Contracts
(2) Independent Maintenance Management Consultant
thyssenkrupp Industrial Solutions AG
Rellinghauser Straße 1, 45128 Essen, Germany
PRL Consulting – Maintenance Management Consultants
prl.consulting@mail.com ; pedro-miguel.viegas@thyssenkrupp.com

I. INTRODUCTION organization and a maintenance service provider. The

first will hardly recognize the need to deliver a quality
These days, maintenance services contracts based on service, simply because the main core business of the
operational and maintenance performance are at the organization is not the maintenance activity, it was
center of the organizations attention and at the agenda of adopted or implemented only because there is a need to
CEO´s, the main objective is the achievement of desired keep the asset in operational conditions and technology
results according world-class business performance and demands it.
an overall increase of competitiveness in comparison
Many organizations have tried to standardize working
with his commercial competitors. The decision to
methodologies and processes, oriented to ensure a better
outsource the maintenance function and the application
control and performance of the maintenance, such
of an asset management program, allows organization to
methodologies and processes have not resulted and will
increase performance, optimize costs and mitigate the
never result in general, since the maintenance should be
business risks. The application of consolidated processes,
considered as a business with very specific processes,
following the implementation of best practices and the
that requires own strategies, different from others
comparison of the obtained results, with international
operational management processes.
references (benchmarking), promotes a continuous
improvement culture which can lead the organization to
The future of maintenance activity according the
the success and to sustainable results.
international context , particularly for medium-large
organizations, must pass in the coming decades through
II. THE CONTEXT
the total outsourcing of the maintenance services , but
Nowadays, we are increasingly seeing a reduction in not under the traditional service models, the vision must
maintenance budgets, providing in many cases several be more comprehensive and global, it means converting
constraints and bottleneck about the strategies those the traditional provision of maintenance services in a
maintenance departments have, in order to implement closer relationship between organization and external
corrective actions for defect elimination and achieve the entities, based on a mutual relationship and in a win-win
desired reliability. approach, in sum adopting performance base contracts ,
with transparent costs , gains and losses.
Other cases know that even with additional economical
resources the results do not achieve the expectations or
III. BEST PRACTICES AND KEY SUCCESS
reflect best maintenance practices, resulting in most part
FACTORS
of the cases on high turnover of the maintenance staff.
The maintenance activity must be self-sustaining and
Below are listed some of the areas and "key success
must be "economical fed”, according his results and
factors“, that requires an ongoing improvement analysis,
qualitative excellence, being an extension of the
strategy, and consequent action plan to “boost” the
operational function, in general maintenance provides a
maintenance performance;
"service" for the business. In this increasingly
competitive world any service company only survives,
 Maintenance Organization and Structure
when as the capacity to deliver a service and results
aligned with the business plan and suitable to
according excellence by earning profits or losses from
implement a pro-active maintenance approach;
those same results. This approach shall be extended to
maintenance and it reflects the difference, with rare
exceptions, from an internal maintenance structure in an

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  Staff skills and competences , supported by an
Word
adequate recruitment strategy and training Class KPI
Class
program;

 Workflow management process;

 Planning and Scheduling best practices;

 Implementation, use and optimization of the

right CMMS;

 Shutdown and Turnaround Strategy;

 Preventive and Predictive Maintenance Program

, based on criticality assessment;

 Materials/Interchangeable management and

materials procurement strategies;

 Promote the culture of autonomous maintenance

and basic maintenance practices;

 Subcontractors Management;

 Performance Management;

 Root Cause Analysis routines , based on a

defect elimination approach and a clear
Reliability Program;

 Asset Life Cycle Cost Projection;

 Asset Data Management;

 Maintenance Process Audits (MPA).

The use of a “benchmarking culture” develops a stimulus

for continuous improvement in the organizations,
promoting the assessment of the results, identifying the
gaps and opportunities for each case. Table1 provides an
overview about several key performance indicators
achieved by world class maintenance organizations;
however an idea shall be retained, a reference value
today, will be a normal value tomorrow and a mediocre
value in the future. The level of maturity of the
organization will dictates the level, ranges and the
priorities to close the gaps.

