Assignment Mis Outsourcing

UNIVERSITI UTARA MALAYSIA MANAGEMENT INFORMATION SYSTEM LECTURER : DR SOBRI BIN MINAI UUM college of Business Universiti Utara Malaysia 06000 Sintok Name of Student: :

Rosli Bin Mohamad Said ( 803640 ) Shaharani bin Sulong ( 803641 )

Assignment title :

Outsourcing and the effect of Services performance

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TABLE OF CONTENTS

1.

INTRODUCTION

2.

OUTSOURCING OBJECTIVES

PAGES

.…………………………………...... 2 ………………………………………..4

2.1 What the real impact on services after outsourcing take place?.......................4 2.2 THE OUTSOURCING SUPPORTS THE NATIONAL AGENDA………….5 2.3 OUTSOURCING IS UNDERTAKEN TO IMPROVE EFFICIENCY ………6 2.4 OUTSOURCING OF HSS BOOSTS THE COUNTRY’S ECONOMY … .6 3

MALAYSIA OUTSOURCED THE HOSPITAL SUPPORT SERVICE IN 1997………………………………………………………………………… 7

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STRATEGY TO ACHIEVE MISSION ……………………………………… ..7

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THE SERVICE PROVIDER OFFERS CONTINUOUS EMPLOYMENT AND CREATES JOBS OPPORTUNITIES …………………………………… 7

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COMPLETE OUTSOURCING OF HOSPITAL SUPPORT SERVICE BY THE MALAYSIAN MINISTRY OF HEALTH …………………………. ..8

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WE PERFORM END-TO-END HOSPITAL SUPPORT SERVICES INTEGRATED FACILITY MANAGEMENT SYSTEM ………………………8

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FMS OUTSOURCING AGENDA ………………………………………………9

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IMPLICATION OF OUTSOURCING THE SERVICES TO 3RD PARTIES …..10

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CONCLUSION …………………………………………………………………12

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1. INTRODUCTION Faber Medi-Serve Sdn Bhd (FMS), formed in 1995, is an Integrated Facility Management Service company undertaking the Hospital Support Services for 74 government hospitals and laboratory with Ministry of Health (MoH) since 1997 in Perlis, Pulau Pinang, Perak, Kedah, Sabah and Sarawak. FMS is a subsidiary of Faber Group Berhad, a company listed on the KLSE main board – involved in hospitality business since 1960’s. FMS also a member of UEM Group and it was incorporated since 1966 with diversified activities e.g. pharmaceutical, hospital development and etc. Currently, FMS services over 100 hospitals and over 300 other healthcare institutions, both public and private, in Malaysia, Philippines and Brunei. FMS is one of the largest Integrated Facility Management Service company in Malaysia and among a few that have been accredited with ISO 9001:2000 certification. FMS hold a share capital of USD14 million and revenues of about USD90 million per annum.

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OURSOURCING TREND IN THE WORLD

UK: Regional health districts awarded 15-25 year hospital management & maintenance contracts USA: Public hospitals outsourced all and part of services

Brazil: State government outsourced facilities management of new public hospitals

Arab Saudi & UAE: Outsourcing hospital management and maintenance

Malaysia: Nationwide outsourcing of 5 support services

Australia: Increased private participation in public hospitals

Faber Mediserve has gone for few stages to establish the team to perform the stipulated task under the concession. For the past few years FMS recorded, as the most performing contractor among the other 2 concessions with Ministry of Health since the privatization take place from 1st January 1997. The rapid growth of FMS are now coming to the maturity stages where FMS started getting challenges from the other competitors, pressured by the Ministry of Health and the investors, To face the new era of challenges, few step and strategy was introduced by

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the management include the outsourcing of manpower and services. This step become the current issues of concern for the management to be discuss further on the advantages and effect to our services performance.

2.

OUTSOURCING OBJECTIVES.

It been defined by FMS the objectives of outsourcing is cost control, reduce paperwork and to manage workers compensation and unemployment claims toward the end of concession in 2011. The management introduces outsourcing manpower and services at beginning of 2007. There are positive sign on the reduction of cost on manpower captured on the system. About 68% of staff seconded to third party under outsourcing project by FMS. A part of the cost reduction, the responsibility of administration department are also reduce tremendously. The strategy of outsourcing worked to the first eye. 2.1 What the real impact on services after outsourcing take place? Part of our responsibility under the concession is to establish and maintain our own basic Management Information System (MIS) to manage the entire project and track the work performance for all five services that been mentioned earlier. Before the outsourcing take place the performance of service can be seen as an excellent where FMS able to minimize complaint on work order , lover fee deduction by Ministry of Health , and high rating of customer satisfaction through the survey conducted by FMS site office (Hospital). In general, the performance of FMS in the hospital can be translated through the deduction fee that can be captured from the CMIS ( Central Management Information System) and the e_Clips. By evaluating the performance through the e-Clips and CMIS, it shows that FMS able to manage the services effectively. The Deduction is below target for the services. For example the FEMS and BEMS services as shown in the table below:

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SERVICE

TOTAL REVENUE (JAN – JUNE 2008)

TOTAL FEE DEDUCTION (JAN – JUNE 2008)

% DEDUCTION

FEMS

22,078,410.10

78,237.69

0.35%

BEMS

11,294,840.66

52,704.74

0.47%

From the figure it shows that the deduction impose by Ministry of Health is minimum and within our control for last year. Most of the hospitals under FMS are performing well since the privatization. Perak region being the top of the performer among other region. Customer ( MoH) satisfy with the services and increase the trust and satisfaction toward our services. Commitment from the staff and management contributed to the success of the service performance.

