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An analytical method for maintenance outsourcing service

selection

Article in International Journal of Quality & Reliability Management · September 2004

DOI: 10.1108/02656710410549118

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IJQRM QUALITY AND RELIABILITY CORNER

21,7
An analytical method for
maintenance outsourcing service
772
selection
Massimo Bertolini
Dipartimento di Ingegneria Industriale, Università degli Studi di Parma,
Parma, Italy
Maurizio Bevilacqua
Dipartimento di Ingegneria delle Costruzioni Meccaniche, Nucleari,
Aereonautiche e di Metallurgia, Università degli Studi di Bologna,
Forli, Italy, and
Marcello Braglia and Marco Frosolini
Dipartimento di Ingegneria Meccanica, Nucleare e della Produzione,
Università di Pisa, Pisa, Italy
Keywords Maintenance, Outsourcing, Analytical hierarchy process
Abstract In this paper an experience dealing with the analysis of maintenance outsourcing by
means of multi-criteria decision methods (MCDM) is reported. In particular, the analytic hierarchy
process technique (AHP) is used as a managerial decision support system to select the best
alternative between different outsourcing contracts in terms of maintenance services. The
proposed methodology has been tested on an industrial case study dealing with an important
italian brickwork. This application shows how the AHP is able to support the choice of the correct
level of the maintenance activities outsourcing. In particular, the hierarchic decisional structure
developed represents an instrument able to give a well balanced synthesis of several different
factors that must be taken into account during this type of decision problem.

International Journal of Quality &
Reliability Management
Vol. 21 No. 7, 2004
pp. 772-788
q Emerald Group Publishing Limited
0265-671X
DOI 10.1108/02656710410549118
Introduction
Industrial organisations are constantly in search of new solutions and strategies to
develop and increase their competitive advantage. Outsourcing is one of these
strategies that can lead to greater competitiveness (Embleton and Wright, 1998).
Briefly, it can be defined as a “managed process of transferring activities to be
performed by others” and its main advantage is conceptually based on two strategic
pillars (Campbell, 1995):
(1) the use of domestic resources mainly for the core competencies of the company;
and
The authors are indebted to the Eng. F.M. Cominoli (Technical Manager Service, Automation
Technologies Division, ABB Process Solutions & Services SpA) for his support during the
implementation of the proposed methodology and constructive comments which enabled the
improvement of the quality of the present study.
 (2) the outsourcing of all other (support) activities that are not considered strategic Maintenance
necessities and/or whenever the company does not possesses the adequate outsourcing
competencies and skills.
selection
In terms of maintenance outsourcing, a set of potential and attractive benefits can be
reached such as to increase labour productivity, to reduce maintenance costs, to focus
in-house personnel on “core” activities, to improve environmental performances, to
obtain specialist skills not available in house, to improve work quality, etc.. However,
773
outsourcing also involves a set of drawbacks that must be taken into account by the
customer:
.
loss of control and loss of a learning source, because an internal activity is
externalised;
.
loss of knowledge of the plant;
.
possible dependencies on the supplier;
.
variations in the quality of the product given to the customer; and
.
problems among personnel, since they lose their functions.
Of course, the magnitude of these benefits and risks depends on the qualifications of
the supplier and on the selected type of outsourcing contract (i.e. the number and type
of maintenance activities outsourced). This is the principal reason for applying
methodological foundations when maintenance services are supplied.
It must be stated that the outsourcing of certain functions or services should not be
considered as the synonym of granted success. Strategic factors that can ensure a
higher possibility of success in the process of moving from a centralised maintenance
management to the outsourcing of certain services (Embleton and Wright, 1998) can be
identified in:
. the strategic analysis – to this, in particular, is demanded the evaluation of the
actual feasibility of the entire project, on the basis of the existing corporate
constraints;
.
the research for those activities that should be managed in outsourcing and the
selection of the providers for their realisation; and
.
the management of relationships between provider and customer – this requires
that the corporation already owns new managerial capabilities, not necessarily
pre-existent, and the definition of suitable monitoring and evaluation procedures.
The real capacity of a corporation to move from a centralised management to the
outsourcing practices must be measured on the basis of an accurate analysis aimed to
determine:
.
which are the internal services to externalise;
.
the real capacities and the eventual restrictions of the local market to
successfully conduct co-operative agreements; and
.
the effectiveness, in terms of costs, of the outsourcing process to reach the
competitive advantages previously mentioned.
Therefore, the management should measure the effective presence of possible causes of
domestic problems, that may be difficult to eradicate, and the conditions by which the
IJQRM outsourcing activities may allow a better mix of quality, costs and service level with
21,7 respect to the internal solution. For these reasons, an appropriate feasibility study
should be executed.
During the feasibility study, the maintenance staff should solve a set of complex
and critical decisional problems generally based on a large amount of
tangible/intangible factors that must be analysed and considered:
774
Evaluate if the company is ready to outsource
Prior to starting the outsourcing program the company should objectively evaluate its
actual situation with respect to some critical issues. Briefly, maintenance staff should
adequately review internal structure, processes and management procedures,
personnel capabilities and their responsiveness to changes and innovations. Doing
so, a significant picture of the overall ability to manage the outsourcing program could
be drawn and, at the same time, the company’s readiness to outsource maintenance
activities could be somehow quantified.

