An empirical investigation on the relationship between business and maintenance strategies

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Int. J. Production Economics 104 (2006) 214–229 www.elsevier.com/locate/ijpe

An empirical investigation on the relationship between business and maintenance strategies Srinivas Kumar Pinjalaa, Liliane Pintelona,, Ann Vereeckeb a

Center for Industrial Management, Katholieke Universiteit Leuven, Heverlee, B-3001, Belgium b Vlerick Leuven Gent Management School and Ghent University, Ghent, Belgium Received 14 April 2004; accepted 21 December 2004 Available online 5 February 2005

Abstract All manufacturing companies choose to compete in the market based on some competitive priorities like cost, quality, flexibility and other priorities, depending upon their manufacturing capabilities. Equipment maintenance being an integral part of manufacturing, can influence these competitive priorities and hence the business strategy directly in a negative or positive way. Over a period of time, there had been significant developments in the field of manufacturing and maintenance. These are in the areas of technology, concepts, methodologies, and philosophies. Examples are Advanced Manufacturing Technologies (AMT), JIT, Total Productive Maintenance (TPM), and Outsourcing. Maintenance, directly influenced by these developments, has risen from a mere tactical to a more strategic level. Hence, there is a growing need to study the relationship between business and maintenance strategies. The paper is supported by a survey conducted in a sample of about 150 companies within Belgium and to some extent in the Netherlands. In this paper, our empirical study investigates whether companies with different competitive priorities pursue different maintenance strategies. The results indicate that quality competitors have more pro-active maintenance policies, better planning and control systems, decentralized maintenance organization structures when compared to others. They manage maintenance much more effectively when compared to others. There is also a difference in the distribution of AMT usage, automation, maintenance personnel (management/supervision and technicians), expenses and budget figures. Quality competitors have more AMT usage, automation, maintenance personnel and spend more on budget, followed by cost and flexibility competitors. r 2005 Elsevier B.V. All rights reserved. Keywords: Business strategy; Maintenance strategy; Competitive priorities

1. Introduction Corresponding author. Tel.: +32 16 322496; fax: +32 16 322986. E-mail address: [email protected] (L. Pintelon).

All manufacturing companies invest a substantial amount of capital in procuring physical assets. One of the important factors that influence the

0925-5273/$ - see front matter r 2005 Elsevier B.V. All rights reserved. doi:10.1016/j.ijpe.2004.12.024

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return on investments is maintenance of these assets. However, when it comes to maintaining these assets, maintenance is being treated as any other budget line item. On the other hand, many developments have taken place in terms of technology, concepts, and philosophies both in production and maintenance. Some examples can be Advanced Manufacturing Technology (AMT), JIT, Total Productive Maintenance (TPM), and Outsourcing. These developments influence directly or indirectly some of the maintenance elements like organization structure, human resource policies (training, recruitment, etc.), maintenance policies and concepts. For instance, AMT and automation require continuous training programs for craft workers and supervisors to enhance their technical expertise. It also requires recruitment of professional staff to raise the level of technical expertise in maintenance department (Swanson, 1997). Also, with the introduction of AMT and high automation, the nature of maintenance has become increasingly complex and costly. According to Maggard and Rhyne (1992) and Mobley (1990), 15–40% of production costs can be attributed to maintenance costs. With the onslaught of more automation, robotics and computer-aided devices, maintenance costs are likely to be even higher in the future (Blanchard, 1997; Niebel, 1985). According to a study conducted in 1989, the estimated cost of maintenance for a selected group of companies increased from $200 billion in 1979 to $600 billion in 1989 i.e. three-fold in just 10 years (Wireman, 1990). On the other hand, the Overall Equipment Effectiveness (OEE) for a typical factory is only 45% (Kotze, 1993). OEE is a function of Equipment availability, Performance efficiency and Quality rate of products. It is the performance metric often used for TPM (Nakajima, 1988). The above paragraph indicates that if maintenance is tapped effectively there is a scope for improving the profits and productivity of a company. For maintenance to make these improvements it should be recognized as an integral part of business strategy or the competitive strength equation (Hora, 1987). In particular, there is a growing need to understand the relationship between a company’s business and mainte-

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nance strategies. Lack of understanding this relationship and only cutting down the costs of maintenance can effect the company’s competitive strength equation and its ability to compete in the market. 1.1. Strategy Strategy can have various definitions depending upon different contexts. However, the elements within it can provide us more insight in understanding the type of strategy and its content. Strategy at any level, say at business level or functional level will provide the company a sense of direction, integrity and purpose. In general, Hax and Majluf (1991) provide a comprehensive definition. According to them ‘‘Strategy is a coherent, unifying and integrative pattern of decisions; determines and reveals the organizational purpose; selects the businesses the organization is in or is to be in; attempts to achieve a long term sustainable advantage in each of its businesses, engages all the hierarchical levels (corporate, business and functional) of the firm and; defines the nature of the economic and noneconomic contributions it intends to make.’’ 1.1.1. Business strategy Porter (1985) identifies three generic choices of strategies at business level. They are cost leadership, differentiation, and focus. Cost leaders compete in the market based on the low price of their products. Differentiators compete based on certain distinct competence like quality, customer service, image, etc. Focus players compete by serving the needs of a particular market or product segment. Hax and Majluf (1991) define business strategy in terms of three elements: the mission of the business, the attractiveness of the industry in which the business belongs, and the competitive position of the business unit within that industry. They view Porter’s generic choices of strategies as generic competitive strategies, which determine the competitive position; the business unit will adopt in order to gain a sustainable competitive advantage. According to Mintzberg et al. (1995), locating, distinguishing and elaborating the core business is more relevant for a business-level