2.2THE OUTSOURCING SUPPORTS THE NATIONAL AGENDA

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•

Enhance Economic Development

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Attain Objectives of the Malaysian New Economic Policy

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Reduce Government Administrative Burden

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Increase Efficiency and Productivity

•

Savings on Capital Expenditure

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Longer Life Span - Facilities, Equipment and Assets

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Centralized Administration of Support Service Providers

• •

One-stop Information Centre for Facilities, Equipment, Assets, Systems and Support Services Availability of a Dedicated Team of Professionals

•

Better Focus on Patient Care

2.3 OUTSOURCING IS UNDERTAKEN TO IMPROVE EFFICIENCY The decision to outsource is driven by: •

Meeting requirements of Hospital Support Serveices (“HSS”) :-related infrastructure and capital expenditure.

•

Acquiring efficiency for professional and specialised services

•

Improving quality of maintenance services

•

Focusing on medical services by the public sector

2.4 OUTSOURCING OF HSS BOOSTS THE COUNTRY’S ECONOMY AND DEVELOP COMPETENCIES

STINGENT REQUIREMENTS OF THE CONCESSION AGREEMENT

PEOPLE TRAINING

CONSUMABLE ITEMS DISPOSABLE ITEMS CHEMICALS LINEN ITEMS IT SERVICES

PEOPLE

SUPPLIES

CONTINUOUS EMPLOYMENT TRAINED WORKFORCE SKILLS DEVELOPMENT SKILLS SPECIALISATION BETTER JOB OPPORTUNITIES COMPETENCY BUILDING

LAUNDRY PLANTS INCINERATOR PLANTS WORKSHOPS TEST TOOLS CLEANING EQUIPMENT

METHODS

EQUIPMENT

IMPROVED METHODS & PROCEDURES NEW TECHNOLOGIES INTERNATIONAL RECOGNITIONS GROOM SMEs FOR EXPORT

VENDOR DEVELOPMENT NEW INDUSTRIES SUPPLIERS SERVICE PROVIDERS IT VENDORS

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EXPERTISE CONSULTANCY INTERNATIONAL STANDARDS BENCHMARKS TRAINING

MODERN FACILITIES NEW TECHNOLOGIES IMPROVED INFRASTRUCTURE

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MALAYSIA OUTSOURCED THE HOSPITAL SUPPORT SERVICE IN 1997

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The Malaysian Ministry of Health (“MoH”) outsourced the Hospital Support Services (“HSS”) in 1997.

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The project was undertaken with the intention to promote and improve the planned preventive maintenance culture in government facilities and assets.

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Concession awarded for 15 years.

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STRATEGY TO ACHIEVE MISSION Patient Care as the Main Focus

 Outsource Hospital Support Services to a single service provider that: 

Utilises local resources



Develops local skills and competencies



Possess relevant experience

 With a long term contract to ensure:

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

Commitment – customisation of systems



Flow of Investments

THE SERVICE PROVIDER OFFERS CONTINUOUS EMPLOYMENT AND CREATES JOBS OPPORTUNITIES

5.1 Existing HSS related staff will be offered:

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

Continuous employment with the Service Provider



Opportunities for relevant on-the-job and formal training



Skills development and specialization



Exposure to international service standards

5.2 Local graduates would be sought to fill supervisory and management positions 5.3 Related businesses would emerge and create employment opportunities 6

COMPLETE OUTSOURCING OF HOSPITAL SUPPORT SERVICE BY THE MALAYSIAN MINISTRY OF HEALTH The Concession Involves:  The management and provision of 5 services  127 hospitals in Malaysia  A total of 36,320 beds  Maintenance of: 

Built up area of 4.3 million m2



81,250 units of medical and electronic assets



346,000 units of mechanical and electrical assets

 Takeover of about 4,000 government staff  Takeover of existing test tools and related equipment

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WE PERFORM END-TO-END HOSPITAL SUPPORT SERVICES INTEGRATED FACILITY MANAGEMENT SYSTEM  Building and Facilities Engineering Maintenance – over 50,000 preventive maintenance orders annually  Biomedical Engineering Maintenance – maintains over 47,000 biomedical equipment annually  Cleansing and Janitorial – cleans over 1.8 million sq mtrs of building daily

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 Clinical Waste Management – processes 8 tonnes of clinical waste daily  Linen & Laundry – processes 34 tonnes of linen daily • 8

Central Management Information System (CMIS)

FMS OUTSOURCING AGENDA

FMS has outsourcing few services in stages in order to minimize administration matter and maximizing profit. The service that been outsourcing to third party are involved: •

