SHORING THE NATIONAL GDP THROUGH AUTOMOTIVE MANUFACTURING, SALES AND MANAGEMENT by Engr Wilson Alli, FNSE FNIMechE FAutoEI MNIM
INTRODUCTION
Good day Ladies and Gentlemen, It is my greatest honour to have been named as the Distinguish Guest Speaker of 2016 Lagos Chapter of the Nigerian Institution of Mechanical Engineers (NIMechE) Public Lecture/Awards.
The topic of this Public Lecture/ Awards series is apt to us as mechanical engineers, engineering practitioners and as citizens of the Federal Republic-Nigeria. This lecture is anchored on two fronts, Automotive Manufacturing and Sales, as well as Maintenance Management
AUTOMOTIVE MANUFACTURING AND SALES
In grounding my discourse, I will be citing some key global economies where the automobile industry played the most significant role in their respective national histories. These economies are specifically the United States, the Federal Republic of Germany (FRG), Japan and the Korea Republic. These are countries who leveraged on the automotive technologies to launch their economies on a global scale, either through the stabilisation of their economies after experiencing recessions and or shoring their individual growth through deliberate policies on automotive engineering. Automotive manufacturing provided the pedestal with which these countries launched themselves to the next level in general and critical infrastructural developments.
The story behind the VW Beetle is well known to most of us, how and after the World War 11, the government of the then Western Germany commissioned some engineers to design a cheap, affordable and efficient automobile for use within the country. The outcome became successful beyond the shores of the country. This birthed the VW Beetle, which was dominant in this clime for many decades. This iconic brand relaunched the then Western Germany into economic prosperity. Today, the automotive industry is still contributing significantly to Germany’s Gross Domestic Product (GDP).
On the other hand, we are equally aware of the negative impact of the VW emission scandal had on the nation’s economy through the recall of some models of the VW brand.
About half a dozen years after the worst recession in the U.S. precisely in the 1930s, the American economy demonstrated many signs of strengthening, and the auto industry helped to drive the recovery. In the US, the automotive industry is a critical component of economic growth, with extensive connections across the industrial and cultural fabric of the country. The auto industry is one of the largest industries in the United States. For more than a century, the automotive industry has been a major contributor in shaping the U.S. economy and has generated and supported millions of jobs. As of September 2014, the U.S. motor vehicle and parts manufacturing industry employed more than 870,000 workers.
Beyond those direct employees working in assembly, body/trailer, and parts plants, there are many more workers in intermediate and spin‐off jobs that are supported through automotive production activities. The economic performance of the automotive industry, as well as manufacturing more broadly, is essential for the continued development and growth of any national and regional economy. Manufacturing and Automotive industry trends can be indicators of the state of the economy, with periods of growth in automotive manufacturing
closely linked to periods of growth in the economy as a whole. A typical example is, as of the second quarter of 2014, the value of U.S. light-vehicle sales was $519 billion at an annualized rate; this is the highest rate ever recorded. It historically has contributed 3.0 – 3.5 percent to the overall Gross Domestic Product (GDP). This sector supports more than seven million private-sector jobs and $500 billion in compensation, along with attracting Foreign Direct Investment (FDI) currently valued at $74 billion—approximately 3 percent of all FDI in the United States.
Additionally, the industry has collectively invested almost $46 billion through expansion and retooling U.S.‐based critical facilities since 2010. Fourteen automotive companies alone have numerous facilities in the United States, with some companies supporting full integrated operations in the country including research and development, design, engineering, headquarters, and manufacturing operations, while others have a much smaller footprint. Beyond the number of jobs created, the industry contributes substantially to federal, state and local tax revenues, providing more than $200 billion to the federal and state governments.
Despite recent economic hardships, auto manufacturers, suppliers, and dealers themselves employ over 1.5 million people and directly contribute to the creation of another 5.7 million Jobs. In total, the auto industry is now responsible for 7.25 million private-sector jobs, according to the Centre for Automotive Research (CAR) analysis.
