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FACULTY OF CIVIL ENGINEERING

SEMESTER MAY 2012

EDTM3103

INTRODUCTORY MAINTENANCE MANAGEMENT

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TABLE OF CONTENT

NO DESCRIPTION PAGE

1 INTRODUCTION 3

2 PROPOSED MAINTENANCE STRATEGY TO REDUCE

MAINTENANCE MAN POWER BY 25 PERCENTS AND TO

REDUCE OVERTIME BY 50 PERCENTS :-

A. BY USING THE OUTSOURCING

B. BY CONVERTING FROM DECENTRALIZED TO THE

CENTRALIZED MAINTENANCE

4, 5, 6

7, 8, 9

3

CONCLUSION 10

4

APPENDIX

A - LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 1

B - LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 2

C - LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 3

D - LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 4

E - LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 5

F - LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 6

11, 12

13, 14

15

16

17

18

5 REFERENCES 19

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INTRODUCTION

Maintenance organization is a planned structure of responsibilities and tasks, and the

process of arranging resources (people, materials, machines, technology etc.) together to achieve

the organization’s strategies and goals. The way in which the various parts of an organization are

formally arranged is referred to as the organization structure. It is a system involving the

interaction of inputs and outputs. It is characterized by task assignments, workflow, reporting

relationships, and communication channels that link together the work of diverse individuals and

groups. Any structure must allocate tasks through a division of labor and facilitate the

coordination of the performance results. Nevertheless, we have to admit that there is no one best

structure that meets the needs of all circumstances. Organization structures should be viewed as

dynamic entities that continuously evolve to respond to changes in technology, processes and

environment.

Maintenance managers must have the capabilities to create a division of labor

for maintenance tasks to be well performed and then coordinate results to achieve the Key

Performance Indicator (KPI). Solving performance problems and capitalizing on opportunities

could be attained through selection of the right persons, with the appropriate capabilities,

supported by continuous training and good incentive schemes, in order to achieve organization

success in terms of performance effectiveness and efficiency.

I have been appointed as a maintenance manager in this organization of large scale

electronics manufacturing company. Currently, this company’s maintenance organization

practices decentralized maintenance without Out-sourcing. This manufacturer’s maintenance

department is facing issues such as very high manpower turnover, excessive overtime, high

equipment downtime, and high spareparts usage that is leading to high maintenance cost.

In this proposal, I have to propose a strategy and solution to meet the Key Performance

Indicator’s (KPI’s) :-

1. To reduce the maintenance manpower by 25 percents.

2. To reduce overtime by 50 percents.

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OUTSOURCING TO REDUCE MANPOWER

AND OVERTIME

The most common reasons why companies decide to outsource include manpower and

overtime reduction, cost reduction and cost savings, the ability to focus its core business, access

to more knowledge, talent and experience, and increased profits. Many companies and

departments decide to out-source because it cut costs such as labor costs, regulatory costs, and

training costs. Companies are able to provide services and products to consumers at a cheaper

price while still having a large margin for profit. This profit margin benefits both the company as

well as the consumer. The cheaper prices lead to an increase a company’s economy. Although

losing jobs hurts the economy because more citizens become unemployed, the cheaper prices

allows customers to purchase more products and services which helps to rebuild an economy.

Benefits of Outsourcing

Outsourcing, for my opinion, is seemed possible by larger companies which farmed out

many large-scale electronics manufacturing companies. Outsourcing has become more of a norm

than an option. Apart from the cost savings, outsourcing is seen as a strategic move that can

allow organization to gain a competitive advantage. It certainly has opened up opportunities for

maintenance department to utilize skill sets and expertise that they normally would not be able to

access without large investments.

At the lower end of the spectrum, outsourcing back-end jobs such as data entry/processing,

customer support, payroll processing etc. can help maintenance department save a staggering

amount of money, man power, and overtime.

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Now, there are service providers across the globe who specialize in simple back-office

services to high-end services like manufacturing design and legal outsourcing, to name a few.

Before deciding to out-source, it is important to define what specific goals are to be met. One

should also be aware of the risks that out-sourcing carries.

