Don't Sweat the Small Stuff
OUTCO managing director Andy Barry explains why packaged outdoor FM services makes sense for estates managers.
Let’s start with a familiar paradox. Company A spends ten million pounds on FM outsourcing. £9m goes to a handful of major contracts - fulfilled by large and highly professional providers that - for the most part - prove relatively predictable and simple to manage. The last million is where things get tricky. Once core demands are dealt with, a plethora of smaller scale needs remain that are fulfilled by a patchwork of small contracts and smaller contractors that consume a disproportionate amount of time to procure and manage. We all know the 80/20 rule about working smarter in business that states that 80% of the gains can come from 20% of the effort. With outsourcing, this rump of small yet time consuming contracts is an oppressive 20/80 burden.
My own part of the FM world - outdoor maintenance - has for the most part been stuck in this tricky final segment: Whether its landscaping, grounds maintenance, car park repairs, cleaning PV panels, or winter gritting, customers are often weaving together numerous service providers – often in each location – to attempt to create a coherent whole. Which is not to say that excellence doesn’t exist. Often, there’s no substitute for experienced workers that know a site or location well. However, for larger companies managing multiple sites, the lack of a consistent approach and the absence of the operational finesse of larger outsourcing partners makes procurement and management a major challenge. Furthermore, when addressing liabilities on site - for example, trips and falls on dangerous surfaces or the danger of falling branches - a lack of professionalism and transparency can carry significant financial and reputational risks.
The picture painted here should be familiar to many readers, but a real-world example should help bring this to life further and illustrate how a better way is possible. Until recently, one of the UK’s largest supermarket chains was meeting their outdoor FM needs in exactly this way. 13 different services around their stores and distribution centres were being fulfilled by six different companies. This involved dealing with six different help desks, six different portals, six invoices and required a large team to manage the relationships. While clearly defined responsibilities provided clarity, it also meant that thousands of ad hoc tasks around the store portfolio would be left unattended (this was a particular challenge given the company’s ageing property estate).
Working with the supermarket’s main FM partner, we developed an alternative approach that replaced these multiple contracts with a single bundled service offering for all outdoor FM requirements. Under this new strategy we trained 30 two-man teams to be able to handle the breadth of services that were previously delivered by six different contractors – and to address changing seasonal outdoor maintenance requirements. This change brought clear financial benefits – removing approximately 13% of the cost base for the supermarket. However, of greater interest to the customer were the opportunities afforded by dedicated teams with a broader scope of expertise. Each team would have responsibility for a relatively small number of sites – around 20 stores. This allowed them to gain a thorough understanding of the particular challenges of a site and offered a continuity of service to the store managers. It also meant that the smaller maintenance tasks around stores that had previously fallen between the gaps could be picked up by the teams during down time – in effect reinvesting the time and money savings into proactive and reactive activity. Potholes were finally repaired, kerbs repaired, leaking air con units attended to – all by a quality supplier but without the added cost and management overhead of setting up a one-off repair.
In effect, this “new” approach was something the FM industry is already familiar with. In an analysis of FM sourcing trends, McKinsey notes that “companies typically follow a progression that begins with outsourcing noncore activities at individual locations. The consolidation, standardization (sic), and bundling of these tasks across facilities over time results in the outsourcing of a comprehensive set of noncore services and management to third parties”1. What is novel however is the application of this bundling strategy to outdoor FM, which has to this point been a comparatively immature market. At OUTCO we feel the time is right to bring this comprehensive, bundled and standardised approach to outdoor FM. Our experience with the supermarket chain demonstrates that the market is ready for this change. And as regulatory and compliance pressures increase for estate owners managing outdoor environments, such an approach can help deliver the professionalisation of outdoor FM that is long overdue.
Importantly, the bundling of services isn’t a silver bullet. Looking back at how this has been achieved in the FM world over the past decade is instructive. When companies like Mitie and Carillion started approaching customers with highly competitive integrated FM offerings, their models proved to be as disruptive as they were attractive. Those companies not bundling services were often obliged to follow suit. However, at the time there were debates as to how best to bring together FM offerings – specifically where to start and where to stop, e.g. whether to limit the offering to soft services or to attempt to run the full gamut of FM services.
There was also the question as to whether companies can self-serve a wide and diverse portfolio of offerings or should bring together third parties and create a bundled offering of subject matter experts. What was true then is true today - any bundled offering has to be able to clearly demonstrate the added value to the customer and be able to deliver it effectively. This is where a focus on complementary services can prove critical, and where the supermarket case study demonstrates the synergies of bundling together outdoor services.
At OUTCO we can see that outdoor infrastructure and maintenance is at a tipping point where certain customers – especially those with larger estates – are demanding something different. Estate owners don’t want to spend disproportionate time, effort and resource on maintaining outdoor environments but do want them to operate in a safe and compliant fashion so they can focus on their core business.
Moreover, technology is changing the game still further and offering opportunities that didn’t previously exist. Via APIs that connect service providers with customers’ FM operations, it’s now possible to create more effective dialogue with teams on site, both to push requests downstream and to provide real time data and visibility on what’s been delivered. In our winter gritting operations we have pioneered using mobile technology to create digital “breadcrumb trails” to show the activity of operatives and vehicles and believe this same transparency can and should extend to other areas of outdoor FM. As well as making services easier to manage, this enhanced visibility becomes all the more important when considered from a risk management and compliance perspective. Across every industry, digitisation is transforming operations that were once time consuming and inefficient - and tackling those stubborn 20/80 challenges. Outdoor FM will be no different and this transformation will be more easily achieved when services are standardised and consolidated.