Contract Maintenance

Contract maintenance is a service agreement in which a company, known as the contractor, agrees to provide maintenance services for another company, known as the client. These services can include a wide range of activities, such as routine maintenance, repairs and inspections, as well as more specialized services, such as machine installation and commissioning and compliance with safety and regulatory requirements. The main objective of contract maintenance is to transfer the responsibility for the maintenance of equipment, facilities and other assets from the client to the contractor, to improve equipment reliability and reduce overall maintenance costs. This allows the client to focus on its core business operations, while the contractor takes care of the maintenance tasks.

Contract Maintenance Content

Contract maintenance: 5 ways to keep things humming in a cost-effective model

With manpower in high demand, fewer highly qualified personnel are available in the labor pool. More and more operators recognize the value of a resident maintenance program, offering guaranteed uptime, guaranteed staffing, and limitless access to OEM engineers and support staff.

Today’s manufacturing facilities and automated order fulfillment and distribution systems operate faster and longer to meet increased volume. Typical operational requirements at a distribution center, for example, mandate sorting and shipping orders 18 to 20 hours a day, seven days a week. These prolonged hours of operation limit available time for maintenance teams to perform required repairs, preventive maintenance (PM), and rebuilds, and prevent benchmarking the relative health of a system.

The intangible cost of downtime can quickly escalate, cutting into slim profit margins and jeopardizing future business and customer loyalty. However, preventing downtime and optimizing operational efficiency of these highly automated systems requires PM programs planned and executed by a skilled maintenance staff that is competent with the latest versions of software, systems, and diagnostic techniques.

With manpower in high demand, fewer highly qualified personnel are available in the labor pool. This increases the risk of losing key personnel and their legacy system knowledge due to employee turnover. More and more operators recognize the value of a resident maintenance program, offering guaranteed uptime, guaranteed staffing, and limitless access to OEM engineers and support staff.

While maintenance outsourcing is not a new concept, particularly during peak demand periods, replacing internal staff with on-site experts and a turnkey maintenance program is proving to be a cost-effective model for today’s high-volume, high-speed demands.

There are five basic benefits to an outsourced maintenance system:

  1. Solving maintenance staffing and training challenges
  2. Controlling the cost of high-tech system and software maintenance
  3. Integrating a computerized maintenance management system (CMMS) with enterprise resource planning (ERP) and warehouse control system
  4. Implementing a robust PM program
  5. Guaranteeing and achieving uptime

Staffing and training

Staffing shortages, particularly skilled mechanical, electrical, and software maintenance technicians, continue to plague plant operators. A resident maintenance program provides an attractive alternative, deploying staff already trained in OEM equipment and resourced to start work on day one. Rather than spending time with internal human resources staff to define and redefine the required skill sets for this month’s maintenance recruitment effort, the resident maintenance service technicians deployed to the facility match operational and maintenance requirements, including any seasonal demand adjustments. Facility staff no longer bears the burden of initial training and subsequent training as equipment is added, upgraded, or changed. In addition, resident maintenance programs eliminate the risk of losing legacy knowledge due to staff turnover. The service provider institutionalizes this information among a broad base of system experts and databases.

“Recruitment and training can be a real inconvenience considering all of the trade disciplines required for a robust preventive and emergency maintenance team,” said Kieran Ryan, director of maintenance services, Intelligrated. “A resident maintenance program frees operations staff from worries about system uptime and extended system lifespan so they can focus on product flow and making the customer happy.”

Control high-tech systems costs

Increasingly complex hardware and software demands new and specialized maintenance knowledge from technicians. Increased productivity brings a potential risk of higher associated maintenance costs.

“The more automation, the more maintenance required. We have seen older non-automated facilities running with 700 to 800 operational staff and perhaps 25 maintenance staff. Upgrading to an automated facility with higher throughput may only need 80 operational staff but require 50 maintenance technicians,” said Ryan.

Keeping a high-throughput automated system up and running with short maintenance windows can be a challenging exercise. Factoring in the staffing and sparing requirements to meet throughput KPIs adds an additional challenge and costs. With less time for maintenance, preventive tasks can get pushed aside for more urgent repairs, with a compounding impact on downtime and maintenance costs as the system ages.

Furthermore, in the event of an equipment malfunction, spare parts must be on-site along with a fully trained technician to complete the repair. A resident maintenance program meets these maintenance challenges and provides a predictable cost for guaranteed throughput. The program not only includes trained mechanical, electrical, controls, and software technicians but also spare parts stocked for fast repair, plus instant access to OEM resources and engineering assistance.

A fully integrated CMMS

Keeping hundreds of assets maintained and operating at peak efficiency is a daunting task. By implementing a computerized maintenance management system (CMMS), every facility asset can be viewed and tracked on a graphical interface, ensuring efficient management throughout its lifecycle. CMMS implementation has benefits that range from system-wide maintenance planning and labor allocation down to individual machine-level monitoring to identify repetitive issues and cost of ownership.