All said and done, outsourcing is definitely part of many organization’s decision making process.

Lists of the outsourcing benefits :-

a) Lower costs

Lower costs are perhaps the prime benefit of offshore outsourcing. You can get work done at a

fraction of the cost that you would have to spend locally, while getting better quality as well.

Because of the differences in pay and standard of living that exist between Asian and Western

countries, labor costs are much lower in Asia. On an average, you can expect about 60% cost

savings if you outsource to countries like India.

b) Skilled Expertise

Finding skilled resources is one of the biggest challenges faced by companies today, not to

mention the investment required to train employees and the attendant infrastructure required,

which can rapidly drain funds. Outsourcing frees companies from these hassles by providing

access to skilled resources at lower costs, with the additional benefit of not having the burden

of managing them directly.

c) Time zone difference

Because of the time zone difference between Asian countries and the West, you can get your

work done while your manufacture closes down in the evening. This is especially beneficial

for companies in this large-scale electronics industry that need to provide round-the-clock

customer support.

d) Focus on core competencies

As a company grows, maintenance department and administrative functions also grow.

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Managing back-office operations and administrative functions takes the time and energy out of

any maintenance department. Outsourcing frees companies from having to manage non-core

functions, and puts the focus back on their core competencies. Organizations have benefited

from outsourcing repetitive and mundane tasks, and have had more time and opportunity to

grow profits.

e) Increased productivity and Efficiency

Outsourcing not only brings cost advantages but can also improve the efficiency of

maintenance department’s operations. If this maintenance department’s goals are properly

aligned with the deliverables in outsourcing, productivity and efficiency are bound to increase.

Outsourcing providers with the right expertise and experience can actually help streamline the

workflow processes and contribute to the bottom-line.

f) Distribution of risk

When certain functions are outsourced, companies also distribute or do away with the risks

associated with running that particular function. For instance, if payroll management is eating

up your operational time and money, outsourcing it to a payroll services provider gives you the

freedom to focus your concentration on other core activities of the maintenance department.

g) Improving customer service

Customer service is paramount to any organization. Through outsourcing you can service your

customers faster, provide better quality and decrease turnaround time.

h) Better people management

Since outsourcing takes care of the skills necessary to run a particular maintenance

management process, organization is much more flexible in investing in key resources. Instead

of worrying about hiring people for your back office operations, you can focus on getting

resources to grow your core competencies. That means, the Key Performance Indicator’s

(KPI’s) is about to achive.

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TRANSFORMING DECENTRALIZED TO

THE CENTRALIZED MAINTENANCE TO

REDUCE MANPOWER AND OVERTIME

As we all know, this current organization practices decentralized maintenance. For my

opinion, decentralized maintenance have much more disadvantages than the centralized

maintenance. Centralized maintenance can be extremely more efficient than using decentralized

maintenance regarding organization’s decisions. Maintenance department typically develop the

organization’s mission and vision, and set objectives for managers and employees to follow

when achieving these goals. Centralization allows corporate decision makers respond better and

faster in urgent situations which require quick decisions.

Centralized organizational structures rely on one individual to make decisions and provide

direction for the company. Many organizations often use this structure since the owner is

responsible for the company’s business operations. Decentralized organizational structures often

have several individuals responsible for making business decisions and running the business.

Decentralized organizations rely on a team environment at different levels in the business.

Individuals at each level in the business may have some autonomy to make business decisions.

Centralized organizations can be extremely efficient regarding decisions. Department typically

develop the company’s mission and vision, and set objectives for managers and employees to

follow when achieving these goals. Centralized organizations utilize individuals with a variety of

expertise and knowledge for running various business operations. A broad-based management

team helps to ensure the company has knowledgeable directors or managers to handle various

types of business situations.

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THE DISADVANTAGES OF

DECENTRALIZED MAINTENANCE

Major disadvantages of Decentralization :-

a) Lower level managers may make decisions without fully understanding the "big picture."