Define what activities to outsource

The choice of the activities to be externalised represents another important decision to
be faced at the very early stages of the outsourcing program. Generally, “non-core”
competencies are all good candidates for outsourcing, being standard, well defined and
repetitive activities (such as, for example, repair of generic and common equipments,
electrical and electronic parts and plant overhauls). Besides, many of them are
adequately performed by a growing number of specialized suppliers available in the
marketplace, with interesting costs and quality rates. In this case, the risk of losing
expertise and know-how is very little, while, on the other hand, in-house maintenance
personnel can concentrate on critical and valuable technical topics.

Select a contractor
To maximise the potential advantages and, at the same time, to minimise the risks
deriving from the adoption of outsourcing policies, an extremely important role is
covered by the selection of the right supplier. Thus, it is necessary to develop the
selection criteria and the benchmarking activities to evaluate and analyse their
capabilities. For example:
.
geographical position (i.e. local contractor presence);
.
the perceived quality of goods and services;
.
contractor flexibility;
.
technical excellence (i.e. proven staff and management);
.
leadership;
.
plant-specific know-how and experience; and
.
low price.
These are some good examples of performance factors that may be used to this aim
(Bailey et al., 2002; Choi and Hartley, 1996). In addition, Judenberg (1994) pinpoints how
the most successful outsourcing arrangements are those in which the supplier brings a
“partnership philosophy”. In other words, it is crucial to obtain a spirit of co-operation
and mutual understanding to sustain an ongoing that benefits both parties.
Monitor the contractor’s performance Maintenance
The outsourcing contractor assumes greater responsibility for successful performance outsourcing
of the function being outsourced, sharing not only rewards but risks as well
(Judenberg, 1994). A fundamental aspect for the adoption of outsourcing policies is selection
strictly joined to a clear and unambiguous definition of responsibilities, so that it can
be possible to establish a link between the performances of an item with the
maintenance activities effectiveness, both when the control activities are performed by 775
the customer or by the provider. By this point of view it becomes extremely important
to define a system of performance indicators, usually linked with quality, quantity and
costs (Levery, 1998). Quality measures are usually linked to the time necessary to
restore the equipment. Quantity refers to the commitment of the maintenance provider
to assure the required services. Finally, costs should be used to evaluate how much the
investments for adjusting and enhancing the maintenance service reflect into a
measurable reduction of all those costs that can be related to the disservice following a
failure. The most commonly used measures of contractor’s performance are:
.
price/cost;
.
equipment availability (e.g., MTBF);
. safety and environmental performances (e.g., average number of incidents);
.
on-time performance (e.g., MTTR);
.
work quality/rework; and
.
amount of work.
The approaches proposed in the past literature concerning the development of decision
support systems (DSSs) during the critical and complex decision problems that a
manager encounters in an outsourcing project are frequently based on a list of detailed
steps and considerations that the decision maker should carefully follow for a
successful implementation of an outsourcing effort. No numerical methodologies are
generally presented. In this paper, an analytical approach able to be used as a decision
support tool during the choice of the most appropriate type of outsourcing contract is
presented. It is evident that the selection of a particular contract implies the choice of
the activities that a management decide to outsource. The procedure is based on a well
known multi criteria decision technique named analytic hierarchy process (AHP) and it
will be tested on a real industrial case study concerning important Italian brickwork.

