Today, the function of integrated facility management, both from a service provider and a client perspective goes far beyond the workplace.
The FM companies are expected to not only maintain office spaces but also offer property management, township management and even municipal services management,” S. Narayan, Founder & President Integron, said moderating a session on supply chain during the IFM summit organized in January 2016.
The services sometimes extend beyond a single building or services to cover entire complexes, varied services or are spread across multiple functions and locations. In such a situation procuring or even planning for the services has become an extremely complex issue,” he added.
Other panel members were Aval Sethi, Head Supply Chain management & Procurement, Asia at Jones Lang LaSalle; Vikas Rawat, VP-Operations, Nirlon Ltd; Ruediger Schroeder, MD Karcher Cleaning Systems Pvt. Ltd and Navin Upadhyay, National Manager- Procurement & Capacity management at Kotak Mahindra Bank Ltd.
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– Vikas Rawat
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Outsourcing or In-house
Vikas Rawat said, “The procurement process for a large commercial space is indeed a difficult task. Same as, when developing any project, customer needs remain central during the design and project management, in case of procurement too, the emphasis remains on getting the right material at the right cost not only at the time of project construction, but also during the maintenance stage as per client requirements. I want the assurance of the supply and the guaranty of the price even after five years to manage the cost of replacement and maintenance budget. Thus, procurement has to be a very deeply embedded stream not only at the time of project execution but also during the life span of the property.
Narrating his own experience on Narayan’s query of whether the outsourcing of procurement is better for the clients than managing in-house, the supply chain across various verticals Rawat stated, “What has worked well for us, is the in-house procurement, where we have been able to take advantage of economy of scale while dealing directly with the OEMs. We look at the cost of initial purchase and thereafter subsequent maintenance cost for next ten years of the product and the reputable vendor offering the best rate accordingly is then finalized.”
As FM service provider, Aval Sethi, deliberated on the factors driving the supply chain and the rising complexities in next few years. He remarked, “When we talk of supply chain, what immediately comes to mind is a very fine map of the process but, as we move from companies to companies, there are a lot of variations. Today there are different factors driving a supply chain such as, IT, sustainability, compliances and risks within the supply chain. The entire landscape and the context itself is changing so, there are a lot of disruptive forces within the supply chain. Evidently, service providers in dealing with the risk and opportunities are imbibing technologies in their delivery modules, taking on board various technology platforms and integrating them together to create a very efficient delivery model for the clients.
“In 2015, we have seen a lot of acquisitions in the market that brought together completely different set of employee culture. Their integration and the time taken become a challenge as companies become more trans-national requiring consistent delivery modules across geographical locations. The supply chain itself is becoming smart and connected with use of technologies like RFID. Very soon we will see a smart FM emerging that will interact with the client, passing information back into real time to the supply chain network, providing solutions instantaneously. Therefore, we need professionals who are tech savvy and who can identify, plan and then roll out initiatives as per the client satisfaction.”
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– Aval Sethi
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Selecting the Manpower issues right partner
The challenge for Navin Upadhyay stems from getting the right service provider across the locations right from a single ATM machine which needs to be maintained and guarded to large complex office spaces. Some important considerations while selecting a FM service provider:
- Will outsourcing a function dilute the sense of ownership which is there as of now
- Will it give me the result which has been projected by the service provider?
He said, “The scope of engagement needs to considered such as, to outsource the entire department/ function or only part of it. Other factors include the FM service provider value addition in terms of audit and technology platforms and whether to go with a regional partner or a national player. All these form the basis for the vendor pre-qualification process, followed by site visits of the facilities managed by them and interaction with the on-ground team. Once the FM agency is on board, you have certain expectations and challenges to face.
Expectations:
- Value for money: Will it lead to optimization in terms of manpower, consumption of materials or streamlining of process?
- Benchmarking: As the FM service provider is providing services to multiple clients, expectation of benchmarking to understand the company’s performance in comparison to my peers.
- Knowledge sharing: Introducing new technology or best practices which does not exist in the company to scale up the performance.
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To retain manpower deployed by third party it is essential to take initiatives like offering various facilities and cash incentives. Earlier the churn out was almost 30% manpower every month, now almost 95% of manpower is retained.
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Challenges:
- Handover from sales team to operations team in terms of what has been promised and what needs to be delivered is something which can improve.
- Maintaining the quality of manpower by ensuring that the right people are at right places. In past 10-15 years, with the increase in magnitude of demand, the quality of manpower has suffered., In case of FM, we do not look at any minimum qualification and simply go by experience so may be as an industry some certification mechanism can be worked out.
- Cash flow management, which is payment to the third party contractor, doesn’t happen at times and there are situations wherein the agency is not able to pay contractor and they go on strike or move out.”
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– Ruediger Schroeder
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Understanding the supply chain logistics
The advantage of purchasing power that a FM service provider does not get passed on to the client. It is observed that the FM agency becomes more of a manpower supplier rather than one which, managing the services pro-actively.”