While top level managers typically have less detailed information about local operations

than the lower level managers, they usually have more information about the company as

a whole and should have a better understanding of the company's strategy.

b) In a truly decentralized organization, there may be a lack of coordination among

autonomous managers. This problem can be reduced by clearly defining the company's

strategy and communicating it effectively throughout the organization.

c) Lower-level managers may have objectives that are different from the objectives of the

entire organization. For example, some managers may be more interested in increasing

the sizes of their departments than in increasing the profits of the company. To some

degree, this problem can be overcome by designing performance evaluation system that

motivate managers to make decisions that are in the best interests of the organization.

d) In a strongly decentralized organization, it may be more difficult to effectively spread

innovative ideas. Someone in one part of the organization may have a traffic idea that

would benefit other parts of the organizations, but without strong central direction the

idea may not be shared with, and adopted by other parts of the organization.

e) More difficult to ensure consistent practices and policies (customers might prefer

consistency from location to location)

f) May be some diseconomies of scale – e.g. duplication of roles

g) Who provides strong leadership when needed (e.g. in a crisis)?

h) Harder to achieve tight financial control – risk of cost-overruns

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THE ADVANTAGES OF CENTRALIZED

MAINTENANCE

Advantages of Centralization over Decentralization :-

a) Singular point of control, which helps make bigger decisions easier, as the top level

maintenance managers have a better picture of the organization as a whole and are better

equipped to make important decisions as compared to a lower level manager.

b) Quicker decision-making (usually) – easier to show strong leadership

c) Greater use of specialization

d) Easier to implement common policies and practices for the business as a whole

e) Prevents other parts of the business from becoming too independent

f) The implementation of an idea, process or policies is easier in a company that has a strong

central direction as compared to a decentralized organization.

g) Easier to co-ordinate and control from the centre – e.g. with budgets

h) Economies of scale and overhead savings easier to achieve

i) Due to a single vision of the head of the company, the organization can work towards a

single goal, which would not be possible in a decentralized organization due to individual

manager goals.

j) Centralization allows corporate decision makers respond better and faster in urgent

situations which require quick decisions.

CONCLUSION

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With a continued focus on quality and efficiency in this maintenance environment, our

department continue to focusing on the opportunities for streamlining processes to maximize

maintenance functions. In reviewing the maintenance functions for manufacturing organizations,

the majority of the benchmark class related that a transition to maintenance centralization could

provide a huge benefits. This proposal considered a strategy and solutions to resolve problems in

this maintenance department. The two major problems is high manpower turnover, and excessive

overtime. The major strategy in this proposal is by using the outsourcing and to transform the

existing decentralize to the centralize maintenance. benefits of outsourcing include manpower

and overtime reduction, cost reduction and cost savings, the ability to focus its core business,

access to more knowledge, talent and experience, and increased profits. Transforming to the

centralized maintenance can be extremely efficient regarding organization’s decisions.

Maintenance department can typically develop the company’s mission and vision, and set

objectives for managers and employees to follow when achieving these goals. By considering my

two major strategy in this proposal, I am sure that the high maintenance manpower can be reduce

by 25 percents and the excessive overtime can be reduce by 50 percents. This means, by using

this proposal for maintenance strategy and solutions, the Key Performance Indicator’s (KPI’s)

can be achive for the next 12 months. Solving performance problems and capitalizing on the

opportunities could be attained through selection of the right maintenance department, with the

appropriate capabilities, supported by continuous training and good incentive schemes, in order

to achieve organization success in terms of performance effectiveness and efficiency.

( 2040 WORDS )

APPENDIX ( LITERATURE REVIEWS )

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A. LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 1

PETRONAS GAS BERHAD

ANNUAL REPORT

During the year, CUF production increased significantly as a result of higher demand from

customers whose plants have reached the final stages of commissioning. This demand is

expected to increase further when more customers come online. The delivery of electricity and

steam, the two bulk utility products for both CUF Kertih and Gebeng customers as at 31 March

2001 were 85 MW and 225 t/h respectively. These utilities are expected to reach 190 MW and

520 t/h when the customers in Kertih and Gebeng are in full operation by 2002. CUF has also

taken the initiative to maximise its revenue by exporting surplus liquid Nitrogen and Oxygen to

external parties, starting in August 2000. The liquid surplus was exported to neighbouring

petrochemical plants and the GPP c o m p l e x e s . The export is expected to increase

substantially when the A i r Separation Unit 2 (ASU 2) is in full operation. A Reliability

Centered Maintenance programme was introduced in February 2001 to ensure the CUF system

reliability with a pilot analysis of the Gas Turbine Air Intake Filter System. T h e System

Application and Product maintenance module has been implemented since November 2000.