Reasons for using contract maintenance services: a complex decision

problem
A detailed list of reasons for using maintenance contractors was drawn during a
survey conducted by the Plant Maintenance Resource Center (2001) and is reported
below:
.
increase labour productivity;
.
reduce maintenance costs;
.
focus in-house personnel on “core” activities;
.
reduce management effort;
. obtain specialist skills not available in-house;
IJQRM .
level fluctuations in workload;
21,7 .
increase access to specialist equipment;
.
improve equipment uptime/performance;
.
reduce risk;
.
improve labour productivity;
776 .
improve work quality;
.
reduce influence of trade unions;
.
improve environmental performance; and
.
keep pace with rapidly changing technology.
It is interesting to note that even when starting as cost reduction initiatives,
outsourcing is not just a costing exercise but it has a strategic dimension that must be
carefully considered and analysed. In other words, the role of outsourcing is not only a
cost-saving method but also a part of the overall management strategy to focus on core
competitiveness. For these reasons, making outsourcing decisions requires deeper
analysis than most companies realise.
Unfortunately, single cost-based decision processes remain the most used
approaches by maintenance managers for making outsourcing decisions (Sunny,
1995). The cost dimension may be sufficient if maintenance is strictly considered a
support functional cost center. But, following the new maintenance strategies such as
TPM, if maintenance is considered a stand-alone business unit, different approaches
are necessary.
Fill and Visser (2000) propose a manufacturing outsourcing decision framework
named “composite outsourcing decision framework” (CODF), consisting of three main
key aspects to be analysed:
(1) The quantifiable (costs, investments, revenues, etc.) and non-quantifiable
contextual factors (strategic interest, confidentiality, stability of employment,
etc.), associated with the context of the particular process that is being
considered for outsourcing. These factors can be internal and/or external to the
specific activity under analysis, and are scored and ranked by using a Likert
scale from 1 to 5.
(2) The strategic and structural implications associated with the company’s
decision. Based on a set of questions proposed by Ewaltz (1991), a guideline is
developed to help organisation consider the structural aspects associated with
the decision and, in particular, to focus on how integrated the organisation
should be (e.g. can the corporate culture be changed? How long will the process
be viable? etc.).
(3) The costs associated with the process or activity under review (classified in
production and coordination costs, as proposed by Williamson (1979)).
Harkins (1997) underlines how outsourcing should be viewed as a long-term measure
when deciding what to outsource, selecting provider, cultivating an outsourcing
relationship and making other outsourcing decisions. In the field of human resources
departments, the author proposed a five-step decision process. It is interesting to
underline, in this context, how the last step is represented by a balance of the potential
effects deriving from a particular choice of outsourcing level. For Harkins this is the Maintenance
most critical step in the decision process, considering that the different variables outsourcing
analysed will head to different directions and the management will have a tough time
balancing the factors. In other words, the final outsourcing decision process can be selection
represented as a complex multi attribute decision problem.
Campbell (1995) presents a structured approach to define the possibility and
convenience of maintenance outsourcing. A six-step approach is presented as a 777
framework to outsource in a systematic way, addressing the key issues around
objectives, readiness, alternatives, proposals and negotiations. The six steps can be
briefly described with the following questions:
(1) Does outsourcing make sense?
(2) Are your objectives achievable?
(3) Is the organisation ready?
(4) What are the outsourcing alternatives?
(5) How is the request for the outsourcing proposal structured?
(6) What are the negotiating tactics?
Sunny (1995) proposes an interesting new graphical method to make maintenance
outsourcing decisions, also defining what activities are better to outsource. The model
introduces not only the cost aspect, but also a strategic dimension that lets
maintenance managers focus on broader, long-term objectives as well as short-term
costs issues. Based on a “cost index diagram”, the departmental cost gaps, suitably
correlated with department’s relative budget, appear again to be the leading factor. In
addition, a second diagram permits to correlate the cost results with the strategic
concept named “core competency”. Core competency is defined as a set of skills critical
to maintain in-house for the plant to be successful. In this way, all aspects of
maintenance activities are analysed in a critical manner and ranked by carefully
isolating the cause and effect of each process.

