EFFECT OF PRODUCTION FACILITIES MAINTENANCE ON CORPORATE PERFORMANCE OF NIGERIAN CEMENT MANUFACTURING INDUSTRY

EFFECT OF PRODUCTION FACILITIES MAINTENANCE ON CORPORATE PERFORMANCE OF NIGERIAN CEMENT MANUFACTURING INDUSTRY

ABSTRACT

In today’s global economy, the world class manufacturing organizations are leveraging on their production facilities as weapon for competitive advantages, corporate goals, long term survival and sustainability. The huge cost of turnaround and continuous improvement maintenance on the heavy duty equipment for the day-to-day manufacturing activities has been a formidable challenge in the Nigerian cement manufacturing industry both in the past and in the present. Thus, this study examined the effect of production facilities maintenance on corporate performance of Nigerian cement manufacturing industry. The specific objectives of the study include to find out the effect of overall equipment effectiveness on corporate performance; determine the effect of production plant uptime on corporate performance; evaluate the effect of production systems reliability on corporate performance; investigate the effect of machine capacity utilization on corporate performance and to ascertain the effect of maintenance cost on corporate performance. Research questions, research hypotheses and regression models were formulated in line with the objectives and tested at 5% level of significance (ἀ = 0.05). The study was a panel study and it adopted ex-post facto research design. The cement manufacturing companies listed or quoted in the Nigerian Stock Exchange as at 31st December 2015, which were Ashaka Cement Plc (Company X1), Cement Company of Northern Nigeria (Company X2), Dangote Cement Plc (Company X3) and Lafarge Cement Wapco Nigerian Plc (Company X4) were selected for the panel study. Data covering a 15-year period (2001-2015) were obtained from the annual financial reports, maintenance scorecards and production scorecards of the selected companies and were analyzed with the statistical tool of Ordinary Least Squares estimator (system-OLS). The Durbin-Watson Statistic values of 1.58 ≤ 2.5 at 5% level of significance (ἀ = 0.05) in the hypotheses test results show no presence of autocorrelation. The R-squared values in the regression results depict that significant relationship existed between the dependent variable (return on investment measure of corporate performance) and independent variables (overall equipment effectiveness, production plant uptime, production systems reliability, machine capacity utilization and maintenance cost). The p-values (≤ 0.05) of the independent variables in the regression results indicate that the regression models and the hypotheses results were all statistically significant. The findings of the study show that machine availability rate, machine production rate, product quality rate, mean time between failures, production equipment availability rate, operational performance rate, production volume flexibility  and machine yield rate  had significant linear (direct proportional) effect on return on investment while machine mean down time and maintenance cost had significant inverse effect on return on investment. Based on these findings, the study concludes that maintenance key performance indicators of overall equipment effectiveness, production plant uptime, production systems reliability, machine capacity utilization and maintenance cost significantly impact on corporate performance of operating firms in the Nigerian cement manufacturing industry and thus recommends for operating firms to have top management’s support and commitment to organizational development of maintenance culture and policies, regular maintenance audit and communication, regular maintenance education and updates, upgrading old machines to artificial intelligence maintenance machines, establishment of maintenance training institute, proactive and continuous improvement maintenance practice for improved and sustainable performance. The study in its contributions to knowledge is on the maintenance key performance indicators framework of direct and inverse relationship with profitability index.