The study found that motor vehicle manufacturing generated at least $110 billion in state government tax revenue and another $96 billion in federal government tax revenue, amounting to about $206 billion in taxes – which is more than the Gross National Product of 142 countries across the globe.
Additionally, there are 521,000 people employed in the automotive parts sector, including workers in the rubber, plastics, battery, aftermarket, and parts export sectors, and another 710,000 people employed in the dealer network selling and servicing new vehicles. However, jobs related to the auto industry go far beyond designing, building and selling vehicles.
America’s automakers are also among the largest purchasers of aluminium, copper, iron, lead, plastics, rubber, textiles, vinyl, steel and computer chips. The CAR models discerned that every OEM employee had an employment multiplier effect of 7.6 (or 6.6 additional jobs for every direct OEM job), while the employment multiplier for the entire industry is 4.7. There are many workers in intermediate and spinoff jobs from the auto industry due to the complex manufacturing supply network with many tiers of suppliers across a wide array of industries.
Breakout of the employment and economic contributions by OEM, all automotive
manufacturing and dealer sectors are as follows:
Direct, intermediate, and spin‐off employment from OEM activities estimated at 2.4 million
- The total compensation of $168 billion
- Estimated personal tax payments of nearly $23 billion
Total employment generated by all automotive manufacturing (including automakers) is estimated to be 5.6 million
- The total compensation of $375 billion
- Estimated personal tax payments of nearly $45 billion
Total employment generated by the dealership network is estimated to be 1.65 million
- The total compensation of $116 billion
- Estimated personal tax payments of approximately $20 billion
These figures are likely to rise as well. CAR’s U.S. automotive employment forecast projects hiring will increase by approximately 10.8 percent, with a compound average growth rate of 2.1 percent from 2013 to 2018.
The U.S. Automotive production forecasts expansion, growing at a compound average growth rate of 2.4 percent, resulting in a projected rise of 12.6 percent in production from 2013 to 2018. CAR’s econometric analysis also suggests that auto sales over the next several years will continue to increase, from 15.6 million units in 2013 to 17.6 million units in 2018.
Figure 1: Light Vehicles Sales Projection from 2007-2018
Figure 2: Vehicular production to Employment ratios
Figure 3: US Research and Development Funding
In Japan and The Korea Republic, the story is not much different. The Japanese after World War 11 equally leveraged on automotive production activities to prop their economy, the same with the Korean Republic. Today, we are all witnesses, to the dominance of Japanese and Korean vehicular brands globally. I can boldly adduce a ratio of 1.1 of their products to every home.
MAINTENANCE MANAGEMENT
An argument by Alsyouf (2007) in his paper ‘The role of maintenance in improving companies’ productivity and maintenance’ stated that before the World War II, there was no maintenance as much and that spare parts were mostly menial, and they would break so they were changed thus removed. An error, therefore, had little effect and was in many cases thus ignored. He went further to argue that this perception changed entirely during the war.
The post-war era witnessed demand for production and production activities increased accordingly, but with a lack or shortage of manpower in maintenance management, this led to more mechanized industry and more complex production systems. In another argument, Kister and Hawking (2006) posited the fact that production cost or cost of production, the longevity of equipment and production machinery, and their availability and reliability became issues that were brought to the front burner in that era, and this gave rise to maintenance departments in these organizations. These new departments started developing periodic maintenance, planned maintenance, and preventive maintenance concepts. The scenario above, when applied to the automotive industry worldwide succinctly, articulates the impact and essence of maintenance management.
The maintenance department in many organizations is responsible for keeping the vehicles and other automotive in the condition it initially was procured and also to ensure that it can deliver and perform according to the specification. It is not an over emphasis to state that the impact of automotive maintenance in every sector of our economy, in the oil and gas industries, it is required for gas turbines which are principally used in driving other turbomachinery such as pumps, compressors, torque converters and much more. In the Aviation and Automobile industries requires maintenance management as the norm, although that of aviation is more intense and enforced. Emphasis on maintenance strategy to be adopted seems to be clearly defined by the exigency and important role the industry plays in our national lives. Successful companies of today often have a distinctly expressed business idea connected to a strategy that explains it and also, how to reach it. It is a widely known fact that maintenance is currently viewed by management as a significant expense. Moreover, it is not an unusual opinion since maintenance does not include any value-adding activities.