Maintenance scheduling, labor management, PM planning, work order generation, spare parts inventory, and performance reports can all be aggregated within a CMMS. In addition, a CMMS integrates with the DC’s[SS1]  ERP and WCS to share data and provide an unprecedented ability to manage assets and predict system wear and tear, all while optimizing maintenance budgets and schedules. The CMMS also sends notifications via text, automated voicemail, or email in the event of critical situations. The result? Reduced response time, less downtime, and lower perceived maintenance costs.

“With a properly implemented CMMS, the operator gains a complete asset history from cradle to grave, including ancillary equipment such as lift trucks and batteries.” says Rick Emery, CMMS system administrator, Intelligrated. “This provides invaluable insight into the true cost and performance history of each asset, impacting how and when maintenance is performed and a potential upgrade or replacement is scheduled with attendant cost benefits to the operator. In addition, each asset is tracked individually so identical units that may have different motors are managed as separate assets. It’s just a smarter way of working, with a real impact on increased uptime.”

Make time for preventive maintenance

Maximizing equipment life and preventing unplanned shutdowns are some of the primary drivers for a PM program. A PM program also ensures that recommended system enhancements and upgrades are implemented. Running a lean internal maintenance team frequently results in downsides such as minimal to no time allocated for preventive maintenance.

Responding to unplanned outages takes all the resources available, with the consequence of expensive equipment not meeting life expectancy and a noticeable increase in unplanned outages. Running 18- to 20-hour days, seven days a week, can also compromise a PM program. A resident maintenance program includes a robust and highly structured PM program designed for total lifecycle support. This type of PM program ensures maximum life of the capital equipment investment, as well as keeping uptime and throughput at optimum levels.

“While a PM program can be overlooked due to reactive maintenance requirements, it’s really an insurance policy for long-term system performance,” said Ryan. “Ultimately, the lack of PM is going to impact cost in terms of lost throughput, increased downtime, and shorter equipment life. We see cost-effective PM as one of the greatest benefits of a resident maintenance program.”

Decrease downtime with contracted uptime

Throughput is one of the most important KPIs. The ability to meet throughput goals relies on sustaining uptime. A superior maintenance program contractually guarantees uptime of 97% or better. While actual uptime frequently exceeds this figure, the number alone is not the whole ROI story. With operational staff free from maintenance oversight, they can focus on strategic planning and management.

“Guaranteed uptime is a huge relief,” said Ryan. “We reach and exceed these uptime figures due to our skilled technicians, our robust PM program, and our ability to immediately respond to emergency outages and equipment failures by having the right technicians and spare parts in the right place at the right time.”

Corey Calla is director of the lifecycle support team at Intelligrated.

Resident maintenance: What to expect

Your resident maintenance professional should be:

  • Time efficient: Providing high-quality maintenance during limited downtime
  • A clean sweeper: Keeping your systems clean and clear of debris
  • A system inspector: Inspecting and identifying worn parts and equipment to prevent failures before they happen, reducing unplanned downtime
  • A reference point: Providing greater access to company resources both remotely and in-person as an employee of the system’s manufacturer
  • Fully trained: Comprehensive training in the company’s specific solution, as well as industry standards and OSHA requirements.
  • Familiar with asset management and legacy knowledge base: Maintaining complete system knowledge that never just “gets up and leaves,” like employees. The system manufacturer manages hiring, training, record keeping, and reporting.

Calculating the ROI

Factoring in sales volume, number of employees, hours worked, and wage structure, operations can easily calculate potential savings incurred by a contracted resident maintenance program. For example, a facility operating 4,500 hours a year with 4% downtime could reduce downtime by 56.25 hours with a resident maintenance uptime guarantee, saving more than $1.25 million annually. Subtract more than $500,000 of in-house maintenance costs and total program savings exceed $1.75 million.

Contract Maintenance FAQ

  • What does contract maintenance mean?

    Contract maintenance refers to the ongoing management and administration of a contract between two or more parties. This includes ensuring that all parties are meeting their obligations as outlined in the contract, handling any disputes or issues that arise and making any necessary changes or updates to the contract as needed. Effective contract maintenance is crucial for maintaining positive relationships and ensuring the contract is successfully executed.

  • What are the pros and cons of using contract maintenance?

    Benefits include helping ensure that all parties are meeting their obligations as outlined in the contract as well as preventing potential disputes. It also encourages transparency and communication between both parties. However, it does require a lot of management and administration, which can be expensive. If communication is not clear for whatever reason, this can lead to project disputes, delays and complications.

  • How do you price maintenance contracts?

    Maintenance contract pricing can vary depending on the industry and the specific services being offered. Some common methods for pricing include time and materials, flat rate, cost plus, performance-based and risk-based maintenance contracts. The selected pricing method should align with the company's overall pricing strategy and take into account factors such as the cost of providing the services, the value the services provide to customers and the competitive landscape.

  • What role do system integrators play in contract maintenance?

    System integrators (SIs) play an important role in contract maintenance by providing services that help companies maintain and optimize their complex systems and equipment. SIs typically work with customers to understand their specific maintenance needs and then design and implement customized solutions to meet those needs. They can provide services such as predictive and preventive maintenance implementation, maintaining control systems, remote monitoring and implementing Industry 4.0 technologies.

Some FAQ content was compiled with the assistance of ChatGPT. Due to the limitations of AI tools, all content was edited and reviewed by our content team.