Should You Outsource Your Maintenance Operations?

Outsource maintenance when you need specialist skills, flexible capacity or cover for non-core work, and keep it in-house when equipment knowledge and response time drive uptime. The true cost is more than the vendor's invoice: it includes monitoring, engagement, transition, learning curve and downtime. Many plants run a hybrid, with a CMMS holding the asset history.

Many organizations struggle with whether to outsource their regular maintenance operations or keep it all in-house. This is an important decision for maintenance managers and higher-ups. While outsourcing maintenance requirements can provide many benefits, it’s important to understand the true costs involved. This guide breaks down the true costs of outsourced maintenance, from monitoring to downtime.

What Are the Pros and Cons of Outsourcing Maintenance?

Outsourcing maintenance can provide many benefits, including cost savings, flexibility, and access to specialized skills and expertise. However, it also comes with potential drawbacks, such as loss of control and communication gaps. Let’s take a look at the pros and cons in more detail:

Pros of Outsourcing Maintenance

• Cost savings: Outsourcing maintenance can provide cost savings, as the provider can often provide services at a lower cost than hiring and training in-house maintenance staff.
• Flexibility: Outsourcing maintenance can provide more flexibility in terms of service offerings and scheduling.
• Access to expertise: Outsourcing maintenance can provide access to specialized skills and expertise that may not be available with in-house employees.

Cons of Outsourcing Maintenance

• Loss of control: Outsourcing maintenance can result in a loss of control over the maintenance process and potentially, the quality of the work.
• Communication gaps: Communication gaps can occur when outsourcing maintenance, which can result in miscommunication and delays in service delivery.

What Outsourcing Models Are Available?

There are several different outsourcing models that businesses can choose from, including full-service fixed bid, labor-only, SLA/performance-based, and as a service. Each model has its advantages and disadvantages, and it’s important to carefully evaluate each option before making a decision.

Full-Service Fixed Bid

• Provides a complete solution, including labor, parts, and equipment, for a fixed price.
• Can provide cost savings and convenience.
• May not provide the flexibility of other models.

Labor Only

• Provides labor only, with the customer responsible for providing parts and equipment.
• May provide more control over the maintenance process.
• May require more coordination and oversight from the customer.

SLA / Performance-Based

• Guarantees a certain level of service and performance.
• Can provide a high level of quality and accountability.
• Can be more expensive than other models.

As a Service

• Provides a subscription-based service, with the provider responsible for all maintenance tasks.
• Can provide cost savings and convenience.
• May not provide the flexibility of other models.

How do the four models compare?

What Are the True Costs of Outsourcing Maintenance?

Outsourcing maintenance can be an effective strategy for businesses looking to save costs and increase efficiency. However, before deciding to outsource, it’s important to understand the true costs involved. The costs below show why each one matters when you evaluate an outsourcing arrangement.

Outsourced Cost

The outsourced cost is the most obvious cost associated with outsourced maintenance. This refers to the cost of the maintenance service provider, which is typically determined by the vendor’s pricing structure. It’s important to note that while outsourcing maintenance may seem like a cost-saving measure, it’s not always the case. In some cases, outsourcing can be more expensive than in-house maintenance. Therefore, it’s important to carefully evaluate the cost of outsourcing versus the cost of maintaining equipment in-house.

Cost of Monitoring

The cost of monitoring refers to the cost of tracking work orders, scheduling maintenance, and overseeing the quality of the work being done. When outsourcing maintenance, it’s important to establish clear communication channels and protocols to ensure that work is being done correctly and on schedule. This requires dedicated resources to monitor and manage the work being done, which can add to the overall cost of outsourcing maintenance.

Cost of Engagement

The cost of engagement refers to the cost of establishing communication channels and protocols with the service provider. This includes the time and resources required to establish a contract, negotiate terms, and ensure that both parties have a clear understanding of their roles and responsibilities. While this cost is often overlooked, it’s important to consider the time and resources required to engage with the service provider and establish a working relationship.

Cost of Transition

The cost of transition refers to the cost of transitioning from in-house maintenance to outsourced maintenance (and/or vice versa). This includes the time and resources required to identify the right service provider, establish a contract, and transition from in-house maintenance to outsourced maintenance. This can be a significant cost, especially for businesses that have relied on in-house maintenance for an extended period.

Cost of Learning Curve

The cost of the learning curve refers to the cost of learning how to work with the service provider and their processes. When outsourcing maintenance, it’s important to ensure that all parties have a clear understanding of the work being done, how it’s being done, and who is responsible for what. This requires time and resources to train employees and establish clear communication channels with the service provider.

Cost of Downtime

The cost of downtime refers to the cost of lost productivity due to equipment downtime. When outsourcing maintenance, it’s important to ensure that the service provider can minimize downtime and maintain equipment in a timely and efficient manner. Downtime can be costly for businesses, especially those that rely on equipment for their day-to-day operations.

Return on Investment in Vendor Resources

The return on investment in vendor resources refers to the potential cost savings and increased efficiency gained by outsourcing maintenance. When evaluating outsourcing arrangements, it’s important to consider the potential return on investment in vendor resources. This includes cost savings from reduced labor costs, increased efficiency from streamlined maintenance processes, and improved equipment reliability.

How Do You Optimize Outsourced Maintenance?

Outsourcing maintenance can be an effective strategy for businesses to save maintenance costs and increase efficiency. However, to truly optimize outsourced maintenance, businesses need to consider several key factors. We’ll take a closer look at how to optimize outsourced maintenance and ensure that businesses are getting the most out of their outsourcing arrangements.

