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The facilities management sector continues to face the challenges of low profit margins, decreasing budgets and increased client expectations.
The need to be able to create a competitive advantage that differentiates an offering from others, particularly in light of the uncertainty caused by Brexit, is increasingly imperative. Being able to deliver FM services more effectively is therefore a board-level discussion that continues amongst senior executives.
One of the key considerations is how technology can be used to support the business operations and processes, whether it is through automation, efficiencies or gathering business intelligence for decision making.
Why technology is the key
Technology is playing an increasingly important role; using it as a virtual backbone for processes and intelligence gathering and collating, FM companies are able to reduce their labour resources and improve their business decisions.
This is borne out by the findings of the 2017 BIFM Facilities Management Business Confidence Monitor which reported over half of the FM businesses were looking to invest in technology. The results showed that 54% of businesses are planning to make a technology investment that will focus on measuring and reporting tools, and 52% are looking to invest in technology that will target service delivery software.
One of the key IT systems that can bring a real competitive advantage to an FM company is asset management technology. It is widely recognised that using asset management technology to support the FM or outsourcing offering can generate significant savings.
There is no doubt that an asset management system supported by well thought out business processes should expect to drive down costs, raise labour productivity and improve service levels. Indeed, there are numerous statements made within the industry that say asset management can deliver 10% improvement in utilisation, 5% in cost savings and 10% increase in asset availability. However, there is little hard evidence available for senior execs to rationally evaluate whether their asset management system and approach are fit for purpose, or maximising the full potential.
Building the case for an asset management system
To counter this lack of tangible evidence, Peacock Engineering carried out diagnostic research to identify the potential savings an FM provider could look to achieve with an effective asset management system. As an IBM Gold Business Partner, Peacock Engineering was able to use its experience of developing and delivering Maximo solutions to analyse the typical savings available to FM companies.
The key assumptions of the asset management approach were to ensure that the FM company was able to retain and deliver existing contracts more profitably, as well as competing more effectively for new FM deals with new and existing customers.
This means that the asset management system was able to increase profitability and customer satisfaction by:
The study looked at a company that had a turnover of c.£1.5bn with a mobile workforce of 3,000 engineers and technicians and a large supporting team structure. They had grown through acquisitions and contract wins, which meant a number of discrete teams came across on TUPE who did not share one single approach.
In order to establish where savings could be made, the workflow lifecycle was broken down into five areas, which could then be analysed for opportunities for improvement. These five process areas were:
A summary of these five areas, each showing the area for improvement and the potential cost saving to be delivered, are shown in the table below.
The relative costs of the work progression lead to differing costs for the activities. For example, typical industry norms are a cost ratio of 10:1 for work execution versus work planning. Instigating automation and optimisation into the work flow offers improvements in both areas, increasing the ratio to above 25:1 and the utilisation rate of the direct labour force.
Technology-based performance gains, when totalled across the different work areas, can exceed 17% with subsequent revenue increase through efficient capture of works that should be billable extras, and more effective income recovery through clarity of work performance and billing.
Identifying the benefits for your company
For an FM company looking at investment into an asset management system, developing the business case for investment falls into seven key steps:
Having an effective asset management system improves maintenance materials, labour, utilisation and efficiency of service delivery stock levels within the context of SLAs for an FM organisation. This supports the overarching business strategy of preserving minimal costs, raising labour productivity and improving levels of service in order to retain and deliver contracts. The result is ensuring assets are available and maintained, and that a field-based workforce is effectively scheduled, thus giving the organisation a clear competitive advantage in the marketplace.
Mike Knapp is a director at Peacock Engineering Limited.
14th December 2018
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