A maintenance reorganisation project

The case study here presented deals with an Italian company, leader in the field of
brick production. The company makes use of highly productive automated plants that,
besides the capability of elevated production rates (450.000 tons/year), allow to realise
products characterised by high quality levels. Among all other products, a particular
place is occupied by specialised parts produced with craft made methods on highly
automated lines. The company is a multi warehouse industry, with factories located in
three different areas, for a total of six productive plants based on six tunnel furnaces.
During the last ten years the firm sustained noticeable investments for the
technological innovation of its plants, up to an amount of about 55 millions Euro,
building ex novo one plant and realising a radical revamping of other four existing
factories. The management showed a particular attention toward product innovation,
releasing to the market 11 new products in ten years. Variously distributed among the
plants, the production requires 430 employees, with an expected revenue of 63 million
Euro for the year 2003. The maintenance function comprises 44 operators and the
maintenance total annual costs have passed from 3.6 million Euro in 1999 up to 4.3
million Euro in 2002, with an expected similar value for 2003.
IJQRM During the first audit in the six production plants, a set of data regarding the
21,7 maintenance activities were collected. In Table I the percentage of repartition of
resources between the different types of maintenance activities is reported.
Briefly, the five maintenance policies reported in Table I are the following:
(1) Corrective maintenance: the main feature of corrective maintenance is that
actions are only performed when a machine breaks down. There are no
778 interventions until a failure has occurred.
(2) Preventive maintenance: preventive maintenance is based on component
reliability characteristics derived by (internal) historical failure data and/or
reliability specifications given by equipment manufacturer. This data makes it
possible to analyse the behaviour of the element in question and allows the
maintenance engineer to define a periodic maintenance program for the tunnel
furnace.
(3) Opportunistic maintenance: the possibility of using opportunistic maintenance
is determined by the nearness or concurrence of control or substitution times for
different components on the same machine or plant. This type of maintenance
can lead to the whole plant being shut down at set times to perform all relevant
maintenance interventions at the same time. Generally this kind of policy
requires the support and assistance of production personnel.
(4) Condition-based maintenance: a fundamental requisite for the application of
condition-based maintenance is the availability of a set of measurements and
data acquisition systems to monitor the machine performance in real time.
Generally, this kind of policy requires an high level of skills of the maintenance
staff.
(5) Progressive maintenance: the progressive maintenance approach is to use
integrated, investigative and corrective practices to significantly extend
machinery life. The goal of progressive maintenance is to eliminate failures of
equipment forever, eventually with a feed-back to plant redesign.
As one can see from data reported in Table I, the audit shows a company characterised
by a discrete level of maintenance organisation and practice. The firm adopts
intensively planned maintenance activities and implementations of progressive
maintenance are also used. Nevertheless the percentage of resources devoted to
corrective maintenance activities is significant and could be appreciably reduced. In a
continuous improvement philosophy, the management has executed a business

Percentage repartition of maintenance resource

Preventive Corrective Progressive
Tunnel Condition-based maintenance maintenance maintenance Opportunistic
furnaces maintenance (%) (%) (%) (%) maintenance (%)