Expertise On-Demand vs. Vendor Markups

When outsourcing maintenance, businesses need to balance the cost savings of expertise on demand with the potential markups charged by the vendor for parts and supplies. It’s important to evaluate the pricing structure of the vendor and determine whether it makes sense to purchase parts and supplies directly, or through the vendor.

Who Owns the Equipment Knowledge?

Efficient maintenance requires knowledge of the plant assets individually and collectively. Knowledge often rests with the vendors. Establishing mechanisms to harvest knowledge is crucial when working with outsourced vendors. This ensures a clear knowledge capital that is readily owned by the in-house team but accessible to all the necessary vendor resources.

Systems and Tools

A computerized maintenance management system (CMMS) can be used in conjunction with various maintenance strategies such as condition monitoring, which involves the use of sensors and data analysis to predict equipment failures and schedule maintenance proactively. By integrating CMMS with condition monitoring, businesses can ensure that maintenance is performed only when necessary, optimizing resource utilization and reducing costs. Additionally, maintenance management software can support condition-based monitoring, which involves assessing equipment performance and wear-and-tear to determine when maintenance is required. A CMMS also gives you one record of every work order, response time and repair, so you can hold vendors to their service levels and keep the asset history in-house.

High Turnover of Resources

High turnover of resources can have a significant impact on the quality of maintenance work being done. It’s important to consider the vendor’s turnover rate, training, and transition plans and how they may affect the quality of the work being done.

Balancing Cost, Quality, and Efficiency

Balancing the costs of outsourced maintenance with the quality and efficiency of the work being done is key to optimizing outsourced maintenance. It’s important to evaluate the vendor’s performance and ensure that they are meeting agreed-upon service levels.

Margin Squeeze vs. Sub-Standard Delivery and Downtime

Cost-cutting measures should not result in sub-standard work or increased downtime. It’s important to ensure that the vendor is delivering quality work and that any cost-cutting measures don’t compromise the quality of the maintenance work being done.

Return on Investment

Evaluating the return on investment of outsourcing maintenance is crucial. This includes evaluating the cost savings, increased efficiency, and improved quality of work resulting from outsourcing maintenance.

Exit Clauses vs. Making it Win-Win

While it’s important to have exit clauses in case of dissatisfaction with the service provider, businesses should strive to create a win-win situation for both parties. This involves establishing realistic expectations, clear deliverables, economic incentives, communication channels, metrics, and commitment.

When Should You Keep Maintenance In-House, Outsource or Use Both?

Keep in-house the work that depends on deep knowledge of your process: critical and safety-related equipment, first-line response and routine PMs. Outsource work that needs rare skills or equipment, such as specialist overhauls, calibration or extra labor for a shutdown. Most plants end up with a hybrid, and a shared CMMS record of work orders, costs and asset history keeps both teams working from the same facts.

How Do You Select an Outsourced Maintenance Provider?

Selecting the right service provider is crucial to the success of outsourced maintenance functions. Some factors to consider include:

• Expertise and experience: The service provider should have the necessary expertise and experience to effectively maintain the equipment.
• Communication and responsiveness: The service provider should have clear communication channels and be responsive to customer needs and concerns.
• Pricing and value: The service provider should offer competitive pricing and provide value for the services provided.
• Flexibility and scalability: The service provider should be flexible and able to scale services as needed.
• Quality assurance: The service provider should have clear quality assurance processes in place to ensure the quality of the work being done.

Which KPIs Measure Outsourced Maintenance?

Measuring key performance indicators (KPIs) is crucial to ensuring the success of outsourced maintenance. Some KPIs to consider include:

• Response time: Measuring the vendor’s response time can provide insights into their ability to provide timely maintenance services.
• Cost per maintenance event: Measuring the cost of each maintenance event can help evaluate the cost-effectiveness of outsourcing maintenance.
• Maintenance backlog: Measuring the backlog of maintenance work can provide insights into the vendor’s efficiency and capacity.
• Overall equipment effectiveness: Measuring overall equipment effectiveness can help evaluate the effectiveness of the maintenance program.

Conclusion

Outsourcing maintenance can provide many benefits, but it’s important to carefully evaluate the true costs involved. By understanding the true costs and optimizing outsourcing arrangements, businesses can achieve cost savings and efficiency gains without sacrificing quality or control. It’s important to select the right vendor, establish clear communication channels, and measure KPIs to ensure that outsourced maintenance is effective and cost-efficient.

Choosing the right vendor, establishing clear communication, instituting CMMS and other systems, and measuring KPIs are all critical components of a successful outsourcing strategy. Additionally, implementing a strong preventive maintenance program can further optimize your maintenance operations and ensure the longevity of your assets. Get in touch with MaintWiz to see how an AI CMMS gives you one record of work, cost and asset knowledge, whether your maintenance is in-house, outsourced or both.

FAQs

When should a company outsource maintenance?

Outsource when you need specialist skills you cannot justify hiring, extra capacity for a shutdown or peak load, or cover for non-core assets. Keep critical equipment and first-line response in-house, where knowledge of your process matters most.

Is outsourcing maintenance cheaper than in-house maintenance?

Not always. The vendor invoice is only one cost. Monitoring, engagement, transition, the learning curve and downtime all add to the total, so compare the full cost of each option, not just the contract price.

What are the main maintenance outsourcing models?

The four common models are full-service fixed bid, labor only, SLA or performance-based, and as a service. They differ in who supplies labor, parts and equipment, how much control you keep, and how the vendor is paid.

Which KPIs should you use to manage a maintenance vendor?

Track response time, cost per maintenance event, maintenance backlog and overall equipment effectiveness. Review them against agreed service levels each month so problems show up before they cause downtime.

How do you keep equipment knowledge when you outsource?

Record every work order, failure and repair in your own CMMS, and require vendors to update it. The history then belongs to your team and stays available when a vendor or technician changes.