Driving Change

17 September 2008

Property and FM has been the ‘Cinderella’ of the manufacturing sector, but those organisations that take control of their property costs can see benefits as Incentive FM has shown Delphi across its European estate

UNDER PREASURE FROM GLOBAL COMPETITION, soaring costs of raw materials, falling demand, the ‘credit crunch’ and more, manufacturers are seeking lower costs for the facilities that support their manufacturing activities and people. A finalist in the European FM Awards 2008, Incentive FM has found significant cost reductions while improving efficiency in the European operations of automotive manufacturer, Delphi

Delphi is a leading global supplier of mobile electronics and transportation systems, such as powertrain, safety, steering, thermal, and controls and security systems, electrical/electronic architecture, and in-car entertainment technologies. It supplies car manufacturers across Europe to the rigorous standards of the automotive sector. Headquartered in Troy, Michigan, Delphi employs about 169,500 people and operates 156 wholly owned manufacturing sites in 34 countries. It’s sales were $22.3bn in 2007.

Delphi has an in-house global facilities organisation (OSG) responsible for real estate, facility and energy management. The UK’s Incentive FM has been working with Delphi since 2002 to help improve understanding of its property and FM service standards that support its business, while driving down its costs

The Incentive FM brief included:
● To develop a ‘technical reporting line’ within Delphi’s European management structure that allowed the flow of best practice and commercial arrangements across its FM operations in Europe.

● To identify and action areas of potential and substantial cost savings across the European estate through improved practices by introducing some standardisation and improving procurement.

Local sourcing
Each country and Delphi location within it had traditionally managed its own facilities sourcing service locally. Outside the UK, the concept of FM was undeveloped as a function. It was part of the responsibilities of the operational managers, and goods and services were procured by the Delphi procurement team who were more familiar with purchasing materials for the manufacturing operations than services. As a result, the management had virtually no visibility on facilities costs site by site, nor of the appropriate standards of service and best practice across the estate.

Incentive FM has undertaken a review of the FM structure in the majority of Delphi’s automotive component manufacturing sites in Romania, the Czech Republic, Slovakia, the UK, Turkey, Morocco, Hungary, Poland, France, Germany, Spain and Portugal. It has presented for example, detailed findings to the Delphi management of five sites in Poland and highlighted the opportunities for restructuring and cost savings in the contract services delivered including catering, M&E and cleaning. It has now implemented a professional FM structure for the Polish operation with Incentive FM staff working alongside Delphi local country managers for a three month period.

Jeremy Waud MD of Incentive FM, explains, “ Even in a comparatively low wage economy such as Poland, we are finding cost savings in excess of 20 per cent. This means for Delphi that even after charging UK consultancy rates, there will be a ROI for Poland of around 700 per cent within 12 months for this project.”

A procurement strategy has been developed highlighting what facilities costs would be best procured locally, nationally or regionally. Internal/external benchmarks for productivity and frequency of activity were also developed and a programme of country comparisons, reviews and networks developed. This helped to reveal to the country and plant managers the comparisons between sites not only the costs of occupation but also the variation in standards.

The graph (see page 20 looks at the basic comparison of a variety of plants with similar product lines, manufacturing processes and working environments, and from a productivity perspective there should be a clear synergy between them. The performance data as can be seen is anything but similar. Incentive FM used this and other more detailed data to demonstrate to local Delphi managers and buyers that far better value and performance could be achieved.

By comparing catering data across the estate, Incentive could advise Delphi where existing arrangements were not delivering relative value for money and to assist in the face to face negotiations with suppliers. For example, they discovered a wide disparity in covers served per head of catering staff which is a key indicator when restructuring such contracts that had been entered into at a local level and without any specialist catering advice.

The success of the first phase of the work with Incentive FM enabled Delphi to further define and develop its FM organisation into the OSG (Operational Services Group) in 2006. It increased the responsibility of the Facilities Services Group (FSG) in the EMEA region and a ‘road map’ was developed and agreed to prioritise this programme in the UK, Poland, Turkey, Germany, and more recently, the E & S Division which deals with car electronics and safety systems (switchgear, sensors, radios, air bags and much more).

The Delphi - Incentive FM relationship continued and expanded into reviewing the internal and external environmental health and safety (EHS) standards of compliance. It was able to show that contrary to belief, many of the best examples of compliance came with the leanest EHS structure, because the compliance was achieved through sustainable embedded procedures within the operational organisation. This information has enabled Delphi to design lower resource levels into its new plants under construction in Morocco and Romania.

Capturing of detailed financial coding information from the initiative has simplified the creation of an OSG reporting process and feeds into the Delphi budget process so that there is a better management understanding and control of facilities costs.

Specifications challenged
Incentive FM has also identified that the Delphi procurement operation was not well attuned to the different demands of purchasing services compared to parts and materials. Whilst services had been procured at the best price, in many areas the specification for procurement had been unchallenged for a significant period of time. For instance whilst reviewing the E & S division (11 sites across 6 countries, it became apparent that the cleaning specifications for extremely similar working environments that included ESD (electrostatic discharge) floors, had vastly different frequencies and cleaning productivity.

The different environmental factors and working practices had to be considered, but using the benchmarking approach, Incentive FM weights these outcomes to establish an acceptable band of performance across a single business stream. Taking these results, a pilot working group of the four sites in Germany reviewed the opportunity to achieve results within the best practice benchmark banding and negotiate a trial implementation with the country’s appointed cleaning contractor.

A detailed evaluation of Delphi’s catering requirements including the cost structure, build up, sales pricing and covers sold across nine - counties, Incentive FM have identified opportunities for service improvement and the ability to procure better arrangements at their new ventures. In Morocco for example, the outsourced catering market is not very strong with only a few companies able to fulfil the demand of a 5,000 cover operation. Having the technical knowledge and information available from Incentive FM has enabled negotiations to proceed and Delphi has achieved better value from their current supplier.

Another initiative involved the fire, safety and security of Delphi’s EMEA sites. Delphi classifies its sites based on the assessment of risk on an ‘A’ to ‘D’ basis. However, over the course of the FM reviews is has become clear that substantially different approaches exist to fulfilling these requirement from sites within the same classifications. This has resulted in varying levels of resources and costs to fulfil the same corporate objective across country boundaries. In conjunction with the Delphi regional EMEA manager responsible for fire safety and security, Incentive FM is developing its tool for assessing the true needs of a site, taking account of the environmental, technical, geographical, economic and cultural factors to establish the minimum benchmark for service supply.

Roadmap
The OSG roadmap will continue to evolve. The initial brief was delivered, then expanded and continues to achieve in a structured way is improving value, standards, communication and commonality of approach across Delphi’s EMEA business. A unique relationship has developed between the senior personnel of Delphi and Incentive FM that ensures the roadmap is driven on and remains resilient in an increasingly competitive environment where continuous improvement is sustainable and a necessity. Being able to interpret American policy, liaise with a German client, communicate, negotiate and implement change with French, Portuguese, Turkish, and Romanian FM Ops staff and buyers requires a certain degree of robustness matched with diplomacy!

In August Incentive FM agreed terms for a further wave of reviews for other sites across EMEA with a further 27 sites to audit and review in two phases of work per location. The work to date across the remaining 23 sites where Incentive has been involved has highlighted up to $3m of savings and efficiencies excluding energy. A high percentage of these savings have been agreed with local plant managers and contracts and are now being implemented.