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strategy. They consider Porter’s framework of generic strategies as those that distinguish the core business. Further, they present two types of strategies for distinguishing a core business. These are the strategies of differentiation and scope. They consider cost leadership or low price strategy as a part of differentiation strategies along with quality, image and design. Further they consider focus as a part of scope strategies along with customization. The business strategy choice elements like cost (or price), quality, customization, or flexibility were termed as competitive priorities by Hayes and Wheelwright (1984). They defined competitive priorities as the ways in which a company chooses to compete in the market place and the types of markets it pursues. Further, they stress that, within the industry, different companies, or business units differ in the emphasis given to each competitive priority. The competitive priorities in principle are the basis on which a business unit will achieve and maintain a competitive advantage. In this paper the term business strategy is considered with respect to a competitive priority, or business strategy element. Since our main aim is to study the maintenance behaviors, by segregating companies based on certain generic business strategy element. 1.1.2. Maintenance strategy The term maintenance strategy is generally viewed from the perspective of maintenance policies and concepts. For instance, it is defined in terms of reactive or breakdown maintenance, preventive and predictive maintenance (Kevin and Penlesky, 1988; Cooke, 2003). Swanson (2001) explains three types of maintenance strategies: reactive strategy (breakdown maintenance), proactive strategy (preventive and predictive maintenance), and aggressive strategy (TPM). However, from our view, these maintenance policies and concepts form one of several elements of maintenance strategy. The list of those elements is presented in Table 2. Maintenance though closely related to manufacturing is a business function of its own. Its business is to provide dependable service to manufacturing. Hence, maintenance strategy can be defined at a functional hierarchy level. It can be defined as ‘‘coherent, unifying and

integrative pattern of decisions in different maintenance strategy elements in congruence with manufacturing, corporate and business level strategies; determines and reveals the organizational purpose; defines the nature of economic and noneconomic contributions it intends to make to the organization as a whole.’’ This definition is based on the strategy definition given by Hax and Majluf (1991). 1.1.3. Relationship between business and maintenance strategies The relationship between business and maintenance strategies can be well understood through the famous value chain framework of Porter (1985). The underlying principle is that all of the tasks performed by a business unit can be classified into five primary and four support activities. The primary activities constitute inbound logistics, operations, outbound logistics, marketing and sales and service. Here, maintenance is considered as a part of operations activity. The support activities constitute procurement, technology development, human resource management and company infrastructure. However, several authors subsequently altered the above classification system according to their own perceptions. For instance, Hax and Majluf (1991) considered inbound logistics, operations and outbound logistics as manufacturing. Whether maintenance is a part of operations or manufacturing it should be managed as a separate value chain activity. For instance, maintenance is often ignored as a part of the value-added chain by considering it as a part of manufacturing overhead (Hora, 1987). By considering it as a separate value chain activity, management can visualize the effects of maintenance costs on the value-added chain and the business strategy. Moreover, the maintenance function plays a critical role in a company’s ability to compete on the basis of cost, quality and delivery performance (Swanson, 1997; Pintelon et al., 2000). Hence, maintenance should be considered as a part of primary activities but as a separate service function of its own. This will allow profiling the competitive position of a business unit with respect to maintenance against its competitors. In addition, every function or activity

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automation and usage of AMT like (CIM) computer-integrated manufacturing, (CAM) computer-aided manufacturing, (CAD) computeraided design (Hayes and Jaikumar, 1988). However, with more automation and AMT usage, even though there are cost advantages with less direct labor costs, it can be offset by increase in indirect costs. This can be one of the reasons that can be attributed for the increase in maintenance costs over the past few years. In addition to this, the maintenance complexity has also increased (Morrison and Upton, 1994). In such situations, maintenance has a crucial role to play in achieving superior product quality and cost-effectiveness of operations. This means more focus is needed in some of the maintenance strategy elements like maintenance modifications and human resource policies. With more equipment design modifications and continuous improvements the number of maintenance tasks required can be reduced and hence the related costs. Moreover, complex maintenance environments require high training and recruitment of professional staff and crew with

Strategy Manufacturing Strategy Maintenance

•Centralized or mixed type of organization strucutre. •High focus on maintenance planning & control systems. •High corrective/shutdown maintenance, with medium preventive & predictive maintenance. More stand-by equipments. •High outsoucing of maintenance activities. •Performance measurements tied with reliability and maintenance costs.

Business Strategy

•High level of vertical integration. •Performance measurements tied to cost.