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 Maintenance Costs as per the processes, technical knowledge, and qualified human
Equipment Replacement 2-5% resources. It is therefore important to define the most
Value- ERV appropriate collaboration model for both parties, but
Costs
Material Costs 25-35% always based on a performance concept , where the
Maintenance Workforce Costs profits/losses are directly connected to the objectives of
0,5-2,5%
per Sales Level
the organization, thus ensuring that the interest to obtain
Planned Maintenance (HH) >90%
Wrench Time 60-65%
the best performance is mutual (Win-Win: both parties
Planning and Overtime < 5% win following the same strategy), something that in
Scheduling Backlog Level 2-4 weeks many organization may be more difficult to obtain
HH of Preventive/Predictive through internal solutions , or between operational and
25-30% maintenance departments.
Maintenance
Inventory Turnover 1,5-3 year
Material Inventory Costs as per the
Management Equipment Replace Value- 2-8%
ERV
Training as a percentage of
3-5%
payroll
Training
Technology Training/Total
>50%
Training Expenses
The number of lost-time
injuries per 200,000 person
<2
hours worked
(OSHA Incidents)
HSE and Lost-time accident frequency
<1
Emergency rate (per 100 workers)
< 3%
Man-hours unplanned
maintenance / Total Man-
hours available
Asset/Plant Availability >97% Figure 1: Win-Win Alignment Strategy
Asset
Overall Equipment
Performance Effectiveness (OEE)
80-85% In the past, organizations only thought of getting the best
External Subcontractor Costs / Total prices from
35-65% their
Services Maintenance Costs
Ratio Technician per maintenance
(8-15):1 service
Maintenance Supervisor
Ratio Technician per providers,
(15-25):1
Maintenance Planner smashing
Organization Personnel Turnover <3,5% ano their profit
Average Overtime – Hourly margins,
< 8%
Maintenance consequence
Absentism Rate <4% of that, they
did not
Table1: Benchmark KPI´s for World-Class Organizations promote any
interest for
IV. THE WIN-WIN CONCEPT invest and

Organizations and entities providing maintenance

consequently could not improve their productivity,
services in particular are recognizing that both must
performance and quality related to the services provided,
follow a convergent business and maintenance strategy,
maintenance contracts with fixed cost budget are a risk
in which both will obtain the results if the objectives are
and a barrier to the continuous improvement and
setup common and focus in the business plan of the
generates economical conflicts and lower transparency
organizations and clients.
between organizations and partners.
These objectives generate the opportunity for the
The Win-Win strategy aims on the development and
organization to choose an outsourcing strategy, sharing
optimization of organizations and their service
the challenges, risks and obtain the commitment of
providers/partners, based in the old maxim that “together
external entities, where their core business is the
we are stronger, alone more weak.”
maintenance services, partners with consolidated
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 V. TCO OPTIMIZATION – THE the experience and knowledge of the partner) and based
OBJECTIVE on the “factor value” it would represents, i.e., what
additional value, the collaboration provides.
The optimization of the total cost of ownership of an
asset (Total Cost Ownership-TCO) is the main objective
of the organizations, to achieve this goal is essential the
contribution of the maintenance function, improving the
reliability and operational availability of the assets. The
maintenance function impacts many areas, either it is
normally responsible for managing different activities,
achieve excellence requires a direct linked between the
performance level and the benefits organizations would
acquiring from that.
An optimization of the maintenance function can
represents a gain of 2-10% (Figure 2) in the business,
increasing the profit by the difference of the results
obtained in the improvement of the performance and the
reduction and optimization of the costs. In most part of
the cases the hidden costs are the basis of the profit,
looking for the “big picture”, instead of the standard
direct maintenance costs, the iceberg model, presented in
figure 3 is a great example of the concept and approach.

Figure 4: Maintenance Services Portfolio

Figure 4 shows an example of the solutions associated

with a portfolio of maintenance services, including the
operation of the assets, and where risk and benefits are
directly related.

VII. PERFORMANCE BASED

MAINTENANCE CONTRACTS (PBMC)
– AN APPROACH

Performance Based Maintenance Contracts (PBMC) can

Figure 2: Maintenance Optimization Saving for TCO
Figure 3: Iceberg Model – Maintenance Costs
be considered as an asset management model, which
imposes on the maintenance service provider (The
contractor) the obtainment of bonuses or penalties
according to their performance, thus encouraging them to
achieve the objectives (KPIs) with organizations,
resulting in an increase or decrease in payments to the
contractor according to reference values and based on an
agreed incentive scheme system or matrix (figure 6).

VI. MAINTENANCE SERVICES

PORTFÓLIO

At the current times, maintenance service providers offer

portfolios that cover different models of collaboration
with between them and the organizations, the decisions
are mainly based on two factors, the trust level existing
both parties (in many cases based on past business
relationships, e.g. Machinery provider/manufacture or by
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 Disadvantages
 Requires a strategy based on medium /
long term contracts between
organizations and maintenance service
providers;

