Is Your Facility Management Organization Adding Overhead By Using a Lower-Cost Cleaning Provider?
There’s a big difference between facility management providers. And, the difference lies in much more than cost. It also lies in the maturity of the FM company you choose.
About mature facility management companies:
Mature facility management organizations focus on service optimization and use data, including benchmarking, to improve performance and reduce costs.
They drive growth by impacting service performance, customer experiences, customer growth, margin growth, employee retention, and productivity.
Their facility management approach strives to provide a competitive advantage over peers and scales the impact across sites and regions.
Unfortunately, most facility management organizations are not mature, as they have distributed teams completing a patchwork of services with no visibility, transparency, or benchmarking to drive growth.
About not mature facility management companies:
These companies have programs that are activity-based vs. outcome-based and audit-based. They are reactive and have a cost-center mentality where they look for the cheapest provider they think can offer a “good enough” service
Lower-cost facility management providers do not save your company money.
Instead, they expose operations to various risks:
· Failed regulatory audits can lead to millions of dollars in fines, hurting your bottom line and margins.
· Employee illnesses, injuries, and attrition that impact operational productivity.
· Degraded work performance will reduce plant production, inventory turns, customer service quality, and KPIs, including profit per employee.
· Customer frustration or discomfort will negatively affect brand affinity and customer satisfaction.
Three Real-World Stories of What Happens When You Choose a Lower-Cost Traditional Facility Management Provider.
1. A major food distributor put operations and revenue at risk when switching to a low-cost traditional facility management provider.
A traditional facility management provider that only tailors commercial cleaning services for the 20% of accounts that deliver 80% of their revenue offered our client (a nationwide food distributor and packager serving large fast-food clients) a discount of up to 25% off OpenWorks fees.
At the time, our client had a cost-center vs. growth mentality, so they switched providers to take care of its distribution centers.
However, it almost lost millions of dollars and precious time. and unwittingly risked its reputation as the lower-cost provider treated all the distribution centers equally.
Due to its cold storage, the provider lacked multi-site knowledge and didn’t provide special attention to the sites that required it. As a result, the food packager and distributor had multiple FDA violations on their hands, and operations were almost shut down in just 60 to 90 days after the lower-cost provider took over.
This is why the client returned to OpenWorks to help them turn the operation around through corporate oversight, governance, and local service providers that could meet the unique needs of its operation.
2. A top dialysis clinic put patients, operations, and revenue at risk by using a lower-cost facility services provider
When one of our clients, a top clinical dialysis organization, moved to a lower-cost “aggregator,” it saw rippling effects on its operations, patients, and P&L.
The client, serving 26,000 patients across 32 states in 400 facilities, hired a lower-cost service provider that outsourced to a patchwork of small, individually owned janitorial companies. As a result, there was limited standardization and oversight.
Due to the aggregators' limitations, the dialysis organization and its centers suffered more significant variability and increased operational and patient risk.
· The aggregator was challenged to find service providers for many locations during the pandemic.
· The local mom-and-pop shops weren’t providing service up to expectations and adhering to regulatory guidelines across all sites. They weren’t using medical-grade disinfectants and EPA chemicals, ensuring the safety of ill patients with compromised immune systems.
· Clinic managers were burdened with facility issues. This took their focus off the patients, as the caregiver’s and staff’s sick time increased. Due to short staffing, patients became frustrated with long wait times to get treatment.
· Individual clinics failed scheduled and surprise audits resulting in fines and affecting margins.
· Through surveys, the center found that patients did not feel “safe” and “comfortable” getting treatment at these locations. They looked to other national dialysis centers that gave an appearance of being clean to ensure their safety.
The lower-cost facility provider offered a 10-15% savings. But in the face of brand damage, productivity losses, regulatory fines, lost patients, and the cost of multiple potential site shutdowns, those “savings” ultimately hurt the organization.
This is why they returned to OpenWorks.
3. Famous general store Dollar General, continuously failed regulatory audits and is deemed a “Severe Violator” by the Labor Department
For years, the Labor Department has operated a Severe Violator Enforcement Program, which targets companies with unsafe working conditions, like manufacturers or construction firms with many injuries or deaths.
In September 2022, the Department’s Occupational Safety and Health Administration (OSHA) widened the program’s scope to include any company that willfully or repeatedly violates safety standards.
The first to be added under the program’s expanded scope: Dollar General.
Since January 2017, OSHA has cited the company for 111 workplace safety violations and imposed more than $15.5 million in penalties.
Between February 1, 2022, and January 31, 2023, OSHA issued citations to Dollar General with nearly $7.5M in penalties.
OSHA inspectors also found issues such as obstructed fire exits and boxes of merchandise cluttering warehouse and distribution center aisles.
In some cases, federal inspectors went to a warehouse to demand that a hazard be fixed, only to find in a follow-up visit that the problem was still there.
While the millions of dollars in fines are only a fraction of the billions Dollar General generates yearly, it still impacts the company’s bottom line and margins.
They could have invested the monies they spent in penalties toward new technologies to improve warehouse efficiency and strengthen the P&L.
But Dollar General is taking a cost-center mentality.
Risk lurks around the corner every day.
Like the three real-life stories above, your outsourced cleaning team can support your growth or place you and your company closer to many unaffordable risks.
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