(Superior product quality with low price)

Manufacturing Strategy Maintenance

Business Strategy

(Cost Leadership (low selling price)

Strategy

in the value chain is a potential source for pursuing either cost leadership or differentiation (Hax and Majluf, 1991). To be effective, each functional strategy must support, through a specific and consistent pattern of decisions, the competitive advantage being sought by the business strategy (Hayes and Wheelwright, 1984). For example, decisions in areas such as capacity, organization structure, maintenance policies, and planning—all sub-parts of the maintenance functional strategy can be different, if the desired business strategy were cost leadership rather than superior product quality with low price. As shown in Fig. 1, the decision patterns of some of the maintenance strategy elements differ, if the competitive advantage sought by business strategy is superior product quality with low price rather than only low price. The effect on maintenance can be viewed either directly through business strategy requirements or indirectly through manufacturing strategy decision patterns. In most of the cases the effect will be through manufacturing strategy decision patterns. For instance, superior product quality at low price can be achieved through more

•High Volume, standardized products. •Continuous flow line production process. •Specialized & high technology with high interdependency of equipments.

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•Product & Volume flexibility •Production process varies but associated, with more automation, Advanced Manufacturing Technology like CAD, CIM, CAM etc. •High training & highly skilled workforce. •Integrated production planning & control systems, •Performance measurements tied to quality & cost.

•De-centralized organization structure. •High focus on maintenance planning & control systems. •High preventive & predictive maintenance. •Professional staff & workforce recruitment, more team-oriented maintenance involving production opeartors. •High focus on equipment modifications, continuous improvements with a motive to reduce the number of maintenance tasks, hence costs. •Performance measurements tied with product quality and maintenance costs.

Fig. 1. The relationship between business and maintenance strategy through manufacturing strategy.

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high skills. In addition, more team-oriented maintenance involving production operators is crucial to maintain product quality and reduce maintenance costs. In other words, there is a relationship between business and maintenance strategies. In that spirit, this paper explores whether there is a relationship in practice, that is, whether companies pursuing different business strategies differ in the way of carrying out the maintenance of their equipment. In the past few years, several studies have emphasized on new theoretical concepts, frameworks and models both related to manufacturing and maintenance. For instance, Demeter (2003) studies manufacturing strategy and its competitiveness. She explains that a smoothly running production system will have a positive influence on business performance. However, smooth running mainly depends on equipment performance, hence maintenance. Several other studies mainly focus on the connection between business and manufacturing strategies. There are meagre or no direct studies on the relationship between business and maintenance strategies. However, some of the recent studies like Waeyenbergh and Pintelon (2004) and Al-Najjar and Alsyouf (2003) emphasize the importance of maintenance and its role in contributing to positive business performance. The subject topic of this paper in that respect is new. In other words, the contributions of this paper are contemporary and are relevant both in practice and academic field. The empirical study in this paper is an effort to build a theory on the relationship and create a starting point for further exploration and testing. Understanding the theory will help to develop the right maintenance strategy that is consistent with the business strategy. The remaining part of this paper is organized into four sections. In Section 2, the theoretical Maintenance as Production task

Maintenance Department

“Necessary evil”

“Technical Specialization”

1940

1950

1960

background is reviewed. The literature on manufacturing strategy is reviewed. Using the manufacturing strategy elements as a guiding framework the elements of maintenance strategy are developed. In Section 3, the research methodology is explained. Then, some tentative hypotheses are developed on the relationship between business and maintenance strategies. In Section 4, the data and analysis are presented. Note that this empirical study was carried out on the whole manufacturing industry and not pertaining to any particular segment of the industry. Finally, in Section 5, the results are discussed and the conclusions with implications for future research are highlighted.

2. Theoretical background Few decades ago, the maintenance function was regarded as an unavoidable part of the production function and difficult to manage. This view only changed gradually and maintenance became a separate, fully recognized and essential business function (Pintelon et al., 2000). Fig. 2 shows the evolution of maintenance on a time perspective. 2.1. Maintenance strategy elements The operating dimensions of cost, quality, and flexibility are dependent upon the key choice elements of manufacturing strategy. These choice elements are plant and equipment, production planning and control, labor and staffing, product design and engineering, organization and management (Skinner, 1969). Here we can assume maintenance to be a part of engineering. Hayes et al. (1988) expanded the list proposed by Skinner to 10 structural and infrastructure decision Integration Efforts

External &internal Partnerships

“Profit Contributor” 1970

1980

“Positive Cooperation” 1990

2000

Fig. 2. Maintenance management on a time perspective (Pintelon et al., 2000).

time

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Table 1 The summary of manufacturing strategy decision elements Structural decision elements Capacity Facilities Technology Vertical integration

Production capacity, shift patterns temporary subcontracting policies. Size, location and specialization of resources. Production equipment, automation and configuration of equipment. In-house production versus outsourcing, and relationship with suppliers.

Infrastructure decision elements Organization Quality policy Production control Human resources New product development Performance measurement and reward

Structure and design. Quality assurance, control practices and policies. Production planning and inventory control systems. Policies and practices, including management selection and training policies. Process and organizational aspects. Performance recognition and reward systems.

