On a level playing field
Since 1994, T.A. Cook has provided its clients with advice on how to optimize maintenance processes and increase productivity. Co-founder and CEO Frank-Uwe Hess looks back at developments in Germany over the last 20 years.
Interview: Amy Faulconbridge
Mr. Hess, you have observed the process industry for over 20 years. Have there been any fundamental changes to company leadership during that time?
My first job as a consultant was at a large chemical company in 1990. Just before the end of their shift, the workers used to wait at the factory gates for the bell to sound so that they could go home. It sounds odd now, but at the time the CEO himself would come up to the door to march them back to work. Authority was absolute.
How has the sector developed?
There weren’t any chemical parks, business units, matrix organizations, commodities or portfolio management back then. Companies were enormous and there were far more directors with a personal chauffeur, significantly more power, status and influence than boards today have.
Have there been any fundamental structural changes in the maintenance field?
20 years ago, maintenance was in a sort of coma. It was a necessary annex to production, but wasn’t considered to be important. The perception was that production achieved value and generated the cash, while maintenance just generated costs. In the mid-1990s, the idea that maintenance could be a service provider began to surface, transforming it from a cost center to a profit center. Subsidiaries were set up and maintenance departments were sold to service providers. Today it’s rare to find more than three maintenance groups in the same company – on the whole the trend is to outsource
manual work and only keep management in-house.
Has outsourcing fulfilled expectations?
The efficiency of maintenance activities has significantly increased. On the other hand, administration
has also increased: suddenly the ‘Maintenance Service Provider’ needed its own marketing and sales functions. Where in the past costs had been split internally, now proposals needed to be written, prices defined and profits calculated, not to mention new technology and the consultants needed to install it. Often, the maintenance costs were higher than they had been before.
Do you think that this development of maintenance into a service provider is negative?
In terms of internal maintenance, yes. The purchaser considers the contractor to be someone who should do what he wants, cost as little as possible and take the blame if anything goes wrong. But maintenance should be equal to production, a sales partner, push new developments and seek funding in order to put them in place. The traditional relationship between contractors and purchasers only leads to contradictory goals and more administratio
Would you argue for a reversal of this trend in outsourcing then?
No – you can’t simplify the issue to that extent. Outsourcing will increase. I actually think that the intensity of cooperation will improve because both parties recognize that they are reliant on the other. In part, management functions should be rebalanced though. You use terms like matrix organizations and portfolio management interchangeably.
How do you explain to people who aren’t familiar with the subject, such as your father, what you do?
My father is 83 and was a Professor of chemistry at the Humboldt University in Berlin for a long time. If I tried to tell him about how we work and different maintenance models, I would be talking in consultant jargon and he wouldn’t understand. So I tell him that we are an advertising agency for maintenance in production facilities. He can imagine what an advertising agency does. He doesn’t think it’s real work though!
What are the most important trends that you think the process industry should be reacting to?
That depends on the market, region and specific products. In Europe – and in Germany in particular – we have comparably high energy costs to deal with, and there is huge price competition. We deal with that by creating innovative products and manufacturing processes on the one hand, and through ensuring reliability and site availability on the other. These are steps which involve intensive research, the optimization of product portfolios, intelligent production networks and a variety of efficiency improvement programs.
How do your clients react to that? Where do you position yourselves as consultants?
Our clients work continuously to optimize their processes. In many areas, it’s not about simple processes anymore but about the installation of intelligent methods and tools such as predictive analytics. We work hard to ensure that our consultants are always improving their technical and implementation expertise. We don’t offer “wall to wall” consulting – our expertise is and remains Asset Performance Management.
Has optimization changed over the last 20 years?
In essence, maintenance strategies are the same as they were before. Processes have been improved over time and technical equipment has clearly brought advantages with it, but for a shift worker who started working in the 1980s, not much has really changed. The real development has been in the field of automation and the steering of processes associated with it. From an organizational perspective, more has changed: maintenance methods and processes are more agile and adaptable. Organizations are more flexible, productivity is higher and the relative costs are lower. Over time, maintenance has become a credible part of value creatio
Could you elaborate on that?
In the past, our clients had their own regional, shift-orientated maintenance teams. Each different site had a control room with a local workforce. Today, production sites are led by centrally organized teams and are sent to different sites according to need. There aren’t any permanent onsite maintenance teams anymore.
How do you think the process industry will develop over the coming years and what does that mean for Asset Performance Management?
If we assume that the markets will be ever more volatile and lower demand will be the norm, then we must be more flexible. That will lead to smaller, local units, unique products and different value creation networks: essentially, to a new relationship between producer and distributor. As permanent, static workforces decrease in prevalence, external, flexible service providers will become more popular. Producers will therefore have to ensure that they retain their in-house expertise so that they can continue to lead their teams effectively. On the grounds of a newer procurement model, contractor management will play a more important role and Asset Performance Management will become a key strategic competence of a specialized management team.
How have the management teams of chemical companies reacted to this change?
Highly reliable site availability as a product is now considered to be more of an organizational challenge than a technical one. Loss of efficiency – in this case low site availability – is really a product of faulty human interaction, complex organization structures, fragmented responsibilities or contradictory targets. High costs or low availability should not be blamed on engineering or maintenance; they are more the result of a lack of cooperation between marketing, production planning, procurement, maintenance and engineering.
Are your clients resistant to change or more willing to innovate?
There needs to be more willingness to change in Germany as a whole. Resistance comes in part from the unbelievable success of the German economy, but all strengths also include weaknesses. Our past successes should not be seen as a positive forecast for the future – they make us overconfident. I saw this very clearly when I worked for a German chemical company in China. The people there absorb knowledge and new ideas like sponges and they start working on them immediately. Shortly afterwards, areas for improvement are discussed – the working atmosphere is positive and inspirational. You see the desire for change everywhere. In Germany, it’s more about ownership and change is perceived to be negative. People think: “Why should we change? We are market leaders.” When management makes a decision, a discussion begins about the point of it, how it can be done and walls begin to be built, which is why people spend a lot of time seeking consensus before actually “publishing” their decisions. That makes us not only slower, but also weaker and more vulnerable to attack.