1 0 35 35 20 10
2 0 60 20 10 10
Table I. 3 0 55 25 10 10
Repartition of 4 0 40 20 30 10
maintenance resources 5 0 35 40 10 15
process reengineering (BPR) study for a complete maintenance reorganisation with the Maintenance
aim of reducing the percentage incidence of the corrective maintenance costs, outsourcing
eventually defining and optimising the pathway toward a potential outsourcing
strategy. Historically, the company maintained its own productive units availing of selection
inner personnel, ready for use and with a great deal of experience and the necessary
know-how. Though yet practised, outsourcing had always concerned accessories
activities, such as those regarding the building (masons, varnishes, etc.) or the 779
specialist activities (lifting and motion, automation, etc.).
At this point the management must define the potential benefits and risks
associated with maintenance outsourcing. An outsourcing program allows the release
of internal resources for other activities and to achieve new competencies in terms of
advanced maintenance skills (e.g. the technologies for “on-condition” maintenance, the
concepts and approaches for TPM and RCM, etc.). On the other hand, the firm is afraid
of losing the competences and the control of the production plant with the risk of
strongly depending on the provider. This aspect is particularly critical because, in this
case, the maintenance is complementary to the productive cycle and does not represent
an accessory part. The production function itself is a warrantor for the preservation of
the corporate know-how.
In addition, the manager must identify those activities which offer the best potential
for a maintenance outsourcing program, i.e. he must select the more attractive type of
outsourcing contract.
The complex managerial choice described above represents a multi-criteria decision
problem that should be solved with the help of an appropriate decision support system
able to select between the following five alternatives:
(1) Prevalent use of inner resources (i.e. to maintain the present situation).
(2) Main contracting – the activities are partitioned by specialisation. A single
provider executes each of them using the plans previously prepared by the
customer. It mainly makes use of its own resources or may appeal to
subcontractors for the accessory activities. The customer has only to maintain
contacts with the provider, that is responsible of the quality and of the
promptness of the execution.
(3) General contracting – as in main contracting, but maintenance engineering
competes to the customer that defines the planning and the programming.
There is only one interlocutor and the contract may include “bonus/malus”
clauses.
(4) Global service – the provider also assumes the maintenance engineering
function, projecting plans and the eventual enhancements. A similar structure is
maintained by the customer, with the aim of monitoring the service level and to
grant the preservation of the corporate know-how. The contract is characterised
by a large amount of “bonus/malus” clauses that also involve aspects of
continuous enhancement. The knowledge of the whole process by the customer
becomes a necessary condition.
(5) Global service plus life cycle costing (LCC) – it consists of a global service
contract where the contractors come to an agreement with respect to costs and
performances correlated to the life cycle of the whole plant. Sharing of the
knowledge of the process and of the management must be complete.
IJQRM It is evident that the selection of a particular contract implies the choice of the activities
21,7 that a management decide to outsource and it is based on an extended set of potential
tangible and/or intangible factors. An analytical approach to be used as a decision
support tool during the choice of the most appropriate type of outsourcing contract is
now presented. The procedure is based on a well-known multi-criteria decision
technique named AHP.
780
The analytic hierarchy process technique
Mathematical models adopted to solve complex optimisation problems usually refer to
an “objective function” that should be either maximised or minimised. Briefly, it
consists of a function in a certain number of decision variables, which are combined
with some decision criteria and thus constitute a formal algebraic expression.
Unfortunately these models may be applied only in presence of simple cases, under
restrictive simplifying hypotheses that greatly reduce their applicability.
AHP (Saaty, 1980) represents a powerful and flexible multi-criteria decision-making
tool for complex problems where both quantitative and qualitative aspects need to be
considered. This represents, indeed, the most important characteristic and the
advantage of such a tool. AHP is preferable whenever one has to represent complex
situations without simplifying them. In particular, the most valuable benefits can be
perceived when a problem is defined in terms of intangible characteristics or if the
involved variables show a high degree non-homogeneity (Saaty, 1990; Vargas, 1990).
Briefly, the AHP technique applies the “decomposition and synthesis” approach. A
complex decision may be represented easily if its factors are arranged into a
hierarchical structure, having a certain number of levels from the root (objective) to the
leaves (alternatives), with the intermediate levels constituted by the so-called
sub-criteria. After this first phase has been completed successfully, the method does a
pairwise comparison of all the elements belonging to a certain level with respect to the
parent element in the upper level. Criteria are then compared to each other with respect
to the global objective of the analysis. Applying this method we derive a series of
comparison (or decision) squared arrays and, finally, a priority vector that measures
the relative degree of importance of all possible alternatives (the leaves). Conceptually,
AHP methodology can be used whenever a problem can be reduced to a hierarchical
representation consisting of at least two levels:
(1) evaluation criteria – those elements that allow to take a decision;
(2) alternatives – those elements that influence the evaluation criteria.
Reassuming, the analysis starts with the definition of the problem, consisting of a
target and of a variable number of possible solutions (the alternatives). Thus, we can
summarise the procedure as follows:
(1) definition of the goal and identification of the criteria and alternatives
influencing it;
(2) construction of the hierarchical structure, starting from the global objective and
stepping down to the alternatives, via all the intermediate levels;
(3) construction of the decision matrices to report all the evaluations deriving from
the assessed pairwise comparisons;
(4) calculation of the priority vector for all the evaluation criteria;
 (5) iteration of steps 3 and 4 for all the alternatives at all levels; and Maintenance
(6) derivation of the final priority ranking. outsourcing
On the basis of the hierarchical structure, a method to determine the intensity by which selection
the elements of a level weight on each node in the upper level must be fixed at the
beginning. In this way, it will be possible to quantify the influence of the lowest levels
on the final target of the analysis. This is reached by interviewing a sample of expert 781
operators with respect to the problem that has to be solved. Each question should
regard a group of alternatives with respect to the parent criteria in the immediately
upper level. To give a numerical judgement during such a qualitative assessment
procedure, we need to use a predetermined conversion scale. Assuming that the
involved elements are homogeneous and that their relative weights do not differ more
than nine times, we can adopt a judgement scale based on nine degrees of importance,
as the one reported, as an example, in Table II. The nine-point scale has often been used
whenever the hierarchical approach could be followed, and showed to be quite reliable.
Generally, to further simplify this approach, the scale is built based on five attributes:
(1) equal;
(2) moderate;
(3) strong;
(4) very strong; and
(5) extreme.
For all those cases where a better precision is required, the calculus can be performed
adopting both intermediate values and decimal numbers. The final outcome is a vector,
normalised to the unity, which permits the individuation of the better alternative with
respect to the target. After evaluating this single dimension array, the AHP technique
allows the analyst to evaluate the correctness and the consistency of the given pairwise
comparisons, by means of an inconsistency ratio (IR) (Saaty, 1980). The judgments can
be considered acceptable if and only if IR # 0.1.

