Future of tyre manufacturing
By David Shaw:
Tyre makers could set up a scalable, highly-automated factory adjacent to that of a vehicle maker. Once the MES systems are linked, the tyre factory simply supplies the vehicle factory with appropriate tyres for its needs. When orders are slow, the factory can produce for the replacement market, but when the car factory is working at full capacity, the tyre factory can be matched to the potential demand
A number of conversations recently have made me think about the future of tyre manufacturing. Most obviously, the recent opening of Apollo’s latest factory in Hungary addresses the issue head-on. It is clear from presentations made in Budapest to Apollo’s existing and potential suppliers that the company expects tyre manufacturing to change in significant ways.
Scalable tyre factories
In many ways, Apollo’s Hungarian tyre factory is fairly typical. It has five mixers, though some of these are for future expansions; it has one calendar, ten tyre building machines (TBMs), and 40 or so curing presses. Nominal output is 6 million passenger car tyres per year.
The critical point to understand is that the production area for building and curing is scalable in units of one TBM and about five presses. Each combination of a TBM and five presses can make around 1800 tyres per day. This is highly scalable.
At the front end of the factory, the mixers, calenders and multi-compound extruders are big, heavy, highly productive machines and they are difficult to down-scale below a factory size of around 18,000 units/day (6mn units/year).
Complexity in tyre manufacture
Tyre manufacturing is a complex business. It is well-known that the finished products are complex composites making use of steel cords, textile-based fabrics and up to ten different rubber compounds, each of which might have 20 or 30 ingredients. These components must be assembled and then cured.
Less widely appreciated is that the production process is a challenging mix of continuous processes, such as extrusion and calendering, and batch processes, such as mixing, curing and tyre building.
Production managers resist change
I was always told that tyre factories are both capital-intensive and labour-intensive. A chemical plant is capital intensive, but employs relatively few people. Chemical plants need to operate at above 85 per cent of nominal capacity before they make money. A capital-intensive, labour-intensive tyre factory needs to operate above 95 per cent of capacity if it is to make money.
This means factory managers are very keen to keep their output at maximum levels.
Altering the production flow introduces risk and this tends to reduce factory output.
Although this is a massive over-simplification, it sets out the production environment: there is high pressure to keep machines operating at maximum productivity and production managers are highly risk averse.
Another factor is that tyre makers tend to have a very high value of installed equipment and like to standardise machinery and processes across a global production network. A significant change in the process at one factory will have capital, process, training, and other implications for the global production network.
This adds to the inertia in the system to resist change in the production environment.
One trend in global factory design has been to specialise in one type of tyre. The other has been for factories to get bigger, with larger investments. It is now not unusual to see a planned investment of USD1000mn over a five- to eight- year period to produce high performance PCR tyres in three or more phases of capacity additions.
There are a couple of issues with this.
First, as the plants get bigger, they necessarily serve a larger geographic area, so logistics lines get longer.
Second, it becomes more difficult to find enough skilled production workers to keep the factory operating at full capacity.
I think the next stage in development of tyre factories will be towards more compact, more flexible operations. Mixing, calendering, and probably extrusions will continue to be carried out in large, highly productive and centralised facilities. There really is no alternative to this – the equipment is physically large and heavy and very capital-intensive.
However, the building and curing operations can be set up relatively quickly and in a fairly standard, single-storey light industrial building.
Already, Chinese tyre makers and others start their overseas factories with only TBMs and curing presses and testing facilities, expecting to ship compounds and fabrics from the headquarters to the satellite factories. This means the factories can be brought on stream relatively quickly, as the building machines and curing presses have a relatively short lead time from the manufacturers.
One of the key challenges for tyre makers is to manage the fluctuating demand from their customers in the OE segment. Vehicle makers do not know from one week to the next how many vehicles they will make. This has consequences for tyre suppliers.
If the vehicle maker could link its MES factory management system to that of the tyre maker, then it could have the tyres essentially made to order.
In an era when premium car makers are seeking to customise the experience for their drivers, this idea of making to order becomes more attractive.
Tyre makers could set up a scalable, highly-automated tyre factory adjacent to that of a vehicle maker. Once the MES systems are linked, the tyre factory simply supplies the vehicle factory with appropriate tyres for its needs. When orders are slow, the factory can produce for the replacement market, but when the car factory is working at full capacity, the tyre factory can be matched to the potential demand.
Looking into the future
Extending this idea of demand pull for a moment, it would be possible to tailor truck tyres to a specific route or driver.
I can imagine a time – not so far away – when a truck is fitted with advanced electronics that can identify when a tyre is close to its limit on tread depth, or is starting to over-heat due to a defect or puncture.
It is not so difficult to imagine the electronics sending the relevant data to an automated tyre factory, and ordering a new tyre. Taking the concept one step further, the telematics system might use data on the history of the tyre, the style of the driver, and the route to request a tyre that is best suited to that very specific application, even down to the individual driver.
The forces driving change – globalisation, customisation, digitisation, urbanisation, the mobility revolution, and ride sharing to name a few, cannot be stopped or reversed.
As one expert said to me, the tyre industry faces a choice – either become a solutions provider for the new age of mobility, or become a component supplier to another company that offers the solutions required by individuals and corporates alike.