All Win – A Maintenance Partnership in Three Pulp Mills: Reasons, Results, and Lessons
John S. Mitchell, ABB Industrial Products, Inc.
Virtually everyone has heard of and will express an opinion on outsourcing. There are clear global trends toward outsourcing and most are experiencing the joys in one form or another. In the maintenance world, outsourcing extends from specialized services, contract labor and consigned spare parts all the way to a full, shared risk-reward, incentive-based partnership.
Some of the benefits cited in favor of outsourcing include:
- Ability to focus scarce resources on highest value core business activities
- Access to process and technical expertise that can’t be justified by the requirements of a single facility
- Move an improvement process and cultural change necessary for prosperity faster and farther than possible from within
- Benchmark and realign processes over a larger base
- Gain greatest commitment to success
Even with these benefits why would an operating company elect to form a maintenance partnership? What factors must be considered? What concerns? Most important – what are the results achieved and lessons learned after a full year of actual operation?
Over the last ten to fifteen years’ maintenance has become increasingly technical and central to the profitability of a manufacturing enterprise. Equipment availability must be at or close to world class values in order to compete in a commodity market. Reliability improvements to eliminate the need for maintenance are essential and the only way to permanently reduce cost. Preventive, condition based and predictive or proactive maintenance must replace reactive maintenance on failure. Effective work planning and scheduling is mandatory.
The preceding are all easy statements but statistically only 25% of the facilities in a given industry can be in the top quartile. What about those who find themselves in the third or fourth quartile, well below the median and losing ground to top performers? That was the question faced by three pulp mills in British Columbia. Survival meant finding answers and implementing improvements – quickly!
A word about change, It is easy for someone on high to mandate reduced costs or increased availability. Some go so far as restricting work and work force on the assumption that there is sufficient slack in the system to assure continuity of production. This approach might produce some results short-term. However, there is a high price to pay – an unsustainable long-term!
A benchmarking survey conducted in 1998 by a pulp producer to identify comparative performance of three British Columbia mills revealed a number of deficiencies compared to world class:
- Maintenance costs significantly above the world class average and in the fourth quartile relative to Canada.
- Downtime due to maintenance about three times the world class average
- Latest maintenance systems and methods lacking
- Insufficient progress toward improvement utilizing internal resources, current levels of training and development allowing the gap to widen
At the conclusion of the benchmark survey, it was apparent that improved maintenance would make a strong contribution to operational excellence. Significant benefits were available by sharing knowledge and applying consistent “best practice” between the three mills. Substantial improvements needed to be introduced and implemented quickly. Question was how to accomplish this vital objective?
Three options for implementing improvements were identified:
- Continue with internal resources
- Utilize the services of one or more consultants to accelerate development
- Partner with a proven provider
In view of the findings from the benchmark survey the first option, continuing with internal resources, was eliminated as unlikely to produce the desired results.
By introducing a change agent, the second and third options offer a means to move faster and farther than with internal resources alone. A change agent can introduce major changes with fewer restrictions from claims that “it has always been done another way.”
Consultants offer expertise, knowledge and a process for improvement. Concerns included cost, the likelihood of a short-term focus, questionable commitment to long-term business results and probable difficulty of gaining the buy-in necessary for success with a process developed largely by outsiders.
Partnering with a proven provider seemed to offer the greatest advantages. It is consistent with global trends toward mutually beneficial win-win partnerships. A partnership offers the long-term relationship considered necessary for success. A partnership provides access to world-class knowledge and resources. The idea of a partnership extended to the workforce eliminates (hopefully) the us versus them mentality that can impede the development and deployment of beneficial change. Most important, constructing the partnership on a business basis with shared risk and rewards applies financial incentives to all involved parties for success.
The partnership alternative was selected as having the greatest potential to achieve the results and success required.
Primary objectives are to move into the top quartile of Canadian pulp producers in three years by reducing maintenance cost by 20% and increasing production output by an average of 6 ½% across all three mills.
Secondary objectives include leveraging the partner’s strengths into a “Pulp and Paper Center Of Excellence” and leveraging scale and growth opportunities to provide added shareholder benefits.