The decisional structure

The central issue of this work has been that of applying the multi-attribute decisional
technique (AHP) to the choice of the optimal outsourcing level of the maintenance
activities. AHP have had a lot of applications in the field of maintenance: costs
repartition criteria, maintainability, reliability and availability had been proposed by

Value Judgement Description

1 Equal Two alternatives share the same level of importance

3 Moderate
5 Strong
7 Very strong
9 Extreme
2,4,6,8 Intermediate values
Experience and judgement favours one alternative
with respect to the other in little measure
Experience and judgement strongly favour one
attribute over another
Experience and judgement tell that one alternative is
much more important than the other Table II.
The difference of importance is extreme Judgements scale used
Used if more precision is needed with AHP
IJQRM Triantaphillou et al. (1997). Another application concerned the choice of the better
21,7 maintenance practices for components in a process industry. It considered as criteria
the cost of maintenance policies, the added value, the applicability and the potential
risks deriving from failures (Bevilacqua and Braglia, 2000).
A fundamental step to identify the optimal level of outsourcing consisted in the
development of the decisional structure which the AHP analysis had to be applied to.
782 This step is of great importance since a deeper level of analysis allows identification of
all the criteria that could be relevant for the choice. Besides, this step permits putting
the criteria in the right place in the AHP hierarchical tree. Hence, a panel of experts (top
managers and maintenance managers), sufficiently large to lessen the bias due to
individual opinions, had been formally questioned on the possible AHP structure to be
adopted, using the Delphi methodology (Linstone and Turoff, 1975). Each expert was
asked, during two separate sessions, to articulate his personal beliefs (based on his own
working experience) about those criteria that could somehow affect the final decision.
Each session was followed by a round-table discussion specifically intended to clarify
subjects and encourage the discussion progress. This allowed us to grant an efficient
feedback and a continuous elaboration of concepts by the panel and to consider a
broader range of aspects than would have resulted from a mere brainstorming activity.
Selected topics were later collected and analysed by the work group, iterating the
process till all the participants agreed on all issues, giving us the possibility to arrange
the problem over five layers, the fifth one being that of the alternatives considered for
the level of outsourcing that has to be chosen for the maintenance activities.
A great result, at this first stage, was that the adopted criteria are sufficient to
describe and solve the problem under analysis, independently from the typology of
products or services that the corporation turn out. The proposed structure is
completely reported in Figure 1.
At the first level we identified three evaluation criteria: the industrial sector, the
main characteristics of the provider and, finally, the conservation state of the good to
be maintained.
Going further on, the work group decided to characterise the industrial sector
criterion on the basis of the dimension and the growth rate of the maintenance
activities in outsourcing, the outsourcing trend, the organic composition of the capital,
the geographical localisation of the potential customers on well defined geographical
areas and, finally, the presence of eventual providers and suppliers that can further
widen the effects of the outsourcing policies of the maintenance activities.
Regarding the most important characteristics of the provider, the work group decided
to split the criterion into three sub-criteria. Hence we referred to the number of potential
actors actually available on the market, the typology of the proposed rate and the
competencies of the provider itself. These voices were further decomposed into a third
level. Indeed, the certification (adequacy to the ISO standards) of the provider, the
availability of equipment and of the required know-how, the knowledge of the process to
be performed at the customer, the capability of performing audits deeply characterise
and influence the provider features. Along with the above-mentioned criteria, we
introduced the geographical position and the eventual presence of acquired references.
The third criterion at the first level is represented by the conservation state of the
goods (e.g. plants and facilities) to be maintained. During the Delphi phase the panel of
experts had identified some aspects strongly related to this last criterion: maintenance
 Maintenance
outsourcing
selection