Having spent the last five years in India, Ruediger Schroeder felt that the country was still at a basic level in terms of new techniques, information technologies and so on. Elaborating on the same, he said, “In the procurement process, Indian clients are habitual of making last minute decisions and expecting the vendor to deliver a bulk order in an unrealistic time frame. The customers would want the job to start in five or seven days but their own internal procedures consume most of the time. As an equipment supplier my understanding is that the logistics supply chain is not understood well. Also, the after sales service is not given due importance here. In case of maintenance service, firstly, the client’s internal clearance process takes unrealistically long time, then if a company like us offers readily available spare parts and immediate servicing though at a premium, the same is considered expensive, not realizing the faulty machinery is also incurring them a loss. Globally, the decision maker is an operations guy who gives a go ahead on the cost approvals. We tried this model in India but the customers are unwilling to change their processes or pay high servicing cost. We and some other companies also came up with the model of renting equipment because then it’s our responsibility to make sure that the machines are working but cost factor became an issue with the clients. What consumers here have to understand is the company’s financial risk to make spare parts available in short time for quick servicing to save the consumer time, money and inconvenience. This attitude needs to change.”
Narayan agreed that the decision making had gradually moved away from the people who actually manage the operations to administrative, procurement and the CFO offices. He questioned the panel if clients were actually willing to pay more for a quality service and if life cycle cost is really considered during FM contracting.
Sethi pointed out that the one-year contracting is now evolving into long term contracts like three or five years. “As a service provider, if cost is the determining factor, then we prefer long term contracts, so that if we have a guarantee, we can actually make investments into the contract.”
Rawat said, “For the similar reasons, all our contracts are five years so the service providers can focus on the delivery. Alternatively, if the SLAs are not met, the termination clause is also incorporated. Regarding the maintenance aspects, we have taken a comprehensive AMC so that the OEM need not bother about the part, its repair, cost or approval, etc. thereby bringing down turnaround time to barest minimum.”
Upadyay added “Indeed, long time contract is the way to go. For our projects, we are just not looking at the project cost for that point of time but enclosing in the project package, two years or three years of DLP plus the total cost of operations, if I give comprehensive AMC to a vendor, what will be my total cost of operations for eight years which is three years of DLP plus five years of comprehensive AMC.”
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– S. Narayan
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Manpower issues
The client whose emphasis on cost is end up working with FM providers who are literally body shops, employing workers at minimum wages with no experience or limited expertise. “But, if the client is willing to pay upfront then the FM companies too offer skilled man power with experience. However, with robots coming into cleaning industry, we are already looking at more use of equipment and less of manpower deployment. I think the future is robotic cleaning and eventually the connected FM or the Smart FM concept will link up with these robots and with the main frames systems at the back which will integrate the entire supply system into one large eco-system and will deliver more efficiently with less manpower,” explained Sethi.
Narayan was of the opinion that as the clients are not willing to make investment into the services delivery base or renting of equipment, the large clients or large service providers will have to form alliances. Upadyay concurred that there was a difference between IPC and non- IPC and as per his personal outlook IPCs were more specialized.
Considering the FM and cleaning industry is quiet large in India, Schroeder was of the view that suppliers, service providers and other stake holders needed to collaborate in improving the industry standards. He said, “it is the procurement and finance departments that have to comprehend and approve of the costs implications of getting a good quality service. Public and businesses need to be made aware of what we are contributing – better property management and preserving values of assets. This is really not understood.”
[box type=”shadow” ]The question is not whether efficiency can be built into a process but whether the traditional processes are even relevant.[/box]
Narayan said, “Talking about NSDC having a hospitality sector skilled council which will actually certify right from a house keeping attendant to a supervisor and a manager, is there any move in the industry to deploy operators certified by NSDC only?”
These concepts have just started to begin but, in the last couple of years’ businesses have been looking at diversity partners and working with NGOs to develop their skill sets, added Sethi. “It will probably take sometimes for clients to start recognizing the value and really ask for trained people with certification, as they will come at a cost rather than minimum wages”.
Upadyay, “I will be willing to pay extra for a certification if it comes with certain efficiency and value addition. If today I am deploying some un-skilled labor, who is say not certified and doing something in X-hours, I expect somebody who is certified to do better than him so, somewhere that cost component will come but having said that, better quality is equally important.”
Rawat, “If you can deploy more qualified persons offering better performance, one is willing to pay more as bringing in efficiency reduces the number. So if efficient man power is adding value and at the same time not impacting the budget considerably then it’s an absolutely acceptable proposal. To retain manpower deployed by third party we have taken initiatives like offering various facilities and cash incentives. Earlier we use to churn almost 30% manpower every month, now we retain almost 95% of manpower.”
Schroeder added, “If workers don’t know what they are doing, they are not producing hygiene standards and are not effective, so what I see from equipment supplier point of view is a huge potential to increase the productivity and delivery of good results. For example, German VDMA, has been conducting skill training program for past four years to work with the cleaning council. We need less people but better educated people who will get more money and they will stay longer in the industry. In countries like Germany, Austria, Switzerland and so on cleaning profession is a vocational training job which needs three years of education so people are trained cleaners, they are getting good salaries and recognition in the society.”
Concluding the panel discussion Narayan remarked that while, steps like long term contracts enable service providers to invest in technology, equipment and service, the skill training helps offer quality manpower and efficiency for which clients too are now supporting the service providers.
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– Navin Upadhyay
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