Security Solutions in the Aerospace/Defense Industry A Pinkerton Government Services White Paper

Transcription

1 Security Solutions in the Aerospace/Defense Industry A Pinkerton Government Services White Paper Robert Maydoney Vice President Sales Pinkerton Government Services, Inc. 740 North Main Street Mansfield, MA T: F: E: [email protected] W: 1

2 Introduction In today's global business environment, safety and security are key concerns for any company. Protecting people, physical assets and intellectual property is essential. But as pressures have increased and budgets have tightened in recent years due to an array of factors, including the economy, mergers and acquisitions, reengineering, downsizing and changes in the world concerns over safety and security have escalated. Companies are being forced to find more cost effective solutions to their security concerns. One area of opportunity involves transitioning from an inhouse, proprietary guard force to an outsourcing initiative utilizing contract guards. Dealing with these issues is no easy task. In the past, most aerospace/defense companies used a proprietary security force, seeking a high level of protection an absolute necessity when handling government contracts dealing with highly sensitive data. But the growing complexity of security combined with increased pressures on operating budgets is creating an environment that makes it more difficult than ever to achieve a cost effective security solution using a proprietary security team. Over the last decade, the corporate world has embraced the strategy of outsourcing noncore business functions and processes particularly for functions such as IT, payroll, call centers and communications centers, food services, janitorial services, inventory control and shipping. One of the last areas to receive serious attention for outsourcing is security program. Although some companies have discovered that it's possible to realize huge gains by turning to an outside security force, an overwhelming number of executives and security directors are hesitant to outsource the entire spectrum of security operations officers, equipment, investigations, background checks and more. In reality, a sound security solution can slash costs and provide a higher level of protection while forging a strong partnership between the security provider and the aerospace/defense industry company with built in financial incentives and risks for the security firm. Such a relationship can greatly reduce potential liability and risk for the contracting company, and provide value added features ranging from training to reduction of overtime costs. Security Industry Background Finding a security solution provider isn't easy. With the worldwide market for security services exceeding $40 billion a year and growing 7% annually, an almost insatiable demand for officers and equipment exists. At present, more than 10,000 security officer suppliers do business in the U.S. alone. The vast majority are small firms with neither the manpower or experience to deal with the growing complexity of today's world terrorism, computer data theft, hackers, workplace violence, gangs, drugs, worker's compensation fraud, theft of equipment and general safety. In some cases, officers haven't been screened adequately by the security firm prior to employment, and many lack the necessary training to provide the quality of service needed. 2

3 Such inadequacies have led to a general belief particularly among executives and managers in the aerospace/defense industry that a proprietary security force is the only way to achieve the desired level of security. And for years, that assumption held true. But today, it's possible to outsource to a security firm that's able to provide highly customized service with the highest level of quality and commitment. In some cases, aerospace/defense firms that have migrated to outsourced security and a total solutions approach have slashed costs by 40% or more, while boosting officer retention to over 90%. The key is finding a company that can provide the full spectrum of services needed, and one devoted to the highest standards. Surveying Today s Security Options Today, companies have four basic options for developing a security strategy: Proprietary Security: The company handles all hiring and ongoing personnel matters, as well as training and compensation. Organizations that require a high level of security particularly aerospace/defense and computer chip manufacturers have traditionally relied on this option though many of these organizations have recognized that proprietary security is costly and demands a great deal of corporate resources. Contract Security: The security force is comprised of contract workers hired and supplied by a security provider. By outsourcing security, a company can save time and money and direct its attention to core business functions. It doesn't have to worry about recruiting, training and constantly monitoring officers. What's more, the security firm handles insurance and payroll. In many cases, this can directly translate to a 25% to 35% cost reduction while providing a higher level of protection. A contract security firm also can provide a backup pool of officers in the event of an emergency, and eliminate or absorb overtime costs. Hybrid Security: As its name implies, a hybrid force is a combination of proprietary and contract security. It can help a company retain control of key operations but outsource many functions. In most cases, it provides flexibility to adapt security needs to specific situations and problems. Total Security Outsourcing: This approach allows a company to outsource its total security program. The outside security provider can offer an experienced management team that's entirely dedicated to the aerospace/defense client. This approach would include the sale of security assets to the security provider, thus reducing the aerospace/defense company's capital equipment investment. 3

