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System maintenance: In or out?

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Should system maintenance be handled by an in-house team or outsourced to a supplier? Dave Acton, Director of Engineering Support Services at AMHSA member, Logistex, examines the issue.

AMHSA November 2.jpgOnce a company has invested in automation to realise efficiency benefits and cost savings, it needs to protect this investment so that unplanned downtime is avoided and the logistics system can continue to deliver results over its lifetime. This is the role of maintenance and today, with warehouses often working 24/7, it can prove to be a juggling act of volume versus downtime.

Getting maintenance right – both the level and the timing – is critical when warehouse operators face ever-shortening delivery windows to meet customer expectations. For large or complex distribution centres, maintenance requires detailed planning and it often makes sense to have a resident team of engineers based at the facility to deal with any issues immediately and also undertake maintenance routines to ensure maximum system uptime. But should this be an in-house team or should system maintenance be outsourced?  

Responsibility and risk

Companies that use their own in-house teams to provide system maintenance retain full control of how their resources are deployed. They also have full transparency when it comes to costs but also carry the risk. With outsourcing, the responsibility and risk for maintenance are passed from the client to the supplier. This means that the outside provider is responsible for any downtime, as well as for ensuring that there are enough and sufficiently competent technicians on site. With this comes responsibility for recruitment, training and retention. In a market where such engineering – and, increasingly in automated warehouses, software – skills are in short supply, this in itself is a challenge that many clients are eager to wash their hands of.

Cost is, no doubt, front of mind for most companies in weighing up whether to outsource, with many taking the view that the supplier's profit must surely make outsourcing a more expensive option. However, this way of thinking fails to take account of a number of factors. Firstly, there are many costs besides the service engineers' salaries – the HR costs, training costs, sick pay, temporary staff to cover absence, pensions, buying in of specialist services where skills are lacking in-house and spare parts procurement, to name but a few. Some firms that outsource their maintenance opt for an open-book accounting model so that the system maintenance costs are transparent; however, the downside to this is that they continue to retain the risk.

The cost of downtime

Another hidden – but significant – factor is the cost of downtime. With brand value so dependent on fast delivery these days, downtime can prove extremely costly. By engaging an outside specialist, you gain access to that provider's years of experience in your industry and other sectors, potentially from sites around the world. An outsourced maintenance service can harness economies of scale that are rarely possible with an in-house team, enabling resources to be balanced across the network to cover peaks and troughs in the demand, and therefore volumes, faced by the customer. One important point to note here is that, however good your system or software might be, you must have any critical spare parts readily available to keep your logistics system running. An outside provider will be better able to hold spare parts for use across a number of customers, compared to the high cost for one individual customer of keeping these parts in stock. These parts can be supplied to in-house teams, of course, but it may be that the provider's own resident teams get priority.

Predictive analytics

Crucially, an experienced provider will generally invest in the latest maintenance technologies and processes. They will not operate on the traditional 'fix it when it breaks' methodology, which risks significant downtime if spare parts cannot be sourced quickly. Nor, probably, will they rely on the more modern preventative maintenance philosophy of performing regular routine maintenance to all equipment at intervals dependent on factors such as running time and age. Instead, an outside specialist today is likely to offer a service based on the latest predictive maintenance techniques. This entails maintenance being based on data collected from the system that indicates when maintenance is actually necessary. To enhance the accuracy of this data gathered from sensors – such as motor speed, temperature and vibration – that may signal a problem, it can be merged with data from around the world via the Internet of Things (IoT). In this way, digitalized maintenance platforms can provide real-time visibility across sites. Predictive analytics can then be deployed to reveal patterns in fresh data that can be combined with historical data to predict what will happen to logistics equipment in the future. Maintenance resources can then be targeted where they are needed most, rather than carrying out maintenance simply because it is scheduled. In this way, predictive maintenance not only increases availability, it reduces the need for reactive maintenance and also enables inventory cost to be reduced.

Competitive forces

Then there is the effect of competition in the outsourcing model. In-house maintenance teams do not tend to face competition, so it is difficult for management to know whether they are achieving value-for-money. In contrast, an outsourced service will entail competitive tender on contract renewal that allows costs to be benchmarked.

In summary, maintenance of an automated system should not be viewed simply as a cost burden but actually as a means of enabling competitive advantage. And, by outsourcing the service to a specialist, it may be that a company can achieve better value for a similar cost. If you are wondering whether an in-house or outsourced team is right for your business, an AMHSA member can help you to work out the benefits and downsides for your particular situation, providing their expertise in an impartial way to ensure the right balance of cost and system resilience for your application.

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As the UK’s leading authority on automated material handling with over 60 members, AMHSA seeks to accelerate the adoption of world-class intralogistics automation across the UK supply chain. Visit www.amhsa.co.uk, call 07517 610514 or email [email protected]

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