"Our technical operations group has a $3.6-billion budget," says Bob Papa, director of Strategic Facilities Planning and Productivity at the Bristol-Myers Squibb (BMS) campus in New Brunswick, N.J. "If we can make our equipment run better, reduce down time and changeovers, and have everything performing at peak efficiency, that means less safety stock and fewer out-of-stock conditions. When you look at the impact of these changes on the supply chain worldwide, the potential for savings becomes staggering."

No Pain, No Gain

According to Papa, the new FM focus is the result of increasingly demanding financial targets, despite excellent results produced by four years of stringent cost cutting. During that time, while the site population at BMS' largest lab and office facilities in central New Jersey and Connecticut almost doubled, from 6,800 people to 12,600, square footage climbed by only 45 percent, and associated facilities spending actually decreased, from $142 million to $141 million.

"We went from $21.30 per sf to a 1999 low of $16.90 per sf ," says Papa. "We're pretty proud of the job we did, driving down our overall spending."

That accomplishment had a downside, however. Without new construction, the only way to accommodate the growing workforce was to impose tighter space standards and boost population densities, a measure that did not meet with universal acclaim.

"We learned that you can be at the top of a metric but have a lot pain associated with it," Papa observes.

Hitting the Wall

A new issue surfaced for the facilities group as costs started to creep back up to $18 per sf in 2000. Analysis showed that the rise was due in part to bringing shuttered buildings back to life. Warehouses that sit empty require minimal services, helping drive down the cost-per-sf metric, Papa points out. As they are refurbished and transformed into new occupied space, the need to provide heating and cooling, cleaning, mail delivery, and other services pushes the metric back up.

BMS incurred additional facilities costs by converting older, inactive pilot plants into new ones.

"It is the smart thing to do from a financial basis because you are utilizing an existing asset," Papa says. "The drawback is that your costs increase but your square footage stays the same. All of a sudden you begin to notice your numbers going up."

Not only did the cost-per-sf metric look less favorable, but it also failed to account for the reality of increased occupancy.

In response, Papa's group devised a new metric to reflect productive cost per sf. At the same time, the corporate economy drive became even more austere. A move from requested productivity gains to an emphasis on sales and earnings growth targets made FM spending cuts mandatory. The concern with that goal, he says, is that ultimately, the savings curve flattens out.

"After years of productivity savings, we're now being measured only on our financial targets and our ability to achieve the corporation's objectives," says Papa. "Past success is irrelevant; the emphasis is on how you are going to deliver those kinds of savings this year. This causes a huge problem because eventually you reach a brick wall. You can only pull so much out of your cost base and still continue to service your facilities."

Time for New Angle

The lack of sustainable cost reduction forced the FM group to come up with new ways to attack facilities spending. Comparing the group's $400 million budget to the significantly larger $1.8 billion research budget led to the conclusion that enhanced facilities performance could make scientists more efficient, thus creating a new source of savings.

Researchers spend much of their time running experiments and equipment, explains Papa. Malfunctioning machines cause them to put in work orders, which take time to filter through the maintenance organization for repairs. The consequence is lost productivity.

"We reasoned that a more proactive approach to equipment maintenance could increase scientists' productive time," he says. "After all, they are the ones bringing the drugs to market."

The facilities group put this theory into practice, collaborating with the scientists to institute a few test programs of routine preventive maintenance. The new focus on customer productivity quickly brought positive results.

"The scientists were able to come into the labs, conduct their experiments, and continue doing what they are good at," says Papa. "We asked the research group to calculate what that was worth to them. We found out that by spending a little more money we produced a quantum leap in savings of almost $0.61 per square foot."

That outcome prompted the organization to expand the facilities group's productivity focus to manufacturing, whose overall budget is twice as large as that for scientific research.

"On the manufacturing side, if you can make maintenance personnel more productive, increasing equipment uptime by 10 to 20 percent, you will have made a huge impact on reliability and on the supply chain," he says. "It's almost incalculable how much that can save in the long run."

Global Pathway to Productivity

Explaining why proactive programs were not part of the initial BMS cost reduction, Papa observes that such initiatives are typically too resource-intensive for a company in cost-cutting mode.