Table 2 The summary of maintenance strategy decision elements Structural decision elements Maintenance capacity Maintenance facilities Maintenance technology Vertical integration Infrastructure decision elements Maintenance organization Maintenance policy and concepts Maintenance planning and control systems Human resources Maintenance modifications Maintenance performance measurement and reward systems

Capacity in terms of work force, supervisory and management staff. Shift patterns of work force, temporary hiring of work force. Tools, equipment, spares, workforce specialization (mechanics, electricians, etc.), location of workforce. Predictive maintenance, or condition monitoring technology, expert systems, e/i maintenance technology (intelligent maintenance). In-house maintenance versus outsourcing and relationship with suppliers. Organization structure (centralized, de-centralized, or mixed), responsibilities. Policies like corrective, preventive and predictive maintenance. Concepts like Total Productive Maintenance (TPM), Reliability Centered Maintenance (RCM). Maintenance activity planning, scheduling. Control of spares, costs etc. Computerized Maintenance Management Systems (CMMS). Recruitment policies, training and development of workforce and staff. Culture and management style. Maintenance modifications, equipment design improvements, new equipment installations and new machine design support. Performance recognition, reporting and reward systems.

elements as shown in Table 1. Hill (1993) compressed the choice areas into process and infrastructure. However, it is Hayes, Wheelwright and Clark’s decision elements that are widely used in manufacturing strategy development processes (Mill et al., 2002). Maintenance as a function of its own, similar decision elements is worthwhile to be considered in maintenance strategy. An overview of those elements can be seen in Table 2. The way these maintenance strategic elements are managed or utilized can have an impact on the operating

dimensions of cost, quality, and flexibility. An effective maintenance is one that fits the needs of the business. To manage a company with several equipment, a diversity of maintenance decisions must be made over time. The framework provided in Table 2 groups those decisions into two categories, namely, structural and infrastructure elements. This framework can be useful in formulating a company’s maintenance strategy. Also, the maintenance strategy elements can be used to perform competitive assessment of a

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company. This process leads to the identification of the major strengths and weaknesses of a company’s maintenance against its most relevant competitors. The first four decision elements in Table 2 consume a majority of the maintenance budget. They are structural in nature because decisions made in these areas are generally assumed to fixed. For instance, a company outsourcing its entire maintenance activities cannot revert immediately to in-house maintenance. This requires enough time and capital investment to gather the necessary resources and skills. Similarly, predictive maintenance requires enough initial capital investment for acquiring necessary equipment, instruments and skills before implementation. The last six infrastructure decision elements in Table 2 are generally linked with specific operating aspects of a company like production process, size, degree of automation, etc. For example, with increasing interdependency and automation of equipment companies tend to have more decentralized maintenance organization structure (Swanson, 1997). It should be emphasized that both structural and infrastructure elements are closely interrelated. For example, if we consider structural elements as the maintenance resources, the decisions taken in the infrastructure elements decide on how effectively the resources are being utilized. Over a period of time decisions must be made both in structural and infrastructure elements. However, both the elements can present a variety of decision choices. They can have a major impact on the maintenance function’s ability to implement and support the company’s business strategy. From a system perspective the elements provided in Table 2 cover most of the elements of a maintenance system. Visser (1998) models maintenance as a transformation process, encapsulated within an enterprise system. Based on Visser’s input–output model, Tsang (2002) identifies four strategic elements of maintenance. These elements as listed below are similar to some of our elements presented in Table 2. 1. Service-delivery options: the choice between inhouse capability and outsource service.

2. Organization of the maintenance function and the way maintenance tasks are structured. 3. Maintenance methodology: the selection of maintenance policies. 4. Design of the infrastructure that supports maintenance. Service-delivery options are similar to our structural decision element, namely, vertical integration. The second element, organization of the maintenance function and the way maintenance tasks are structured are split in our case. We consider organization structure as a separate element, while structuring of maintenance tasks is included in maintenance planning and control systems element. For maintenance methodology element his maintenance policies are similar to our maintenance policies, while TPM and RCM we distinguish as maintenance concepts, he chose to call them maintenance methodologies. For the fourth element, i.e. infrastructure that supports maintenance he combines training, reward and recognition, team work, communication, e/i-maintenance, CMMS, and performance measurement systems into one element, while we split them according to their relevant positions.

3. Research methodology 3.1. Maintenance link with business strategy elements In this paper, maintenance link with business strategy elements, or competitive priorities is explored based on production process characteristics given by Hayes and Wheelwright (1984). The generic way of dividing production process can be job shop, batch, assembly line and continuous flow line. Process choice is a key decision element that links operations to business strategy (Hossein et al., 1996). In an empirical study their findings support the expectation that firms with different process choices emphasize different business strategy elements, or competitive priorities. Flexibility is the most important competitive priority for job shops. Quality can be a top priority for all the process choices (job, batch, assembly and flow). It

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is presumed that quality and innovativeness go together. Cost and deliverability can be most important priorities for continuous flow shops (Hax and Majluf, 1991), as most of these industries produce standard products in high volumes. Very few companies have deliverability as their sole competitive priority. In fact, Hossein et al. (1996) found no statistically significant differences between the four process choices on this priority. The effect of maintenance on business strategy elements or competitive priorities can be studied by focusing on the end points, namely, job shop and flow lines. The maintenance strategy elements that are investigated in this paper constitute outsourcing, organization structure, maintenance policies, planning and control systems and finally, human resource policies. In addition, the effect of AMT and automation of equipment is studied through technical complexity of maintenance. Technical complexity can be measured by the amount of time spent on trouble shooting process and the type of problems encountered in equipment. Morrison and Upton (1994) divide troubleshooting process into four stages, namely (1) fault detection, (2) information collection, (3) elimination and (4) diagnosis. Further, the troubleshooting process also depends upon the type of problems, which occur in equipment. They are (1) expected or familiar faults, (2) intermittent faults, (3) novel or unfamiliar faults. According to Morrison and Upton (1994), high technical complexity environments require teamwork between operators and maintenance crew in addition to more training. In our survey technical complexity is measured based on two dimensions, namely, trouble-shooting time and type of problems in equipment. 3.2. Cost competitors Cost competitors generally produce standard products in high volumes by having continuous flow line production process. They try to gain profit margins through economies of scale. Equipment are capital intensive, specialized and with high technology. Hence, the technical complexity, teamwork and training requirements of workforce and staff will be high. Since most of the processes