Reactive maintenance as we all know, impacts negatively on company’s balance sheets, as equipment must be repaired for production to resume or its else’s outright replacement will be sought. The other types of maintenance strategies when successfully deployed facilitate the journey towards becoming sustainable through high asset utilization, thus providing the overall profitability to such organization and when organizations books are in blue, jobs are retained, more are created, the wheel of progress of the economy is well oiled.
The negative perception held by most organization’s CEOs is gradually ebbing; It is increasingly common for enterprises to work with maintenance as a centre point of profit. Greater knowledge of maintenance and its ability for long term profiting have increased the interest in the topic. It is all based on minimizing the downtime and the key to success is to ensure that proactive maintenance is adopted as the organization’s policy. Hence, by leaving the firefighting perspective and striving to use proactive maintenance there is a lot to gain. Less failure, minimized downtime, lowered stress and higher quality, all working in favour of profit.
Comparing Maintenance Strategies Based on Cost and Availability
Reliability Centered Maintenance (RCM) analysis provides a structured framework for analyzing the functions and potential failure modes for a physical asset (such as an airplane, a manufacturing production line, etc.) in order to develop a scheduled maintenance plan that will provide an acceptable level of operability, with an acceptable level of risk, in an efficient and cost-effective manner.
RCM techniques often utilize a logic diagram approach for evaluating the potential effects of failure and selecting the appropriate maintenance strategy. In addition to, or instead of, a logic diagram approach, the RCM analyst may wish to use cost- and availability-based comparisons of potential maintenance strategies when selecting and assigning maintenance tasks.
Types of Maintenance Strategies to Consider Although there is variation among practitioners regarding the terminology used to describe the available maintenance techniques, in general, the RCM analyst may consider any of the following maintenance strategies to address a potential failure mechanism:
- Run-to-Failure – fix the equipment when it fails but do not perform any scheduled maintenance.
- Scheduled Inspections
o Failure Finding Inspections – inspect the equipment on a scheduled basis to discover hidden failures. If the equipment is found to have failed, initiate corrective maintenance.
o On-Condition Inspections – inspect the equipment on a scheduled or ongoing basis to discover conditions indicating that a failure is about to occur. If the equipment is found to be about to fail, initiate preventive maintenance.
- Scheduled Preventive Maintenance
o Service – perform lubrication or other servicing actions on a scheduled basis.
o Repair – repair or overhaul the equipment on a scheduled basis.
o Replace – replace the equipment on a scheduled basis.
- Design Change – Re-design the equipment, select different equipment or make some other one-time change to improve the reliability/availability of the equipment.
Using Simulation to Compare Maintenance Strategies Given certain information about how the equipment will be operated, the probability of occurrence of the failure mode and the maintenance characteristics, the analyst can use simulation to estimate the cost and average availability that can be expected over the operational life of the equipment when a particular maintenance strategy is employed. The calculations can then be used to compare available maintenance strategies so that the analyst can select the most cost-effective strategy that provides an acceptable level of performance.
Run-to-Failure (Corrective Maintenance Only) To estimate the cost and average availability that can be expected for a run-
to-failure (corrective maintenance only) maintenance strategy, the analyst must provide the following information:
- The amount of time that the equipment will operate.
- The probability density function (pdf) that describes the probability that the equipment will fail due to a particular failure cause.
- An indication of whether the failure is detectable during normal operation.
- The amount of time that the equipment is expected to be down each time corrective maintenance is required. This can include the time to perform the maintenance as well as any logistical delays (i.e., waiting for labour and materials required).
- The cost each time corrective maintenance is required, including the downtime, labour, materials and other costs.