"Spending the time to put together a good history of maintenance practices with accurate data is an extensive research process," he says.

For example, sometimes it's more economical to let an inexpensive machine run to failure than to follow the manufacturer's recommended maintenance schedule. Other equipment might require constant attention because it is critical to operations. All these details must be compiled into an overall plan.

"Working on a way of calculating the savings takes a lot of industrial engineers and other resources to figure out machine capacity, overall plant capacity, and so on," he says. "It's a huge undertaking to shift focus like that."

One key to making that shift is a mechanism for global communication and knowledge sharing. The Facilities Management Group came up with a "Global Pathway to Productivity" strategy to tap worldwide corporate expertise in seven specific areas known as Centers of Excellence: Worldwide Computerized Maintenance Management System (CMMS); Energy Supply and Demand; Maintenance Model/Transformation; Manufacturing Line Mapping; Organization Models; Office Facilities and Common Standards; and EHS (Environmental Health and Safety) Technology.

The Centers of Excellence teams are comprised of BMS specialists from all over the world who meet electronically and in person to report on regional trends, share ideas, and develop best practices in their respective disciplines.

Of the seven targets, Papa rates the first two as the most indispensable.

"CMMS is critical to our long-term success," Papa states. "We have a global information network so the sites can share common metrics and productivity data. We're pushing an IT project to inventory spare parts globally. This requires good databases and standardized equipment terminology. It is not an easy task, but it's our enabler, key to all the other results. It should be fully implemented worldwide by the end of 2003."

Energy is the other pivotal team. At $125 million per year, utility expenditures consume the largest share--more than 30 percent--of the facilities group's annual budget.

"That represents a huge exposure and opportunity," says Papa. "We can't do too much on price, but we can certainly impact demand."

In progress is a ranking of capital projects, from more efficient equipment to cogeneration, to reduce worldwide energy consumption, as part of a corporate global energy strategy. Given today's energy prices, BMS is taking a fresh look at projects that a few years ago were dismissed for failing to offer an adequate return on investment. Usually the company likes to see a three-to-four-year payback, Papa says, but now even projects with a seven-to-eight-year payback can look attractive.

Think Globally, Act Locally

The global approach has already proved itself in the area of environmental health and safety. By creating worldwide standards and combining the needs of several sites into one global purchase, the EHS team realized significant savings in the recent acquisition of seven thermal oxidizers, a high-ticket item used in waste treatment.

Along with better pricing, volume buying offers greater leverage with the vendor when repairs are needed, says Papa. System standardization enables BMS to reduce the number of spare parts required at each site, another cost advantage.

Despite their universal scope, Papa cautions that to be successful global programs must reflect geographic differences by being regionally driven and locally accepted.

"The people using the system you are recommending or the program you have put in place have to live with it and its problems every day," he explains. "They are the ones who are ultimately saving or spending the money. So we look at the program globally and drive it regionally, but the site has to take ownership of it."

He also underlines the fact that savings are accomplished only in the field.

"All headquarters can do is come up with savings programs, but we can't actually save the money here," he says. "The manufacturing sites, the lab facilities, and the office buildings--they are the only ones that can really save money."

Accounting Woes, Lessons Learned

Another imperative of the new focus is the need for a sound financial tracking mechanism to accurately report savings and productivity gains at each site. While the teams work to quantify the impact of the Centers of Excellence programs, at the corporate level the FM group still encounters some difficulties justifying its strategy. The challenge is that BMS' financial goals target the FM organization's $400 million budget, while the productivity savings show up in reduced research and technical operations spending.

"We have started an education process to convince senior management that financial targets should be levied against areas where we can have an impact," says Papa. "They still haven't let us off the hook on our facilities savings goals, but they are starting to get the message that service levels should not be cut anymore."

Four years of working on this challenge have persuaded Papa that committed leadership, continued innovation, perseverance, and partnerships are other keys to success. As other corporate groups grapple with similar mandated cutbacks, they are very receptive to FM's new approach.

"Financial targets make strange bedfellows," he comments. "When the targets get oppressive, people will look for help."

By Nicole Stahl