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are totally automated and equipment is seldom idle, maintenance of equipment in such situations is highly critical. Hence, most of the critical equipment will have a standby to prevent total shutdown of the plant. Majority of maintenance is done during day shifts and during plant shutdowns. Also, equipment availability for doing preventive or predictive maintenance may be limited unless there is standby equipment. It may not be possible to always have a standby-equipment due to cost considerations. Hence, the maintenance policies can be highly corrective, or shutdown maintenance followed by medium level preventive and predictive maintenance. Moreover, shutdown maintenance requires more manpower; hence many of the maintenance jobs may have to be outsourced. Since the nature of the plant operation is continuous and the objective is to keep running, some of the total maintenance work forces may be working on shift basis (three shifts a day) to do minor maintenance tasks. However, major maintenance is carried out during the day. Hence, mixed type of maintenance organization structure may be used instead of purely decentralized structure. For cost competitors, keeping costs under control is highly critical. Niebel (1985) views that maintenance costs can be kept under control by effective planning and control systems. Hence, they may have highly effective planning and control systems supported by Computerized Maintenance Management System (CMMS). Hypothesis 1. Cost competitors have a mixed type of maintenance organization structure; high corrective, medium preventive and predictive maintenance; high outsourcing; high technical complexity, training and teamwork and high use of CMMS. 3.3. Quality competitors Quality can be a top priority for all the process choices (job, batch, assembly and flow line). To produce high-quality products, quality competitors may have to use more of AMT and automation. AMT and automated equipment can produce products to more exacting specifications

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when compared to the most skilled human machinists or operators (Hayes and Jaikumar, 1988). Hence, technical complexity, teamwork and training requirements will be high. Equipment can produce defective products prior to, or after reaching complete failure. Hence, the intensity of maintenance interventions can be high in quality production environments so as to ensure superior product quality and less defective products. Maintenance policies like preventive and predictive maintenance will help to know the condition of the equipment before it can produce defective products. The maintenance decision is usually based on the use of a threshold which, when reached, means that maintenance is to be carried out. This will ensure to maintain high product quality, especially, if the thresholds are chosen so that equipment does not deteriorate to the extent to which defective, or near defective products are generated (Ben-Daya and Duffuaa, 1995). Hence, quality competitors do high preventive and predictive maintenance of equipment. Moreover, planning and control systems using CMMS also become crucial in such situations. Quality environments require high speed of maintenance response to prevent defective products. The loss associated with defective products can be very high, and especially with high-speed automated lines. Hence, such environments require more of de-centralized maintenance organization structures. This will also allow workmen to get familiar with, and specialized to solve complex equipment problems. In complex equipment environments the skills required are not readily obtainable and interchangeable. They have to be cultivated over a period of time by getting familiar with the equipment. Moreover, outsourcing of maintenance in such environments can be only at medium levels, because with high speed of maintenance response and complex equipment problems outsourcing may be more expensive than in-house maintenance.

Hypothesis 2. Quality competitors have de-centralized maintenance organization structure; low corrective, high preventive and predictive maintenance; medium outsourcing; high technical

complexity, training and teamwork and high use of CMMS.

3.4. Flexibility competitors Flexibility competitors generally have job or batch shop production environments. They tend to have more of generalized equipment. However, in some cases to have more flexibility, job and batch shops may also use AMT-like flexible manufacturing systems comprising multiple computer-controlled processing stations (e.g. CNC metal cutting machines). In such situations the technical complexity may be high. In general, flexibility competitors have low technical complexity, training and teamwork. Since the interdependency of equipment is low, equipment maintenance is not much critical. Hence, flexibility competitors may do more of corrective or breakdown maintenance than preventive or predictive maintenance. Moreover, such situations may also not require thorough maintenance planning and control systems. Most of the maintenance jobs can be easily outsourced since the skills required for maintaining general-purpose equipment are readily obtainable and interchangeable. The relative size of maintenance crew is also low in job or batch shops. Hence, maintenance can be managed with a centralized organization structure. Hypothesis 3. Flexibility competitors have centralized maintenance organization structure; high corrective, low preventive and predictive maintenance; high outsourcing; low technical complexity, training and teamwork and low use of CMMS. Even though the three hypotheses are built on certain theoretical background, in some cases, some assumptions were also made. Hence, these hypotheses can be considered as tentative. The purpose of our study is to mainly build a theory for further research and testing. As per Flynn et al. (1990) theory building study is not a hypothesis, but rather, some assumptions, frameworks, a perceived problem or perhaps, very tentative hypothesis.

