When Niagara Mohawk Power Corp. announced its competitive restructuring plan on October 6, 1995, it broke ranks with what had been a curiously united front against competition. The opposition had...
Outsourcing Fleet Management: Boon or Bust?
the fleet will "stay competitive because we share information with our mechanics. ... We know, for instance, that a journeyman mechanic is 44 cents per minute. We also know that for a simple oil change on a pickup, we may not be as cost-competitive as we are working on the hydraulic system of a crane, and the mechanic has to know that."
Robert Bray, transportation services manager at Southern California Edison Co., knows about benchmarking to keep costs competitive. His fleet has been busy benchmarking against other companies since 1988. Bray's employees are represented by the
International Brotherhood of Electrical Workers. Their contract includes a provision that bars any outsourcing that would eliminate existing jobs.
Bray oversees 350 employees and a $60-million budget. The fleet does some "vending" during peak work periods, such as transmission repair and engine tuneups. Body and glass work, upholstery, and painting also are outsourced. Altogether, however, less than 5 percent of the fleet's work is vended (work never performed by union workers). Bray says his vending relationships have been excellent.
"The thing I would offer as advice on outsourcing is to look at the long-term cost benefit, rather than just the immediate benefit," he says. "Once you've outsourced a function and discovered a mistake, it's almost impossible to recreate that capability within the company."
For Dennis Sharrock, a self-managed work team supervisor with PECO Energy's utility fleet in Philadelphia, economics and quality offer the strongest arguments against outsourcing. His 129-employee, $26-million, nonunion shop outsources only 10 percent of its work, including body repairs. Since 1985, the shop has downsized from 226 workers.
Outsourcing companies often claim that with industry restructuring around the corner, every efficiency will be needed, and outsourcing is the way to get there.
"I disagree with that," Sharrock says. "One of the problems is when the outsourcing companies come in, they say you need a dispatching center. [But] you never had a use for it." A simple call on radio or telephone can bring help to a broken down vehicle. "We have a lot of our equipment out every day, but not everything breaks down," Sharrock says.
Years ago, PECO used an outsourcer, but didn't get the job quality it wanted. "If we want to do a Jiffy Lube lube, it's very difficult to do [at our pay scale]," he says. "We don't do that because we found out if we do a little bit better lube than that, we beat Jiffy Lube's price by a good shot."
Like the anonymous midwestern fleet manager, Sharrock says PECO discovered it could buy parts from distributors, instead of the vendors outsourcers were using, and save. The $150 tire changes dropped to $100 per tire.
PECO's fleet continues to look at ways to improve prices and costs, Sharrock says. "We want to gradually lower the costs as time goes by."
He advises utility fleet managers to take the following steps before they consider outsourcing:
s Streamline your operation. Look at costs, and cut where you can (em in manpower, stock, and the product you're working on.