Cleaning and cleansing services. – In Perak Region, manpower for Cleaning and Cleansing and Clinical Waste Management services is fully supplied by NS Medic Sdn Bhd and Pivotal Allied as the main contractor. The supervision and related management of the services is under FMS responsibility. Through the manpower outsourcing, FMS is able to reduce staff administration such as recruitment, medical, claim, leave entitlement and other human resources management matters. This programs is involved about three quarter of staff been transferred to the contractor as a take over staff. Benefit that received by management at Hospital FMS levels are:o Reducing delay of getting new staff to fulfill the vacancy. Management at Hospital FMS level just need to propose to Head Quarters Management in management paper with a proper justification why additional staff is needed. While HQ approved the proposal, HR at HQ level will appoint and produce instruction letter directly to either NS MEDIC or PIVOTAL ALLIED to supply number of manpower to related site within 2 weeks upon getting approval letter. Administration work at site will reduce because no interview session done to select the appropriate candidate for the available position. After monitoring the performance of the staff within probation period, if site management feel

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that the staff was not perform as required they can reject the staff and it will be replaced another staff by supplier within 2 weeks. It was stated in contract agreement within FMS and the said supplier. •

Facility Engineering Maintenance Services – Under the facility maintenance

services, Ground maintenance, Sewerage maintenance and Pest Control are outsourced to the various contractors at each hospital. By outsourcing the services FMS can cater to the new challenging demands of the customers and able to increase productivity and services performance and diversify the business opportunity to private Hospital. FMS only need to monitor the contractor performance in compliance to hospital requirement. Any serious non compliance to the contract, FMS will impose the fee deduction to the relevant contractor. By impose a sum of deduction to contactor due to non compliance matter will ensure that the contractor will perform the task given continuously in quality manner. FMS reduce the cost of buying tools and maintenance due to matter was absorbed by contractor. •

Biomedical Engineering Services – Healthtronics (M) Sdn Berhad was given the contract by FMS to deal with the maintenance of biomedical equipment in the Government Hospital. Many biomedical expertise from India and other countries employed by Healthtronics was exposed our local staff to absorb the technical skill and technology transfer. The art of outsourcing by FMS indirectly open the opportunity to other small skill contractor sharing the cake that been awarded to FMS. As per returned, FMS are now able to extend the contract with the JVA in India and UAE.

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IMPLICATION OF OUTSOURCING THE SERVICES TO 3RD PARTIES

9.1 Declining the employee morale and motivation The staff that involved and seconded to the outsourcing contractor didn’t like the idea of the outsourcing processes and started expressing lack of interest or lack of quality at work in some area. Few incident happen where seconded staff started showing their protest when term and condition of the employee they are getting from 10

new employer differed from the one that they get from FMS in term of seniority , staff benefit and other related welfare. 9.2 Performance and quality of contractor. It happens that FMS outsourcing provider not only providing services for FMS organization. But also catering to the needs of several companies, there might be not be completely focus on FMS. Base on our monitoring system (CMIS) , there is delay in action from the contractor especially response time when their staff are involved with multiple task assigned by their top management. 9.3 Lost control on the business process In order to comply with the quality process and procedures, FMS are controlling every single operational process in order to cater to the needs of the customer for each service that provided. Through outsourcing FMS lose control over certain process that is out sources. As a result, when there is declining on services performance, FMS fail to find the actual root course originated from the contractor. As example, FMS is the best paymaster and treat supplier as a share partner. This kind of relation are not been practice by our outsourcing company. Certain conditions the down time captured from our monitoring system is high due to manipulation by the supplier. They don’t supply spare part to them when delay or no payment is made. As the main contractor FMS , high down time will lead to negative implication to the service performance. 9.4 PR and customer Focus By outsourcing, FMS sometimes forget to cater to the needs of your valuable customers when certain condition requires negotiation skill and PR. Outsourcing make FMS suffer from lack of customer focus. The outsourcing contractor will only

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looks for profits and interest without considering the main contractor responsibility to satisfy and sacrifices certain thing to customer need. There can be few more several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others. 10 CONCLUSION The disadvantages of outsourcing give FMS organizations an opportunity to think more matured about what they are stepping into. However base on

FMS

performance the disadvantages of outsourcing are less than the advantages of outsourcing. Outsourcing, and JVA (Joint Venture Agreement) exposed FMS to the disadvantages and advantages experiences, but with reliable outsourcing partner that FMS dealing with, FMS are now able to expend the services abroad and internationally. In order to smooth running the outsourcing process by the FMS for other services in future, it is recommend that before FMS outsourcing their business, take the interests of the customers and employees into consideration and then make an informed decision. If it is genuinely benefit and interest to the company, let not the disadvantages of outsourcing stop the trend because it is only temporary measure before maturity stages take place. References 1.

Concession Agreement. - The Government of Malaysia and Faber Medi-

Serve Sdn Bhd Dated 28th October 1996. 2.

Technical Requirement & Performance Indicator.(TRPI)

3.

Master Agreed Procedures (MAP)

4.

Website Feber Group – http://www.fabergroup.com.my

5.

Website Centralize Management Information System

http://www.cmis.com.my

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6.

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Slide presentation Qatar / UAE contract department.