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4. Data and analysis

Table 3 The profile of respondent’s representation

4.1. Data

Industry

Respondents (%)

A sample of 140 companies were identified using the Trends 30 000 (2002) from Belgium and the remaining 10 companies are from The Netherlands, chosen from NVDO (2003) a handbook of The Netherlands maintenance association. This comes to a sample of total 150 companies. This sample was stratified to ensure that all major industries would be represented. All of the companies were chosen to have minimum 100 employees. Plants1 with minimum 100 employees are expected to have a reasonable maintenance activity. The standard European industrial classification two-digit code-NACE was used to identify the type of industry. The industries that were targeted are: chemical (NACE 24), petroleum products (NACE 23), machinery and equipment (NACE 29), basic metals and fabricated metal products (NACE 27), electrical and optical equipment (NACE 30), paper and paper products (NACE 21,22), food products (NACE 15) and finally, transportation equipment (NACE 34). The distribution of plant sample was proportionate to the industry population in Belgium as our major sample comes from Belgian industries. First, a pilot study was done in four different types of companies, to ascertain that there is no ambiguity in understanding the questions by respondents. Minor modifications were made in the questionnaire according to the feedback received from this pilot study. Questionnaires were sent either to maintenance or production mangers via email. This was done to overcome the common method variance problem to a certain extent, as practical considerations required single respondents. According to Phillips (1981) high-ranking informants tend to be more reliable sources of information. We also took several other steps so as to reduce response bias and measurement error due to mono-informants. The survey instrument was long and variables in each part were randomly placed, reducing the chance that respondents could

Transportation equipment Chemical industry Food industry Basic and fabricated metal products Paper and paper products Machinery and equipment Electrical and optical equipment

45 23 04 16 04 03 05

1 In 2000 out of total 22 301 manufacturing plants in Belgium only 1043 plants have 4100 jobs (Bertinelli and Decrop, 2002).

cross check for their own internal consistency. A total of 10 companies were deleted from the sample, as they did not have manufacturing units in Belgium. In total, 50 filled in questionnaires were received out of which 4 questionnaires were eliminated for reporting fewer than 100 employees and incomplete answers. This brings us to a total of 46 usable responses, representing a response rate of 32.85%. A review of respondents showed a proportionate distribution (except food industry) to the top 10 manufacturing industries in Belgium (Bertinelli and Decrop, 2002). The profile of the respondents’ representation is shown in Table 3. Based on the profile of respondents, it can be seen that most of them belong to a process choice of either assembly line or continuous flow line. These process choice category companies are bound to have significant maintenance activity. 4.2. Analysis 4.2.1. Business strategy elements, or competitive priorities In the survey, the questionnaire was split into two major parts. The first part consisted of manufacturing variables measuring the competitive priorities, namely, cost, quality, flexibility, and deliverability. The second part consisted of variables, measuring various elements of maintenance strategy. The Cronbach’s alpha for various variables measuring the competitive priorities reached more than 0.70 indicating that the reliability of the variables is sufficient. To further assess the reliability of these variables and to identify the latent factors, confirmatory factor analysis applying maximum likelihood estimation procedure was

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carried out. Confirmatory factor analysis was used since the structure of the factor model is based on theory in manufacturing strategy literature. Two tests, namely, Kaiser–Meyer–Olkin (KMO) test measuring sampling adequacy and Bartlett’s test of sphericity were done. The KMO’s measure reached a middling level of 0.704, indicating that the data are sufficient for factor analysis. According to Sharma (1996) a cutoff point of 0.60 is tolerable. Bartlett’s test is a statistical test to assess whether or not the correlation matrix is appropriate for factoring. It also examines the extent to which the correlation matrix departs from orthogonality. For our data set, the Bartlett’s test statistic is significant (po0:005), implying that the correlation matrix is not orthogonal i.e. the variables are correlated among them and is therefore appropriate for factoring. The variables were then reduced into 4 factors. Variables are measured on a scale from 1 to 5. Higher value means very high importance or achievement. Since a correlation is expected between the latent factors, an oblique (promax) rotation was done to the four factors. Table 4 shows the factor loadings after a promax rotation. Five variables dealing with quality of the product have high loadings on factor 1; hence we can label this factor as Quality. The first two variables, namely, consistent product quality and superior product performance are measured by the level of importance given to these variables on a scale of 1 to 5. Quality dimensions are measured by the level of importance given to sub-variables like confirming to specifications, reliability and customer quality perceptions. Quality improvement programs are measured through the degree of use of sub-variables like TQM, continuous improvement, quality circles etc. Rework rate was measured directly by asking the re-work rate in percentage. Four variables have high loading on factor 2, which we can label as Deliverability. The first two variables were measured by the level of importance given to them. Distribution network was measured by asking how they react to customer needs. The options given were wide network of distribution depots, extranet/EDI usage, wide-transportation network and distribution software usage. Delivery rate was measured by their percentage rate of deliveries