783

Figure 1.
Hierarchical structure for
AHP

costs, complexity of the plant, owned skills, obsolescence of the goods to be maintained
and the costs deriving from a lack of maintenance. Besides, during the following
brainstorming activity, it was decided to split the costs of maintenance into a
supplementary sub-criteria level (internal, external and material-due costs). The skills
criterion identifies the capability of the corporation to reduce the requirements of
corrective maintenance activities with respect to the planned ones. The cost due to the
lack of maintenance keeps track of the additional burdens necessary to maintain a
IJQRM good level of safety for the personnel, the environment and the plants, along with the
21,7 costs deriving from the insurance charges and from the losses of image.
Although the proposed model applied to a particular case study situation, it can be
considered of general nature and, therefore, can be applied to any industrial condition.

Analysis of the outcomes

784 Once the hierarchy structure of the maintenance outsourcing models had been defined,
a group of experts was formed to assess the judgments. The group was created by
persons in charge for maintenance and production, selected by the corporation and
operated in order to weigh up the hierarchy structure using pairwise comparisons and
the Delphi technique.
The Delphi technique is a structured process which investigates a complex or
ill-defined issue by means of a panel of experts. The methodology proves to be an
appropriate research design for this type of theory-building research and permits
to obtain individual opinions by a structure of a group during a communication
process (Delbecq et al., 1975). The technique is particularly indicated in case of
complex, interdisciplinary problems (Meredith et al., 1989).
The five tunnel furnace plants previously described have been analysed through
the use of the AHP methodology. All the elements under a particular node must
be compared with each other with respect to the node itself. Then, the assessment
consists of a relative importance of the elements under any node. The estimation
is performed by the experts by using pairwise comparison by means of questions
that are formulated in a linguistic style as, for example: “With respect to the level
of outsourcing of the maintenance activities (parent criterion), using a scale that
measures the relative importance, which is the importance of the typical industrial
sector (1st child criterion) versus the provider of maintenance activities (2nd child
criterion)?”.
Table III reports an example of the pairwise comparison concerning the “industrial
sector” attribute for the outsourcing maintenance decision strategy, with the relative
judgements obtained by adopting the quantitative scale shown in Table II.
The global priority indices obtained after the pairwise comparison process for each
criterion, sub-criterion and alternative included in the AHP hierarchy structure, are

Dimension Presence of
and growth Outsourcing Capital Geographical eventual providers Local
rate trend intensity localisation and suppliers priority

Dimension and
growth rate – 3.0 2.0 3.0 3.0 0.145
Outsourcing trend – 4.0 1.0 5.0 0.354
Capital intensity – 4.0 2.0 0.090
Table III. Geographical
Example of pairwise localisation – 5.0 0.354
comparison for Presence of
“industrial sector” eventual providers
attribute with and suppliers – 0.058
outsourcing level Note: Inconsistency ratio 0.01
reported in Figure 2. The corresponding overall inconsistency index is equal to 0.04. Maintenance
This means that the analysis is consistent and the judgements are congruent and outsourcing
reliable. For brevity, the partial IR values are not shown in Figure 2. Nevertheless, all
the IR values result lower than 0.1. selection