4 The Benefits of Outsourcing For years, companies large and small have pursued separate outsourcing initiatives for various component parts of their security program, such as guards, alarm systems, access control and investigation, to name a few. But with budgets tightening while security solutions are becoming more complex the need for sophisticated and integrated security solutions has grown immeasurably. As a rule, aerospace/defense firms have created an internal security structure that's superior to most other industries. Department of Defense regulations and clearances ensure that's the case. Nevertheless, aerospace/defense too can benefit from outsourcing and many security directors underestimate the capability of a properly managed Security Solution. Such a business relationship, when designed properly, can create a natural partnership that allows both companies to benefit. In addition to cost savings there are other cost benefits to be gained from outsourcing: 1. Cost Avoidance: An outside security company can eliminate many of the costs associated with properly protecting a corporate environment. Some of these costs aren't apparent until a problem occurs. Litigation and Lawsuits, including wrongful termination. When a security company assumes control of operations, it becomes directly accountable for events and processes and assumes liability. With multi million dollar lawsuits common, this can eliminate a major concern at many companies Non-billable overtime. At many aerospace/defense companies, staffing crunches result in overtime particularly among senior level security personnel. Because an outside security firm employs its own officers, it enjoys far greater flexibility when it comes to relief personnel and part time workers. That can result in better coverage, and because the security firm manages all personnel, it pays any necessary overtime wages. Investment in rapidly changing technology and equipment. Access control devices and security monitoring equipment can become an expensive drain on corporate resources. Keeping such systems up to date and integrating different systems particularly in a post merger environment can prove difficult. Not only can an outside company that specializes in such technology help streamline and integrate operations, it can devise a strategy for leasing equipment thereby reducing the company's costs and risk for dealing with obsolescence. 4

5 Elimination of non core personnel and assets. An aerospace/defense manufacturer isn't in the business of security by choice. It's simply a by product of normal operations that are essential for protecting people and property, and meeting customer requirements. Through the outsourcing of security operations, a company can eliminate many of the costs associated with a program particularly those arising from human resources and capital expenditures. The outside security firm, with greater manpower and flexibility, can typically handle the same tasks at a 25% to 35% reduction in costs. 2. Value Added Features: An outside security firm can provide several benefits not directly related to cost (though cost savings can result): Proactive identification of weaknesses and liabilities. An outside security company can often identify problems and liabilities that aren't apparent to those working in a particular environment. This fresh perspective can reduce the risk of accidents, theft, attacks and other problems. Leverage Combined strengths. A well designed partnership allows each company to combine its knowledge and expertise to create a superior security force. Training. Through outsourcing, a company can eliminate the need to establish elaborate training programs related to security. These programs are typically costly and difficult to administer. One stop Shopping. A total solutions approach eliminates the need for dealing with different vendors. It's possible to contract for security personnel, equipment and expertise from a single source. Because that vendor understands the internal workings of the company, it's possible to cut costs and devise better integrated and more streamlined security systems. It's also possible to reduce administrative tasks, including purchase orders, multiple invoicing and meetings. Shared risks and rewards. It's possible to devise an incentive based system, whereby the firm providing security services shares in the risks and the rewards. If, for example, the security company can achieve a preset benchmark such as saving the company $500,000, it might receive 10% or 20% of that savings. Decreased Turnover. Even if an aerospace/defense company contracts for security officers (who are employed by the outside security firm), decreased turnover translates into officers who are more knowledgeable and professional. That can eliminate many problems and emergencies due to officers who are inexperienced or unfamiliar with operations. 5