on time. Two variables, namely, the importance given to introducing new products and the rate at which new products are introduced (like every 1 yr, 2 yr, etc.) have high loadings on factor 3, which we can label as Company’s innovativeness. Based on one variable i.e. customized product with a positive loading, the fourth factor can be taken as Flexibility. The variable was measured by the percentage of customized product manufacture. Based on two variables with a negative sign, namely, low selling price and standard products have high loading on factor 4; therefore, it can also be labeled as Cost factor. These variables were measured by asking the level of importance given to low selling price and the percentage of standard product manufacture. It is presumed that quality and innovativeness go together. Cost and deliverability can be the combined priority for cost competitors (Hax and Majluf, 1991). In a total of 46 cases, there were 14 with cost priority, 21 with quality priority and 11 with flexibility priority. The competitive priorities, which have been identified, closely correspond to those discussed in the literature (Hossein et al., 1996; Gerwin, 1993; Noble, 1997; Giffi et al., 1990; Flynn et al., 1999). In the next part of the analysis,, the relationship between the competitive priorities identified above along with those of maintenance strategy elements is presented (Table 4). 4.2.2. Relationship with maintenance strategy variables Three competitive priorities were used, namely, cost, quality and flexibility to compare with following maintenance variables: 1. Maintenance organization structure. 2. Outsourcing of maintenance activities. 3. Maintenance policies (corrective or breakdown, preventive and predictive maintenance). 4. Human resource policies like training and teamwork. 5. Maintenance planning and control systems associated with CMMS use. In addition to the above, the effect of AMT and automation of equipment is studied through technical complexity of maintenance.

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Table 4 The factor loadings after promax rotation Factor

Low selling price Consistent product quality Superior product performance Consistent deliveries Fast deliveries Introduce new products Customized products Standard products Distribution network Delivery rate Introduce new product rate Quality dimensions Quality improvement programs Product with multi features Rework rate

1

2

3

4


0.347 0.924 0.919
0.097
0.045 0.072
0.203
0.047 0.085 0.084 0.063 0.900 0.892
0.163 0.779

0.098
0.027 0.090 0.942 0.912 0.010 0.041
0.007 0.857 0.880 0.116
0.101
0.098
0.128 0.183

0.012
0.080
0.040
4.632E-05
0.056 0.968 0.236 0.112 0.082 0.050 0.860 0.209 0.066 0.543
0.087


0.639 0.043 0.201 0.000 0.096
0.094 0.769
0.962
0.082
0.064 0.022
0.162
0.091 0.337 0.107

Bold numbers indicate high loadings under each factor.

The variable organization structure was measured by asking the type of maintenance organization in use. The choices were central, de-central and mixed type of maintenance organization. Outsourcing of maintenance was measured directly by the percentage of maintenance activities, which are outsourced. Also, maintenance policies like corrective, preventive and predictive were measured directly by asking the percentage of maintenance carried out in those categories. The measurement of technical complexity was made on two dimensions, namely, faultfinding dimension and level of failure pattern of equipment. Fault finding dimension was measured by the time spent (minimum time ¼ 1, maximum time ¼ 5) on four sub-variables, namely, fault detection, information collection, eliminating prospective faults before approaching at component level and finally, the time spent on diagnosis. The time spent on faultfinding dimension was measured both with electricians and mechanics separately. The level of failure pattern of equipment was measured with three types of problems, namely, expected or similar faults, intermittent faults and novel or unfamiliar faults (1 ¼ very low and 5 ¼ very high). Training was measured directly by the number of hours that maintenance craftsmen, supervisors,

engineers; production operators are trained per year. Team work was measured by the level of production operator involvement on a scale 1–5 (1 ¼ very low and 5 ¼ very high) in maintenance tasks such as equipment cleaning, lubrication, minor maintenance tasks, helping maintenance workers during breakdown, shutdown, etc. Computerized maintenance management usage was measured at rare use to frequent use on a scale of 1–5 with the following 8 sub-variables: 1. Work order planning and scheduling. 2. Preventive and predictive maintenance planning. 3. Equipment repair history. 4. Spare parts inventory. 5. Work force planning for maintenance. 6. Spare parts purchase. 7. Maintenance cost control and budget. 8. Making detailed maintenance reports. A binomial test with a correction of the p-value using the Bonferroni’s principle was performed. A pair-wise comparison is made between the competitive priorities. The variable organization structure has three levels, namely, central, de-central and mixed. Corrective and preventive maintenance

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were re-coded at low (o30%), medium (30–45%) and high (445%). Predictive maintenance and outsourcing were re-coded at No (No outsourcing/ No predictive maintenance), low (o20%) and high (420%). Training was re-coded at low (o100 h/yr), medium (100–150 h) and high

(4150 h). The remaining variables were re-coded at low (a score of 1–2), medium (a score of 3) and high (a score of 4–5), respectively. The results are displayed in Table 5. The table shows the frequency count in terms of number of respondents at each level of the maintenance variables.

Table 5 The comparison between maintenance variables and competitive priorities Maintenance variables

Cost

Organization structure Central De-central Mixed

4 2 8

9 9* 3

7 1 3

* Significant at po0:05

Corrective maintenance Low Medium High

4 3 7

5 9* 7

0 3 8

* Significant at po0:05

Preventive maintenance Low Medium High

5 5 4

5 5 11*

3 8 0

* Significant at po0:05

Predictive maintenance No Low High

5 5 4

5 5 11*

3 8 0

* Significant at po0:05

Outsourcing No Low High

5 2 7]

6 4 12*

4 5 2

* Significant at po0:05 with flexibility ] Significant at po0:05 with flexibility

Technical complexity Low Medium High

3 4 7

5 8 8

4 4 3

Training Low Medium High

6 1 7

8 4 9

6 1 4

Teamwork Low Medium High

4 10] 0

7 10* 4

4 3 4

* Significant at po0:05 with flexibility ] Significant at po0:05 with flexibility

CMMS use Low Medium High

5 2 7

6 5 10*

4 5 2

* Significant at po0:05 with flexibility

Note: *

]

Quality

Flexibility

Done at one-sided pair-wise comparisons of competitive priorities.