- The degree to which the equipment will be restored by corrective maintenance (e.g., “as good as new,” as bad as old,” etc.).
The analyst can then simulate the operation of the equipment for the specified operating time, given the specified reliability/maintainability characteristics, in order to estimate:
(1) The expected number of corrective maintenance actions that will be performed and
(2) The amount of time that the equipment is supposed to be operating (uptime) over the specified time. These estimates can then be used to calculate the total operating cost, cost per uptime and average availability, as follows:
Scheduled Repair/Replacement To calculate the cost and availability that can be expected from a maintenance strategy that involves preventive repair/replacement of the equipment, the following information is required (in addition to the inputs described previously):
- The time interval at which the preventive maintenance will be performed.
- The amount of time that the equipment is expected to be down each time preventive maintenance is performed.
- The cost each time preventive maintenance is performed.
- The degree to which the equipment will be restored by preventive maintenance.
With this additional information, simulation can be used to estimate the expected number of Corrective Maintenance (CM) and Preventive Maintenance (PM) actions, along with the uptime. The total operating cost for this maintenance strategy includes the cost of all CMs plus the cost of all PMs.
Calculations for Service and Failure Finding tasks are performed in a similar manner except that the assumptions of the simulation will vary to fit the conditions of the task. For example, if the failure is undetectable during normal operation and the equipment is found to have failed during a scheduled Service task, then the simulation will assume that corrective maintenance will be initiated. Likewise, a Failure Finding task can initiate corrective action if the equipment is found to have failed but does not restore the equipment to any degree if it is found to be running.
On-Condition Inspections On-Condition Inspection tasks (which are designed to monitor the equipment at scheduled intervals or on an ongoing basis and initiate preventive maintenance only if a specific condition is detected) require additional information and a more complex simulation/calculation method. In addition to operating life, probability of failure and corrective maintenance characteristics, the analyst must describe the characteristics of the scheduled inspections that will be performed:
- The time interval at which the inspection will be performed.
- The amount of time that the equipment is expected to be down each time an inspection is performed.
- The cost each time an inspection is performed.
- An indication of when the approaching failure will become detectable during the inspection (which could be described as a percentage of item life or as a fixed time interval).
For the cases in which the inspection detects that failure is approaching, the analysis also requires the downtime, cost, and restoration factor associated with the preventive maintenance that will be initiated.
Simulation of this scenario will return the following
(1) The expected number of corrective maintenance actions, (2) the expected number of inspections, (3) the expected number of preventive maintenance actions and (4) the amount of uptime.
The total operating cost then includes the cost of all CMs plus all inspections plus all PMs, is as shown
This total operating cost is then used to calculate the cost per uptime and average availability as described previously.
CONCLUSION
Having analysed the concepts of automotive manufacturing, sales and maintenance management on how it positively impacted on economies of developed climes, it is imperative that we as a nation adopt deliberate policies toward improving the automotive industry. The very recent announcement by the Federal government is still short of enforcement required to bring it to realisation. Many countries have turned Nigeria into a dumping ground for all sorts of automobiles. Attempts have not been made towards streamlining designs to suit our climes, not just tropicalizing the cooling systems, but down to the suspension system, the frontal, rear guides, the lighting and trafficating systems and lightings ought to be considered now such that will bring to the realisation a truly Nigerian car. When this industry policy is well-grounded and enforced with timelines, there will be telling impacts on our rubber plantations, the plastics industry will blossom significantly, and the textile industry will flourish. The aluminium industries will be established; moribund foundries will be revived, our Universities and Polytechnics will benefit through Research and Development funding from the automotive industry. Many other industries will develop, and more Nigerians would be employed.
After-sales service and automotive maintenance will become more attractive to our young and upcoming mechanical engineers.
Thank you
Engr Dr Wilson Alli, FNSE is an astute and versatile engineer and project management professional, with extensive years of cumulative hands-on experience in engineering, projects and programme management acquired through business and organizational management, delivery of critical mechanical and electrical engineering infrastructural projects.