Jerry Whitaker, a vice president in Eaton Corp.'s $2.3 billion electrical-products division, had reservations about outsourcing his equipment maintenance. At the time, Eaton employed on-site mechanics to tackle emergency repairs. "Our initial concern," he recalls, "was whether [the outsourcer] would be pulling people away from our plants to attend to others." Whitaker was also worried about what would happen to the current crew: would third-party administration of his machines mean he'd have to sack longtime staffers?
But in December 2000, as Whitaker contemplated the move to outsourcing, machine uptime at Eaton Electrical was only 85 percent, and he thought the division could do better. Increasing uptime to 90 percent would yield more than 100 extra man-hours annually. There was also another fiscal argument: since a new machine cost $500,000 to $2 million, better upkeep could save millions if it could extend the life of existing equipment.
So despite some apprehension, Whitaker signed with Advanced Technology Services Inc. (ATS), a Peoria, Ill.-based provider of outsourced repairs and maintenance. ATS sets an annual cost reduction goal. If the goal is met, both sides split the savings; if not, ATS covers the difference. For this, Eaton pays a fixed annual fee (based on time, material, and manpower estimates) in monthly installments.
So far, the deal has been a good one. Uptime has jumped to 95 percent, and Don Brown, an Eaton Electrical director of operations, estimates that the company's six plants save $400,000 a year through ATS's contributions.
Most of the 45 former Eaton mechanics were hired by ATS, and are now deployed at the various Eaton facilities, allaying Whitaker's concerns about manpower availability and employment for longtime workers.
In addition to ATS, other providers of outsourced repair and maintenance include The Fluor Corp., a $1 billion engineering and construction company based in Aliso Viejo, Calif., which has a maintenance division; BE&K, of Birmingham, Ala., which offers maintenance outsourcing through its industrial-services unit; and Zurich-based ABB Ltd., a $19 billion giant, which offers maintenance and field services, mostly in the utilities sector.