Improving maintenance operation through transformational outsourcing

Abstract

Outsourcing maintenance to third-party contractors has become an increasingly popular option for manufacturers to achieve tactical and/or strategic objectives. Though simple in concept, maintenance outsourcing is difficult in execution, especially in a cost-sensitive environment. This project examines the Full Service business under ABB Ltd to understand the key factors that drive the success of an outsourced maintenance operation. We present a qualitative causal loop diagram developed based on the case study of Kinleith Pulp and Paper Mill in New Zealand. The diagram describes the interconnections among various technical, economic, relationship, and humanistic factors and shows how cost-cutting initiatives can frequently undermine labor relationship and tip the plant into the vicious cycle of reactive, expensive work practices. The model also explains how Kinleith achieved a remarkable turnaround under ABB, yielding high performance and significant improvements in labor relations. A case study of Tasman Pulp and Paper Mill provides a contrasting case where success has been more difficult. Results point to the importance of creating sufficient resources ("slack") to implement improvement activities and pace implementation based on pre-existing dynamics on site.