VIII. CHALLENGES FOR THE

IMPLEMENTATION OF
PERFORMANCE BASED
MAINTENANCE CONTRACTS

There are some challenges that organizations and service

maintenance providers should consider and identify
Figure 7: Example of an incentive scheme for KPI´s
before and during the implementation of a performance
achievements, in a potential performance based
based maintenance contract, in order to mitigate the risks
maintenance contract.
of potential barriers that are in many cases responsible
for the failure of an operation & maintenance contract or
by the successfully implementation of a asset
The approach promote the establishment of a
management program, that everyone would like to see as
collaboration and partnership , being exclusively
long-term collaboration.
controlled by the performance, thus obliging the service
maintenance provider to adopt and implement the best
Some of the most common challenges in implementing
practices in order to achieve excellence and release
an asset management program, including a possible
additional profit.
maintenance outsourcing contract, are related to the
following factors;

 Wrong Organization Setup and inflexible local

labor laws;
 Lack of resources with adequate skills and
training, as well as the incapacity of the
organizations and service providers to define
upfront a clear strategy and a training program
Figure 8: Example of payment system associated to a to close-out the gaps;
PBMC.
 Lack of a clear workflow process and
The celebration of performance maintenance based procedures, developed according to best
contracts, particularly at the industrial level, presents practices and adjusted to the business;
advantages and disadvantages to the organizations, as
the ones listed below;  Inadequate use of management and
control/reporting tools;
Benefits
 Monitoring strategy and commercial
 Low needs for specialized knowledge; relationship between organizations and service
 Long-term financial risk reduction; providers;
 Significant cost reduction;  Lack of understanding about the cultural and
ethnic context of the organizations according
 Improved performance and service. the geographic location;
 Stimulates the use of new technology  Poor Logistic Plan ;
and processes according to the best
practices;  Upfront understanding and clear strategy about
the existing of hard working conditions and
 Reduction of the bureaucracy level. accessibility to material, Interchangeable and
consumables;
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  Adaptation of the procurement and financial
processes to respond to the requirements and
characteristics of the operating and
maintenance areas;
 Definition and control of key performance
indicators non-adequate to the contract, based
on baselines defined in assumptions or wrong
projections.
IX. THE ASSET MANAGEMENT
STRATEGY AS A VEHICLE TO SET A
GLOBAL MAINTENANCE SERVICE
LEVEL
The implementation of an asset management program
requires the total involvement of the maintenance
function in order to achieve the desired an excellent
performance. Figure 5 presents an overview of the "great
journey" that organizations and service maintenance
providers must consider and walk together, in the sense
of achieving the major following objectives;
 Improve performance;
 Optimize costs;
 Mitigation and control the risks.
Figure 5: The Asset Management Journey and the main
objectives of the maintenance function
In general there are 6 main stages which must be
consolidated, to achieve a successful implementation of
an asset management program, and where the
maintenance functions as a key-role. Below are listed the
baselines that require the total focus of organizations;
 Strategy and Planning;
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 Organization and Personnel
 Asset Life Cycle , based on a clear maintenance
and operational risk analysis;
 Asset Data Management;
 Continuous Improvement Process;
 Asset Data Management;
 Continuous Improvement Process;
X. CONCLUSION
The worldwide demand for business optimization based
and focus on an asset performance strategy bring
organization to the need, about the mission and
involvement of the maintenance function as a key
success factor to achieve the objectives, what in many
cases leads to a conclusion to challenge internal
maintenance organizations or for a common decision for
a close agreement with a partner expert on that matter.
The partner is seen as someone that has and can
implement the best practices, in order to achieve the best
indicators, with focus in TCO optimization, and
consequently increase business margins.
Select the right maintenance service portfolio offered by
different maintenance service providers, is directly
connected with the thrust level existent between both
parties and the add value it represents. The result might
origins a performance maintenance/operational based
contract, established in a clear incentive scheme that
measure on a fair way the performance of the contract
and goes aligned with the goals and targets of the
organizations, based on a win-win concept.
Challenges regarding the implementation of an
agreement or partnership should be target of a clear
strategic plan, in order to mitigate the risks and monitor
the success. These strategic plans are part of the overall
asset management program, that can support in many
cases the change process, yes because that is all about,
the paradigm of a unique and clear “change management
process”.
XI. REFERENCES
[1] Wilson, A., PhD. Asset Maintenance
Management: A Guide to Developing Strategy and
Improving Performances, Second Edition. Industrial
Press Inc., June 2002.
[2] Cody Frampton, Benchmarking Word-Class
Maintenance, Charles Brooks Associates Inc.

[3] Terry Wireman, Benchmarking Best Practices in

Maintenance Management, Second Edition. Industrial
Press Inc., 2004.

[4] Terry Wireman, World Class Maintenance

Management, Industrial Press Inc., 1990.

[5] Operation and Maintenance Service Contracts,

Dec.1997, PECI-Portland Energy Conservation, Inc.

[6] MAME – Book-of-Knowledge, Asset

Management Business, tkIS Service, 2014.