6 Case Study Over a four year period, one major aerospace/defense firm managed to save more than 40% in security costs by outsourcing with a total solutions provider. The aerospace/defense giant, no longer burdened with administrative tasks, was suddenly free to concentrate on core business issues. Besides managing personnel and protecting physical assets, the security firm took over technical services such as access control, badge and ID controls, systems design and data input on DOD forms. Other major corporations have gone so far as to contract for fire protection and sell assets to the outside company. In the late 1990s, before the aerospace/defense company outsourced its plant protection, it spent $21 million a year for security. Officers averaged $14 an hour and, with benefits, the total cost had climbed to $19.60 per hour, or $40,768 per officer per year (excluding overtime). At that point, the company employed 500 security officers spread among six major sites all within a 30 mile radius of one another. After assuming control of staffing and operations, the outside security firm immediately began reviewing job functions and assignments. The two companies immediately recognized that they could reduce headcount by 10% to 450, while retaining some existing officers from the aerospace/defense company. Besides eliminating redundant positions and the associated wages, the company could trim overall benefits costs which had traditionally accounted for about 40% of the expense of employing security officers. Managers at the two companies also examined how officers were deployed. A fundamental change in scheduling eliminated the need to pay overtime for weekend coverage. Because the security provider had greater flexibility with staffing, officers could be deployed on an as needed basis despite the fact that the aerospace/defense company's needs hadn't changed. Within this system, the security provider was responsible for all overtime and any associated benefits if required. During the first year, the company slashed security costs by over 40%. Five years later, the cost savings had continued to accrue, thanks to a continued emphasis on facilities realignments and security systems automation. Expanded use of access control devices, intrusion alarm monitoring and response, as well as CCTV for improved surveillance had resulted in better systems that required less human intervention. In fact, all these cost reductions had taken place despite 2%-5% annual raises for officers. 6

7 The chart below compares the cost structure under the outsourced model (which the company adopted) and the previous proprietary model, with annual raises factored in. Labor Costs: Outsourced vs. Proprietary Security (all figures in millions of dollars) Pre- Transition Cost Year 1 Year 2 Year 3 Year 4 Net Increase/Decrease Outsourced $0 $11.2 $11.8 $11.3 $12.0 -$9.0-43% Proprietary, with 2% annual increase $21.0 $21.4 $21.9 $22.3 $22.7 +$1.7 +$8% Proprietary, with 5% annual increase $21.0 $22.1 $23.2 $24.3 $25.5 +$ % Despite lower personnel costs, the skill level of officers actually increased in an outsourced environment. Originally, officers merely staffed posts and patrolled. Later, technical services, including lock and key, technical security systems design, and maintenance and installation became part of the picture. It's important to note that these technical personnel were assigned full time to the aerospace/defense company. In addition, security was able to assume several other key functions, including parking and ID badge control and monitoring DOD forms. In the end, the company continued to outsource a broad range of security services with no loss in performance or overall quality. Making Outsourcing Work How should a company go about finding a security provider that can deliver a total, integrated security solution? What does it take to boost the bottom line without compromising protection? There are no easy answers. Yet it is possible to develop a superior security force through outsourcing. The reluctance to use an outside provider, particularly in the aerospace/defense industry, often results from unfamiliarity with the types of services available, and the quality of protection and level of integration possible. A qualified total solutions provider can bring far greater understanding and expertise to the entire security process, and eliminate the patchwork approach that so often leads to security breaches and exposures. In an environment where mergers, downsizing and layoffs place enormous stress on a workforce, that's essential. In order to realize such gains, it's essential to work with a security provider dedicated to offering the highest level of service even if it means spending additional dollars up front. In fact, a quality first approach can save countless dollars and aggravation down the line. In most cases, there's more to the equation than the price that's quoted. A total quality provider can boost the bottom line and ratchet up performance. 7

8 The security profession and aerospace/defense industry have worked together for the greater part of a century. Yet, today, both are on the verge of dramatic change. Looking at security holistically rather than piecemeal; weighing both cost and quality rather than simply the expense; and using shared expertise to reduce security risks these are the strategic approaches that allow an enterprise to embrace a total quality approach. Total Security Solutions and the Aerospace/Defense Industry Summary Pinkerton Government Services is a leader in outsourced security programs in the Aerospace/Defense industry. The choice of outsourcing or proprietary programs is an organizational choice based on many factors mentioned. Always remember that the further a organization strays from their core competency the more potential there is for issues in that area with government regulatory compliance. 8