HSE continued to play a vital role in CUF operation. In line with B O M B A’s requirement,

CUF had successfully obtained its ICS approval in February 2001. Prior to that, the HSE

Management System had already been put into practice since December 2 0 0 0 .

H e a l t h , Safety and Env i ro n m e n t

In its commitment to maintain high HSE standards, PGB strictly conformed to all laws and

regulations, and adhered to the PETRONAS HSE Management system’s requirement in its daily

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o p e r a t i o n s . Anew requirement by BOMBAto adopt an emergency response approach

based on the ICS was satisfactorily complied with at GPPs 5 & 6 and CUF. This new system was

successfully tested when a major emergency response exercise (codenamed Santong Bara) was

conducted at GPPs 5 & 6 on 6 November 2000. More than 300 personnel including those from

relevant government agencies participated in the event. PGB also embarked on a Health Risk

Assessment study in January 2001 to review the existing Occupational Health management

system whilst conforming to the requirements of the new USECHH Regulations 2000 (Use and

Standards of Exposure of Chemicals Hazardous to Health). As testimony to its effort to excel in

HSE, the company’s Transmission Operations Division again received recognition from the UK-

based Royal Society for Prevention of A c c i d e n t s ( R O S PA) when they won the

Commendation Award for being among the best three in the Oil and Gas Industry Sector. T h i s

award represents a level higher than the Gold Award that PGB received in the previous year. Our

Plant Operations Division was also accorded the Gold Award by the Malaysian Society of

Occupational Safety and Health.

Dialogue sessions such as this with local communities at

where PGB operates help create a better understanding of

the company’s operations

B. LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 2

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Centralized Vs. Decentralized Organizational Structure by Osmond Vitez, Demand Media

An organizational structure is the outline of a company’s framework and guidelines for managing

business operations. Small business owners are usually responsible for creating their companies'

organizational structure, which is usually an extension of the owner’s personality, management style and

characteristics. Two types of organizational structures are found in the business environment: centralized

and decentralized. Each structure offers advantages and disadvantages for business owners. Ads by Google

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Definition

Centralized organizational structures rely on one individual to make decisions and provide direction for

the company. Small businesses often use this structure since the owner is responsible for the company’s

business operations. Decentralized organizational structures often have several individuals responsible

for making business decisions and running the business. Decentralized organizations rely on a team

environment at different levels in the business. Individuals at each level in the business may have some

autonomy to make business decisions.

Advantages

Centralized organizations can be extremely efficient regarding business decisions. Business owners

typically develop the company’s mission and vision, and set objectives for managers and employees to

follow when achieving these goals. Decentralized organizations utilize individuals with a variety of

expertise and knowledge for running various business operations. A broad-based management team

helps to ensure the company has knowledgeable directors or managers to handle various types of

business situations.

Disadvantages

Centralized organizations can suffer from the negative effects of several layers of bureaucracy. These

businesses often have multiple management layers stretching from the owner down to frontline

operations. Business owners responsible for making every decision in the company may require more

time to accomplish these tasks, which can result in sluggish business operations. Decentralized

organizations can struggle with multiple individuals having different opinions on a particular business

decision. As such, these businesses can face difficulties trying to get everyone on the same page when

making decisions.

Considerations

Business owners should carefully consider which type of organizational structure to use in their company.

Small organizations typically benefit from centralized organizational structures because owners often

remain at the forefront of business operations. Larger organizations usually require a more decentralized

structure since such companies can have several divisions or departments. Business owners may need

to consider changing the organizational structure depending on the growth and expansion of business

operations.

