In the September 2007 issue of Uptime Magazine, Tim Goshert (Cargill) and Andy Page (Allied Reliability) wrote an article that outlines the concept of creating a trust based, win-win relationship with contractors, service companies and suppliers.

Here is an online copy of the article: Fitting Your Condition Based Monitoring Program to Your Facility

As the maintenance workforce continues to shrink and managers are asked to do more with less - do you think that this trust-based partnering concept will catch on? It seems like the Toyota Production System from Japan has had this concept for 50 years but it seems brand new here in North America.

I also wonder - just as any reliability improvement requires a culture change (which must be managed) does this partnering require managing cultural change as well?

Does anyone have examples of how they partner with suppliers in this trust-based win-win context?

Does it require management buy-in or even be management driven?

Cargill sure seems successful with it.

Terry O

What is trust-based win-win contract? The other term used is smart alliance or partnership, isn't it?

The contractor wants to make profit as much as possible while the facility wants the cheapest cost possible? How to reconcile or balance this difference in the contract? Perhaps details at Acrghill or Toyota can reveal the secret ingredient...

I heard about some win-win contracts for bearings or seals where capital and cost reduction/savings are shared by the partner and facility.

I also heard about some refinery or turnaround performance improvements based on win-win contract offered by some expert companies where capital and profit is shared.

I agree, Josh. We have seen everything from motor management partnerships to partnerships based upon energy improvements, the concept is not all that new. The key is to include all of the 'stakeholders' in all aspects of the development and implementation of the program. This does involve a fair amount of trust, as well as definition, and everything must be agreed to up front so that meetings do not turn into negotiations.

The upside is when all of the stakeholders have improvements to the processes/reliability, etc. in mind. Also an aspect of trust - but still must be business-driven such that the vendors are rewarded for improvements.

However, in my experience, any successful program must be driven both by management and by labor. If the workforce feels that it is being threatened expect a lot of resistance and challenges getting the program off the ground. Unfortunately, people tend to forget that the workforce is a stakeholder in the success of any such program, as well.

Howard

I think the whole trust-based partnership is a new name for how business should be. I think we have long forgotten the days of a handshake and the promise and what they meant. I am not saying that they still don't exist but I think they have become very rare due to the aggressive nature of the business culture today and changing suppliers constantly to get the lowest rate. Suppliers often have to raise their rates to cover the marketing and administration expenses to find new customers because of the constant change. "Are you going to be there for me tomorrow?", seems to be a common thought among people today.

Last year I worked with a client helping them build an RCM program and teaching and mentoring the engineers. I was given carte blanche to implement all recommendations and improvements. This enabled me to deliver the best service possible while giving them the peace of mind that I would not be dropping a book of recommendations and running. It also showed them the commmitment behind my word to be a part of their team and deliver them a product I would stand behind because there was no room for excuses if the recommendations failed to delever benefit. After the initial contract was complete another company (I previously worked for) tried to low ball there way in and were told that they would not entertain any other companies because they were happy with the work that I was performing. This was a Win-Win because I knew that I would continue to be there because they trusted me and that they knew I was dedicated to helping them acheive their goals.

Clients are like the stock market, long term investments in trusted areas might not yield money quickly but you know they will always be there and delivering. Short term investments can sometimes yield money quickly but also lose money just as quick.

Robbie, perhaps you would like to share how do you and the client measure the satisfactory performance? What are the KPIs and results achieved? I'm sure it's not just a coincident perfect chemistry between personalities.

Josh,
A lot of our relationship relied upon honesty and trust based on the ownership I took within their facility. I truly think people can tell when you have a genuine ownership vice a mask you put on to impress them. But, yes as any other relationship there are standards that we relied upon.

I hate to say it but cost reduction was and issue but not the bottom line. The customer obviously wanted to reduce his cost for maintenance and we tried to identify systems that have potential for savings initially. But the cost savings did not dictate the outcome of the analysis. Over several system we had some that showed a cost reduction, some that broke even, and some that even came up with a cost increase (special case involving contract maintenance and lack of maintenance). This was based on labor, materials (only direct PM materials), and occasionally lost operation cost for major failures. My conservative approach to the analysis and the fact that I didn't pad my numbers to always get a cost reduction showed the honesty and sincerity I had to helping them improve. Other measurements we relied upon were rework, downtime, and overall maintenance cost. We could have gone further and identified more metrics to track but this was somewhat of a culture change and we started out with small steps.

This was a great client to work with because they were actually focused on improving the maintenance and reliability instead of just reducing cost. And as most of the people on this forum probably know (or they wouldn't be here) is that there are a lot of cost savings and benefits from improving reliability that are not direct and take time to be realized.

What is your form of contract? Is it based on a lump sump, unit rate, reimbursable or share capital and profit between clent and contractor?

In view of the honesty and trust, do you still need a service order or at least a letter of intent before starting works at site? (just kidding....)

Yes, we had a contract based on the number of analyses required and is handled as a unit rate for labor. Yes, we did need to have to have a service order prior to starting work due to contracting policies with the client.

How do the client and you control the manhours spent on the analyses?

We had an overall dollar amount and that would translate into how many hours we could spend to perform the work. The overall dollar amount was based on time and rate estimates. We would keep track of our hours and the client would pay.

Trust based may have some similarities to "performance based" Do a search on PBL, lots out there. Basically the supplier is paid based on your performance, they take risk in doing so and are highly motivated to whatever is best for your KPIs. As your performance goes up, so does their profit.
I am currently leaving my current position to pursue this particular goal.
The bottom line, it's a contract based on achieving goals which increase profitability. This serves both parties.


Let me know if i missed the target.