III) Outsourcing

Service providers often see asset management as a means of extending their service offering (Herder and Wijnia, 2009). Hence outsourcing became an important aspect to analyze in assessing the maturity in PAM practices, having a look / insight on the support from service provides along the whole asset life cycle.

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

E.II.1) How many contracts do you have? (order of magnitude) _____________________________________

E.III.2) Which service does your organization outsource?

□ Design

□ Construction

□ Operation

□ Maintenance ¹³

Focusing on maintenance, maintenance outsourcing consists in externalizing a set of activities, related to execution of maintenance interventions, information management, spare parts management and maintenance engineering, to a third party. Maintenance service providers offer activities that go beyond corrective and preventive maintenance (Kumar et al., 2005).

E.III.2.1) Which services are offered by your maintenance providers?

□ Assistance in defining product specification;

□ Assistance during the installation and commissioning phase of a product/system;

□ Assistance in defining the operational strategy;

□ Field service – maintenance tasks;

□ Remote diagnostics;

□ Expert assistance for at site diagnostics and repair;

□ Help desk, online help, telephone support;

□ Advanced training;

□ Logistic support optimization;

□ Assistance in product End-Of-Life management;

□ IT

□ Other:_________________________

The previous questions (E.III.1, E.III.2 and E.III.2.1) are important in order to understand if the service providers are integrated along the whole life cycle of the assets (during the design and the operational phases, in defining assets strategy,..)

13 These are the fields considered in the acronym DCOM (Design, Construction, Operate and maintain) ordinary used in infrastructure assets management.

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

but they are not linked to a maturity score because we cannot quantify the answers in a numerical result.

To perform the services listed above the sharing of information becomes a key factor.

E.III.3) How does your organization share information with its service providers?

Answers Maturity Score

There is no database shared between company and contractors

1

Contractors have their databases and only some information are shared

2

There is some shared databases but contracts cannot update them

3

There is an integrated database, easily accessible for both parts

5

Outsourcing has several advantages but also it brings some risks, that should not be underestimated. The main risks of outsourcing are:

 Hidden costs

 Less flexibility

 Skills erosion

 Contractual problems

 Conflict of interest

 Suppliers problems

These risks are linked to the uncertainties around costs, contracts and future evolutions of markets.

In a multi-provider situation, it can be difficult to assign every firm its responsibilities, because of the strong interactions existing among different firms’ work. This can turn into a difficult definition of a good performance scorecard as a basis of an agreement on the level of services offered (such as a Service Level Agreement). Moreover, conflicts can emerge if a provider offers a predefined level of performances and does maintenance itself, deciding how and when to operate on customer’s assets: in these situations, there could be done too much interventions, and too short machine parts

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

replacement periods could be defined, to be sure not to underperform, with consequent high maintenance costs..

Hence, when externalizing some activities it should be better to keep in-house proprietary assets know-how; if not so, the firm cannot leave its counterpart without having a hard worsening of its performances.

E.III.4) Do risk analysis about contractors exist?

Answers Maturity Score

There is no analysis about contractors risks 1

Risk analysis are developed only when contractors are chosen 2

Periodical analysis about risks are developed but there isn’t a standard procedure

3

Periodical analysis about risks are developed with a standard procedure

4

There is a continuous monitoring of the risks related to contractors

5

Company do not have to check only risks but has also to monitor performance of contractors.

E.III.5) Are the performances of service providers monitored?

Answers Maturity Score

There is no analysis about contractors performances 1

Occasional analysis are developed 2

Periodical analysis are developed but there isn’t a standard procedure

3

Periodical analysis are developed with standard procedures 4

There is a continuous monitoring of contractors performances 5

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

Concerning performance monitoring, one of the contractual instrument used is the Service Level Agreement (SLA). SLA allows the customer to evaluate provider’s performances and pay the service in function of them; the basis of this contractual clause is the defining of a Service Level (SL) which must be granted, and then a no-claim bonus system to manage differences between SL and effective outcomes. In this kind of agreements, a fundamental role is played by the requirements specification and the related contract payment structure: to avoid abuses and to incentive the provider to achieve better performance, the requirements specification must be outcome-based, and the outcome must be carefully measured, defining metrics and a KPI dashboard covering all aspects of outsourcing

E.III.6) Do you stipulate SLA (Service Level Agreement) contracts with your service providers?

□ No

□ Sometimes

□ Yes

Table 4.9 shows the possible answer of the external coordination index.

Table 4.9 Summarizing table - ECIi

The formula of the ECIi (External Coordination Index), for a generic i-th firm, is then expressed as an arithmetical average of all the questions to which a maturity score is assigned, i.e.:

𝐸𝐶𝐼𝑖 =𝐸. 𝐼. 1_�+ 𝐸. 𝐼𝐼. 1_�+ ∑ 𝐸. 𝐼𝐼𝐼.^�_{� ��}

3

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures

where:

- q is the index of the question

- E.i.iq is the score obtained by the firm i in the question indexed as q.

4.3 Concluding remarks

It is worth underlining the importance to include in each section of the questionnaire some questions that are not linked directly to a maturity score. There questions have the following functions:

 to introduce the argument of subsequent questions, so helping the respondent to understand better what the section is about;

 to help the analysis of the maturity assessment not in automatic way, as with the closed questions, but through considerations and reasoning (leading to a sort of mixed analysis between closed questions and qualitative reasoning).

 to give some suggestions to the respondent, such as about possible uses of some tools (LCC, risk analysis,…).

These functions are completed with the maturity assessment method based on the close questions and scores associated to their answers, as explained during the whole chapter.

Moreover, also the matrix itself is an important tool for the maturity assessment: as it will be seen in Chapter 5, the matrix is going to be used to finally present the maturity achieved in the different indexes by each company studied. The matrix is a summary table, where each column shows the progressive growth of maturity of PAM practices:

the correspondent textual description, characterizing each maturity level, synthesizes in fact the main practices achieved at that level, see next table.

Management decisions Information Management Organization & culture External coordination

5. Optimizing

Life cycle cost and risk analysis are applied in a complete and proactive way. Maintenance is planned following the principle of continuous improvement

Information is a central part of integrated decision-making and data are readily available.

Performances of process are monitored to support decision making analysis are not done in a complete way. Company understands the importance of continuous organization and affects decision making but not at all levels.

PAM is recognized as one of the main principles of the organization.

The importance of training is developed in a structured way but they focus only on the main aspects of the life cycle of the assets. TPM and RCM practices are occasionally performed.

The importance of integrated and completed databases is understood but it is difficult to find data in them. future requirement in its strategic plans. structured databases. KPI are monitored without standard practices.

Organization recognized the importance of PAM principles.

Training is only during the analysis. There aren’t standard procedures for maintenance contractors. The importance of Sustainability is not yet understood Table 4.10 Maturity Matrix

Maturity assessment for Physical Asset Management: Evidence from Manufacturing Plants and Infrastructures