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5. Discussion The purpose of this study was to see whether there is a relationship between business and maintenance strategies. In comparison with the elements identified in Table 2, only some elements were used to check if there is really a trend. It has been found that cost competitors tend to do high corrective, medium-level preventive and predictive maintenance. They also have high technical complexity and training, but teamwork is only at medium level. Also, they tend to do high outsourcing. Even though they had high count on mixed type of organization in comparison to others, it was not significant. A large-scale survey can show us the clear picture. Also, organization structure may depend more upon the size of maintenance employees, geographical size of the company, company policy, etc. However, except outsourcing and teamwork none of them are significant enough compared to other competitors. Hence, Hypothesis 1 is only partially supported. It has been found that quality competitors tend to have more de-centralized organization structure compared with cost and flexibility players. They tend to do less corrective maintenance and more preventive and predictive maintenance in comparison with others. They also tend to do high outsourcing and use more CMMS in comparison to only flexibility players. Teamwork is found to be only at medium level. Hence, Hypothesis 2 is mostly supported except technical complexity, training and teamwork. Flexibility competitors tend to have mostly centralized organization structure. They tend to do high corrective, medium-level preventive and low predictive main-

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tenance. In case of other elements, the results are somewhat inconclusive. Hence, Hypothesis 3 is not supported. The limited number of cases with flexibility as priority in comparison to others might have had an influence on the result. The results agree with some of our hypotheses. For technical complexity and training there is no significant variation between each of the players. This is also true with the training variable. This can be attributed to the relationship between technical complexity and training. More technical complexity requires more training of supervisors and maintenance crew. This may indicate that AMT and automation is used in all industry sectors to some extent. Table 6 shows that quality competitors have more AMT and automation usage when compared to others. It also has more maintenance personnel and expenses in comparison to others. In particular, there is a difference in the maintenance organization structure and human resource recruitment policies. With more AMT and automation usage, the level of professional staff (management/supervision) requirement along with technicians is high. This naturally increases the direct and indirect labor cost. Thus, the nature of maintenance is becoming increasing costly and complex with more AMT and automation. In general, there is a difference in the way of doing maintenance between the three competitors. This can be due to two reasons. First, it can be due to different business objectives requiring different levels of emphasis on maintenance. Second, it can be due to the developments that have taken place in terms of technology, concepts and philosophies both within manufacturing and

Table 6 Distribution of AMT, automation use, maintenance personnel, expenses, and budget (average figures) Competitive priority

Cost Quality Flexibility

AMT usage*

3 3.7 2.6

Automation usage*

3.6 4.1 3

Personnel Mgmt/ Supervision

Crafts, technicians, etc.

8 15 7

28 52 30

* On a scale of 1–5, 1 ¼ very low and 5 ¼ very high.

Expenses (% of manufacturing costs)

Budget in million euros

8 16 13

19.7 27.8 4

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maintenance. This study indicates that there is certainly some relationship between the business and maintenance strategies worth considering. It also gives some theory behind the relationship for further exploration. 5.1. Conclusions The results indicate that there is a relationship between business and maintenance strategies. The results show some support to some of the hypotheses, which have been formulated in Section 3 as hypothesized quality competitors have more pro-active maintenance policies, better planning and control systems when compared to others. They seem to manage maintenance much more effectively when compared to others. This is also agrees with their business strategy, since superior product quality can only be maintained with effective and efficient equipment. TPM concept is also based on this link between maintenance and quality. Though cost competitors had high count in some of the elements, they were not significant. This can become clear with a large-scale survey. Interestingly, in most of the companies teamwork is still only at a medium level. This can be due to many reasons like workers attitude, training level of operators and management philosophy. To implement people-oriented maintenance concepts like TPM first improving teamwork is an important factor. There is also a difference in the distribution of AMT usage, automation, maintenance personnel (management/supervision and technicians), expenses and budget figures. Quality competitors have more maintenance personnel and spend more on budget, followed by cost and flexibility competitors. Technical complexity of the equipment does not show much variation between different competitors. However, in a majority of the quality competitors it is from medium to high level. This can be due to more AMT usage and automation in quality competitors when compared to others. This study has been limited to only a small population of Belgium industries; a study on a large scale can provide us much more information on certain issues. Some of these issues can be training, technical complexity, teamwork, etc. Moreover, the results of this study give us some

points for further research. The link between quality and maintenance can be much explored in the areas of maintenance expenditures, personnel, measuring and quantifying maintenance output on quality. A limited study within an industry (say an automobile sector or chemical processing industries) producing similar products but with differing competitive priorities may also provide us with some more clues. In general, these types of studies will help us to understand maintenance in different contexts. It can therefore be helpful for managers to devise appropriate maintenance strategies in different contexts.

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