SIG Webinar: Next Generation Sourcing Strategies For Facilities And Maintenance Transformation, Presented By A.T. Kearney (Daryl Watkins, Senior Sourcing Manager and Bernard “Bud” J. Going, Director of Procurement).
Before we go further, it is worth noting that between ISM, SIG and many of the solutions vendors procurement professionals are incredibly fortunate to have such quality events put on free of charge that we can attend from the convenience of our desks. In the case of SIG, you have to catch the event the first time around unless you are a member.
The focus of this webinar was on the transition of facilities service management from in-house administration to being outsourced one service at a time to consolidating all outsourced services under one vendor. The term used for this final state is Integrated Facilities Management, which we’ll shorten to ‘IFM’ for the rest of these notes.
In 2008, the North American facilities management market was $278B: 70% handled in-house, 22% individually outsourced, and 8% outsourced as part of an IFM program. In 2012 the projected market value is $347B: 70% handled in-house, 20% individually outsourced, and 10% IFM. [Source: North American Integrated Facilities Management Services Market, Frost & Sullivan)]
The global IFM market in 2010 was $63B. IFM’s global market share within the whole facilities management spend mirrors that in North America. The UK has the most mature IFM market. The average cost breakdown within facilities management categories is labor: 65%, materials 35%, and overhead 10%, and it is important to represent all costs in a sourcing effort.
Although there is great variation in the size and complexity of these projects, typical IFM sourcing projects may be from $250-500M (once you include all of the service subcategories), require 3-6 resources and take 4-6 months to complete. Because of this, it may be hard to handle them without the help of an outside resource like A.T. Kearney.
Drivers for implementing an IFM program: economic conditions, marketplace dynamics, productivity challenges, supplier management, and sustainability (green initiatives). When preparing to source facilities management services, efforts should be made to define scope, collect data, identify the current contract(s) status, understand current workflow, evaluate current systems, and identify key stakeholders. Ultimately, the quality and representativeness of the data available are most key to the success of the project.
The value added benefits associates with IFM programs are reorganization, specification rationalization, application of technology, category best practices, and a focus on facilities management.
Facilities management categories are ideal for the application of collaborative optimization – or going beyond a rigid bid sheet to allow suppliers to bid according to their strengths. It allows them to define their vision and suggest alternative arrangements. These categories are good candidates for optimization because they have many items, many bid attributes, and many suppliers. They are also usually have multi-winner award strategies and a number of business constraints. On average, using an optimization solution provides an additional 3 – 8% savings over something like Excel. These results depend on the complexity of constraints and the variation from the historical management approach.
One interesting question posed by a participant was about unionized facilities and how to handle them. The effort needs to be well organized, and will require more from Human Resources and the company’s leadership. Bring in union leadership early in the process. Not all included facilities may be union – and it is important to know up front the status of each location.