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Misconceptions

Organizational structures do not always require significant amounts of planning time. Many businesses

have organizational structures that simply evolve during the business’s lifetime. Business owners often

set the tone based on how they manage employees. Employees will perceive how the owner handles

different business situations and simply adjust their work style accordingly. This will create an

organizational structure by default, with no serious planning involved.

“Organization Structures: Theory and Design, Analysis and Prescription”; Helmy H. Baligh; 2006

About the Author

Osmond Vitez started writing new media content in 2009. His articles have appeared on websites such as

Think+Up and Houston's Chron.com. He is an adjunct accounting instructor and former corporate

accountant, with experience ranging from small business to a Fortune 500 company. Vitez has two

accounting degrees: a Bachelor of Science from Pensacola Christian College and a Master of Science

from Liberty University.

More Articles

What Are the Benefits of Centralized Companies?

The Importance of a Correct Organizational Structure

Roles of Organizational Structure

C. LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 3

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A centralized organizational structure is a setup in which most power and critical decision making

responsibilities are concentrated with a few key leaders. A centralized organization often houses its

primary decision makers or executives in a central headquarters with offices and meeting areas for

leaders to discuss business.

Focused Vision

Vision is a key trait of effective leadership and having a more centralized structure keeps all levels of an

organization focused on one vision or purpose. A company president or executive team can establish and

communicate its vision or strategy to employees and keep all levels moving in the same direction. This

prevents potential inconsistency in vision and helps companies deliver a common message to customers

and communities.

Fast Execution

With fewer people involved in discussing and deciding on strategy and action, centralized organizations

typically react more quickly to a dynamic marketplace. Leaders can gather information and efficiently

discuss pros and cons of decisions in a small group. This makes the communication and decision making

process much more efficient than in decentralized structures in which many local managers must

participate in the process. Once decisions are made, top managers send out directives to lower levels for

implementation as directed.

Reduced Conflict

When only one person or a small group at the top makes important decisions, companies experience less

conflict and dissent among lower to mid-level employees. If many employees and levels in the

organization get involved in decisions, more potential exists for conflict and difference in implementation.

With top managers taking the responsibility of making and implementing critical decisions, they insulate

other managers and leaders from the burden of making risky or unfavorable decisions. This is especially

important to lower level manager-employee relationships.

Control and Accountability

When centralized leaders are in charge of all major decisions they retain more control over operation of

the company and development of its culture. Additionally, little question exists over who is accountable for

the results of those decisions. If the company gets a bad price in a supplier negotiation, top managers

know to turn to the head buyer to get a sense of what went wrong. This accountability causes top

managers to drive each other to peak performance.

D. LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 4

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E. LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 5

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F. LITERATURE REVIEW OF MAINTENANCE ORGANIZATION 6

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REFERENCES

Knight, A.V. & Silk, D.J. (1990) Managing Information. McGraw-Hill, London.

http://tutor2u.net/business/people/org_centralisation_decentralisation.asp

http://smallbusiness.chron.com/centralized-vs-decentralized-organizational-structure-

2785.html

http://www.expertmanage.com/index.php?option=com_content&view=article&id=112&I

temid=75

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http://www.epa.gov/records/tools/central.htm

http://www.reliableplant.com/Read/14665/centralized-decentralized-maintenance

Bradley PS (2002) Designing the Best Maintenance. http:www.samicorp.com:1–5

Chelson VJ, Payne CA, Reavill RP (2005) Management for Engineers Scientists and

Technologists, 2nd edn. Wiley, Chichester England

Daft LR (1989) Organization Theory and Design, 3rd edn. West Publishing Company,

New York

Duffuaa SO, Raouf A, Campbell JD (1998) Planning and Control of Maintenance

Systems: Modeling and Analysis. Wiley, New York.

Isa SEA (1989) Maintenance Management in Industrial Entreprises. J of Ind Coop

1:44–70.

Haroun AE, Ogbugo MA (1981) Development of Maintenance Policies and Procedures

for Crosield Electronics at Milton Keynes. CIT, Cranfield, England

Kanaway G (1992) Introduction to Work Study, 4th edn. ILO, Geneva

Kelly A (1984) Maintenance Planning and Control, Butterworth, London