The objectives are to be gained by:
- Utilizing internal and partner resources to develop common best practices across the three mills
- Developing a flexible, multi-skilled organization with internal experts
- Re-aligning people to assure best utilization of talents and skills, better sharing of area resources
- Focusing on improved reliability, improving the preventive to corrective work ratio
- Improving work prioritization, planning and scheduling
- Improving the process for mill stores and material management
- More training and development for all mill personnel; 4% to 6% of hours worked
- Incentive compensation in which all employees share financially in success achieved
Specific objectives include:
- A reduction in the OSHA reportable rate in maintenance
- Performing tasks correctly the first time measured by rework orders
- 20% of hours expended on improvements
- Partner and employee satisfaction 70% good and above measured by a formal survey
It is important to note that formal partner and employee surveys, some conducted by an independent third party, are vital for quality assurance of service delivery, identifying areas that require attention and measuring progress.
The partnership agreement reached to meet mutual objectives has a five-year term and includes:
- Approximately 300 hourly and 75 staff employees
- Management from both partners
- Flattened organization
- Specifies sharing of cost and production benefits between partners
The partnership between Fletcher Challenge Pulp Operations and ABB was launched in November 1999. Employees were transferred in March 2000.
A mission statement was developed to establish the basis for and demonstrate commitment to objectives and mutual success:
“To provide our partners the services to create maximum value and make them the best”
The mission statement is constructed on an “Open, Fair and Honest” statement of values.
From the beginning it was recognized that partnership success would require:
- Partner satisfaction and loyalty
- Profitable growth for both partners
- Motivated people
All had to succeed for the partnership to succeed.
A detailed evaluation of benefits, what is currently being done well, requirements from the operating partner, improvements necessary to provide highest quality service, opportunities, behaviors that are to be continued, started and stopped and issues to be addressed were all listed to assure everyone began “on the same page.”
As in any endeavor, there were concerns. All three mills are unionized and there had been problems in the past. Some employees viewed the partnership as outsourcing and a threat to job security rather than the positive enhancement it was meant to be. The latter to be achieved by opportunities to increase skills, competence, responsibility and hence individual value.
All of the concerns had to be addressed and worked through. Communications was the key. The partnership communicated current conditions, necessity for change, specific objectives, benefits to partner and employee alike and KPI’s to all employees in a “kickoff” presentation. Questions were encouraged. An upbeat newsletter was published in two versions to introduce the concept and players in a very “friendly” way. A three-day training course was conducted for maintenance team leaders. The course included application and deployment of best practices for local conditions and a three-stage workshop for participants. The workshop was designed to demonstrate methods to identify priority areas for improvement, gain consensus and develop detailed action plans. The course will be repeated for maintenance and production team leaders.
The organization was basically flattened into two parallel levels. At each mill, a site manager is responsible for strategic direction, business success (measured by specific KPIs) and coaching area maintenance teams. Area maintenance teams focus on equipment reliability, Preventive and Proactive Maintenance, provide day-to-day maintenance and work closely with production crews. The whole idea is to combine initiative and opportunity with incentives to push responsibility down in the organization.
A Central Support Team provides team and project support to the mill teams in areas such as reliability engineering, planning, scheduling and material management as well as shutdown preparation.
Benefits of Outsourcing to Company and Employees
Benefits to the company are compliance with the objectives that initiated the partnership agreement.
- Increase availability and production output
- Achieve world-class maintenance
- Reduce maintenance costs
Employees have increased opportunities for career enhancement gained by developing skills and a more secure future with a competitively stronger company. There is greater satisfaction derived through increased responsibility and control over work performance. Perhaps most important, employees share financially in the fruits of their efforts and success with a portion of compensation based on results.
As the partnership formed the following specific actions were implemented to assure satisfaction and success:
- Mill partnership master plans
- Monthly partnership meetings
- Monthly partnership rating
- Joint problem solving and shutdown teams
- Loss tracking
- daily review
- weekly report of availability, lost production and utilization compared to targets
- Pareto analysis to identify opportunities for improvement
Challenges of Outsourcing
In any endeavor there are always challenges including plans that are more difficult than anticipated to implement and unanticipated resistance. Specific challenges that arose during the first year of the partnership included:
- Communications – is everyone on the same page and in agreement with conditions, objectives and priorities?
- Upgrading skills – where do you begin, with the best people or with potentially best?
- Sustaining improvements – how to maintain improvements while continuing the change process.
Results of Outsourcing in the first year
Stated briefly, all targets for the first year were exceeded. The mills achieved record production at reduced costs. It is recognized that most of the “low hanging fruit” has been identified and harvested. Focusing on systems and human capabilities are now required to build on the strong start. The shared risk reward compensation produced the most money employees have ever made. The partnership is considered so successful that it is now an integral part of the production company strategy. Further, the recent purchaser of the production company views the processes and practice developed by the partnership so strong that they will be considered for introduction to other worldwide mills owned by the new parent.