Contractor Management: Multi-Site Analysis in Latin America
A German special chemicals manufacturer supplemented its portfolio in Latin America as part of its international expansion. Due diligence revealed significant cost reduction opportunities with 1,600 contractors in three locations with an annual order volume of approximately 20 million euros. Here are the key results:
Approach
On account of the complex problems, T.A. Cook included all functional areas and core problems related to contractor management, such as procurement, legal, and core processes such as maintenance, production, and logistics at the sites, one after the other. The analysis focused on the four major impact areas: contracts & data, processes & structures, productivity and benchmarks. T.A. Cook critically examined contractor agreements in accordance with the 80/20 rule. Predefined assessment guidelines facilitated comparisons of best practice and locations.
T.A. Cook was able to identify current patterns and areas where future action was necessary:
- Existing contracts that are not based on need of demand and performance
- Many core functions within the organization had not been established and there was a lack of consistent
responsibility for contractors
- The operative execution of services, e.g. in maintenance and production support showed critical losses in
efficiency causing frequent down times; resources were at times only used 30% productively
- Robust schedules of maintenance tasks were missing, demand management with structured definitions of
needs and set priorities did not exist, resulting in approximately 90% reactive, corrective maintenance.
Achievements
T.A. Cook revealed improvement potential of €3.8 to 4.8 million.
In order to leverage this potential, the following was defined:
- Rework of contractor agreements in accordance with SLA principles as service packages
- New definitions and implementation of an optimized contractor management process
- Definition of future needs in outsourced services in logistics, maintenance, production, taking into
account production strategy, planned technical optimizations and targeted productivity gains
- Optimization of core processes in maintenance, engineering, planning & scheduling as well as work force
management
- Definition and appointment of key functions such as Contract Manager, Planner, Scheduler etc. at
headquarters and the different locations
- Development of a control system for the productivity management of contractors on the basis of Key
Performance Indicators.
T.A. Cook was also commissioned to conduct the implementation project simultaneously at three locations over a period of nine months.
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