785

Figure 2.
Priority vector of the
different levels of
outsourcing
IJQRM The analysis of the priority vector puts in evidence that the better solution consists of
21,7 the adoption of the general contracting policy, requiring to outsource all the
maintenance activities to a single contractor.
Although the solution shows a possible scenario where “industrial sector” is the most
important first-level criteria (see Figure 2), the AHP solution can change in accordance
with shifts in analyst logic. To explore the solution robustness to potential shifts in the
786 priority of outsourcing strategies, a series of sensitivity analyses of criteria weights can
be performed by changing the priority (relative importance) of weights. Each criterion
can be characterised by an important degree of sensitivity, i.e. the ranking of all
alternatives changes dramatically over the entire weight range (Min and Melachrinoudis,
1999). The problem is to check whether a few changes in the judgement evaluations can
lead to significant modifications in the priority final ranking. For this reason, sensitivity
analysis is used to investigate the robustness of the alternatives to changes in the
priorities of the criteria at the level immediately below the goal.
The analysis emphasises the priorities of the three “first-level” criteria in the AHP
model reported in Figure 2 and shows how changing the priority of one criterion affects
the priorities of another one. It is clear that as the priority of one of the criteria
increases, the priorities of the remaining criteria must decrease proportionately, and
the global priorities of the alternatives must be recalculated, as one can see in Table IV.
All the results reported in Table IV are obtained using the “Expert Choice” software, a
multi-attribute decision-making tool based on the AHP.
It is possible to note that:
.
the “general contracting” outsourcing alternative remains the best solution,
increasing to the maximum value (100 per cent) the importance (i.e. the local
weight) of the “industrial sector” criterion or decreasing the importance to the
minimum value (0 per cent) of the two criteria “provider” and “conservation
state”;
.
when increasing the importance of “provider” criterion from 22.9 per cent to 65.7
per cent, the global service alternative becomes the preferable choice;
.
when increasing the importance of “conservation state” criterion from 7.5 per
cent to 42.3 per cent, the “global service plus life cycle costing” alternative
becomes the preferable choice; and

Increasing importance of criterion Decreasing importance of criterion

Industrial Conservation Current Industrial Conservation
sector Provider state state sector Provider state

Industrial sector 1 0.309 0.434 0.696 0.371 0.902 0.752

Provider 0 0.657 0.143 0.229 0.473 0 0.248
Conservation state 0 0.34 0.423 0.075 0.156 0.098 0
New ranking of alternative
General contracting 0.312 0.232 0.234 0.266 0.227 0.319 0.273
Main contracting 0.266 0.190 0.208 0.229 0.197 0.266 0.234
Table IV. Global service 0.189 0.234 0.205 0.208 0.224 0.173 0.208
Results from the Global service plus
sensitivity analysis of the life cycle costing 0.167 0.230 0.235 0.200 0.228 0.170 0.192
first level criteria Present situation 0.066 0.114 0.118 0.097 0.124 0.072 0.093
 .
when decreasing the importance of “industrial sector” criterion from 69.6 per cent Maintenance
to 37.1 per cent, the “global service plus life cycle costing” alternative becomes outsourcing
the preferable choice.
selection
As one can see, only by adopting large changes of the weights of the first criteria is it
possible to alter the first position in final ranking of the different alternatives. This fact
reveals an intrinsic robustness of the final results obtained by AHP analysis previously
reported. 787
The simple approach to sensitivity analysis here adopted seems to be a good
compromise between efficiency and efficacy (Bevilacqua and Braglia, 2000). In fact,
two exceptions are possible. First, the sensitivity analysis here proposed is only
relevant to the priorities of the three first-level criteria. Second, because we have
changed each attribute weight one at a time, only the “main effects” have been
considered. In other words, “interaction effects” of the changes made to two or more
weights have been ignored. Nevertheless, these simplifications have been adopted for
the following two reasons:
(1) the final solution is mainly sensitive to changes in the priorities at the highest
level of the hierarchy; and
(2) the introduction of the interaction effects makes the sensitivity analysis too
complex for actual applications. In addition, one should note that the main
effects are generally the most important aspects in a sensitivity analysis.

Conclusions
The decision concerning the maintenance outsourcing was traditionally executed
using cost-based decision models. However, the dramatic change in the way
maintenance function is viewed has challenged the validity of this approach. Today,
maintenance outsourcing decision is analysed in a different way, taking into account
complex and extended sets of (tangible and/or intangible) strategic factors. An
analytical multi-attribute decision method named AHP is here proposed as a means to
encourage managers to appraise the range and complexity of the issues that need to be
considered when making decisions concerning maintenance outsourcing.
The obtained results suggest that the proposed technique represents a useful tool to
support the maintenance staff in making this critical and complex decision.
Despite the proposed approach having been applied to a case study concerning an
Italian brickworks, it can be considered of general nature and easily extended to other
different industrial situations.

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