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Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Dr. Michael Warner – Local Content Solutions
Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)
Part 2 : Measuring local content in manufacturing
Dr. Michael Warner – Local Content Solutions
Part 1 :A case study of paint manufacture in NigeriaEng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Overview
Part 1 – Case History of establishing paint manufacturing in Nigeria
Paint manufacturing development in Nigeria
Local content requirements for paint manufacture
Using license technology
Capacity development in relation to market
Multiplier effects of supporting manufacturing
Part 2 – Selecting Nigerian content metrics for the paint industry
What metrics to measure Nigerian content?
• General
• Specific to paint manufacture
Conclusion
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Overview of PCMN development
2000 2002 2004 2006 2008 2010 2012 2014
Distribution licenseFully imported product
100% foreign ownership
100% local manufacture100% Nigerian ownership
Manufacturing license signed
Semi finishing40% Nigerian ownership
PCMN becomes Plc60% Nigerian ownership
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Overview of PCMN personnel development
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2015
0
50
100
150
200
250
NigerianEx-Pat
Manufacturing commences
Num
ber
of s
taff
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Overview of PCMN capacity development
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
100000
200000
300000
400000
500000
600000
700000
800000
Imported productsNigerian Manufacture
New factory proposed 2015
Capital expansion Phase II increases capacity
Imp
ort
/ pr
oduc
tion
leve
ls
(litr
es p
er a
nnum
)
• Global cost of corrosion > $2 Trillion per annum
• Likely cost to Nigerian economy = towards $10 billion dollars per annum*
• Nigerian investment to increase dramatically in next 10-20 years
- Offshore oil and gas / onshore processing / transmission pipelines
• Passing of PIB into law will release projects resulting in increased demand
• PCMN positioning its capacity plans to capture a large % of market
- Upstream / downstream and M&R activities
Importance of paint manufacturing
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Local content levels in paint manufacturing
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
2012 2013 2014 20150
2
4
6
8
10
12
14
Local content requirmentTotal market
Mill
ion
litre
s pe
r an
num
Nigerian heavy duty protective coatings
market estimate
PCMN Pro
jected ca
pacity
License History
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
• License manufacturing agreement entered into 15th May 2009
• Covers manufacturing and use of registered trademarks
• International Paint is a major supplier of protective coatings globally
• Part of the AkzoNobel group with turnover > $ 18 billion
• Extensive oil and gas experience globally
• License agreement catered for
Establishing manufacturing plant in Lagos
Transfer of initial product range and associated technical support
Guidance on factory start-up and regular auditing
PCMN now accredited to ISO 9001: 2008
Advantages of license technology
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Licensor
Access to market
Zero capital investment required
Reduced logistics
No in country footprint required
Licensee
Access to world class products
Reduced product development costs
Quick establishment of product range
Support from technology provider
Economy
Increased employment opportunities
Support for infrastructure projects whilst benefitting economy
Access to current technology
Encourages capital investment
Capacity Development - Challenges
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
• Difficulty in forward forecasting
• Associated Impact of stock on working capital
• Capacity building needs to be proactive
• Role of operators
Forecasting assistance
Identifying associated bolt-on opportunities
Capacity development (continued)
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
2000 2002 2004 2006 2008 2010 2012 2014
Capacity development (examples)
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
• Addition of 2 off 2400 litres high speed dispersers (previous slide)
• Addition of 6 off 2000 litre “pans” for mixing
• Further capacity expansion planned for (5,000 litre pans)
• Installation of semi automatic piston type filling line
• Associated infrastructure (generators etc)
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Overview of PCMN personnel development
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2015
0
50
100
150
200
250
NigerianEx-Pat
Manufacturing commences
Num
ber
of s
taff
Manufacturing multiplier
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
• The Local content Law gives clear economic benefit to Nigeria
• Manufacturing offers significant benefit to national (Macro) AND local (Micro) economy
• Increased personnel required to operate manufacturing versus distribution
• Nigerian ownership is critical to the further development of the economy and the multiplier effect coming into place – for every 1 job directly created 10 additional downstream jobs are created
• PCMN is proud to be at the forefront of Nigerian content development in paint and coatings manufacture
• We look forward to partnering with NNPC and the oil majors to grow the Nigerian Economy into the powerhouse it should be in Africa.
In summary
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
• Capacity is available
• Proven in-country capacity should be supported
• Economic means
• Enforcement
• Expanding markets to utilise Nigerian manufacture
• Regionally
• Multinational projects
• Expanding portfolio
• Linking proven manufacturers to customers
• Expanding visibility
• Infrastructure project requirements
• Earlier involvement
Part 2 : Measuring local content in manufacturing
Dr. Michael Warner – Local Content Solutions
Part 1 :A case study of paint manufacture in NigeriaEng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Background to metric selection
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
• Increasing clarity on metrics and reporting for operators
• Lack of visibility on requirements – downstream supply chain
• Metrics should
I. Provide details on Nigerian content
II. Measure of ability to serve the market
• Goods or services
• Currently limited to single point activities i.e. supplier assessments
• Metrics may need to be adjusted to reflect the organisations business
• Supply chain needs to be proactive
• Work in progress
Key areas of measurement
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
Investment / ownership
Training
Employment
Importation
Manufacturing and services
• Measures identified to
I. Indicate Nigerian content
II. Identify the suitability of the business to serve the market
• Currently being finalised prior to initiating monitoring
Accuracy of measures
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
• Care should be taken when selecting national content measures
• Metrics may be divided into 3 main types
I. Erroneous – [Insert definition]
II. Proxy – [Insert definition]
III. Accurate – [Insert definition]
• Some erroneous metrics may provide useful background information into supply chain
• Should be clearly identified
• How to measure relationship between licensee and licensor?
Sample measures – manufacturing and services
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
Metric Accuracy
Volume manufactured in Nigeria per annum since start-up as a % of total volume sales
Proxy
Manufacturing capacity of Lagos operation per annum since start-up Erroneous
Number of product SKU's manufactured in Nigeria by year as a % of total sold
Proxy
Cumulative number of formulations transferred from technology provider Proxy
$ value of raw material purchases awarded to nationally registered vendors (Inc. packaging) per year as a percentage of overall $ value
Accurate
Local content based upon $ value of raw material purchase less proportion of imported components of purchased goods e.g. CIF value
Accurate
Sample measures – manufacturing and services
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
Metric Accuracy
Local content based upon $ value of raw material purchase less proportion of imported components of purchased goods e.g. CIF value, Top 10 products
Accurate
Number of man hours of national labour spent on manufacturing Erroneous
$ value of service contracts awarded to nationally registered vendors per year as a percentage of overall sub-contracts
Accurate
% nationally registered vendors on company vendor register Proxy
Local content in manufactured paint
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
• Assessing using drill down method for national content in each paint material
• Can be used for domestically manufactured OR imported
• Can be utilised with local content calculator
• Limited visibility as it contains proprietary formulations belonging to licensor
Michael – Please can you insert this description I was thinking of the drill down slide from the training?
Conclusion
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
• Paint industry is an important part of supporting infrastructure development
• License technology with globally recognised technology provider offers significant benefits
• Offers potential for rapid start-up and capacity development
• More work needs to be done on visibility of metrics for supply chain
• Further guidance on national content metrics
-Government
- Operators
• Choice of metrics is important for correctly identifying national content
THANK YOU