September 14 is the deadline for compliance with a new quality management system standard for the automotive industry. Devised by the International Automotive Task Force, a group formed by the Wests biggest carmakers, IATF 16949:2016 will bring changes to the way parts, including lubricants, make their way onto non-stop production lines.

The auto industry is fed by a vast global network of suppliers of parts and other materials. Each must deliver its product on time, to the right production site, in the correct quantities and most importantly with no flaws. This is made possible by a standardized quality management system. Any disruption can mean faulty vehicles, production line shutdowns and loss of narrow profit margins.

Members of IATF demanding compliance with the new standard are BMW, Fiat Chrysler, Daimler, Ford, General Motors, PSA, Renault and Volkswagen AG, some of the largest carmakers in the world. Together they produced roughly 60 percent of the more than 73 million cars made in 2017. That is a lot of factory-fill lubricants – into the hundreds of millions of liters.

Implemented at the start of 2018, IATF 16949:2016 affects all auto supply organizations, from small manufacturers to large multinationals. It therefore can include suppliers of not only factory-fill lubricants but also metalworking fluids, both directly to original equipment manufacturers metalworking facilities and to suppliers of engineered parts.

As with its predecessors, IATF 16949:2016 is based on the International Standard Organizations ISO 9001 Quality Management System and aligns with ISO 9001:2015, the most recent revision of 9001. This alignment is intended to make it easier for organizations that have to implement more than one quality management system standard, such as lubricants manufacturers, who normally register to ISO 9001. However, the new standard has created more work for all associated with the auto industry, leaving some wondering how the lubricants side has performed in compliance.

Standard Scope

The focus of the standard is on continual improvement that emphasizes defect prevention, while also reducing supply chain variation and wastage. The priority areas include risk-based thinking; integration of customer-specific requirements; first- and second-party auditor competency; product safety; manufacturing feasibility; warranty management; and the development of products with embedded software.

All except the last point are relevant to lubricants manufacturers, with product safety a higher priority for suppliers of fluids compared with suppliers of parts.

To make matters more complicated, the standard can be constantly revised and updated. It was still being developed and clarified during 2018 through a series of so-called sanctioned interpretations, or SI, which are mostly minor modifications to the original text. The latest SI – 12 and 13 at the time of writing – were published in June and became effective in July. Just to keep users on their toes, SI 8 and 10 were revised and reissued at the same time.

One SI could have specific impact on lubes marketers and is found in the section on product safety – one of several completely new sections compared with the older ISO/TS 16949. It states, Special approval of safety related requirements or documents may be required by the customer. This means that in order to give such special approval, the auto OEM customer may require information from the lubes marketer that is sometimes regarded as intellectual property or confidential business information. The implications are leakage of intellectual property.

LubesnGreases contacted two European-headquartered oil majors, two industry bodies and one of the largest global metalworking fluid suppliers to ascertain the impact of implementation on the lubricants industry. Both lubricants companies, Shell and Castrol, declined to comment despite having significant factory-fill business with at least six OEM members of IATF.

One of the industry bodies, the Technical Association of the European Lubricants Industry, or ATIEL, canvassed their membership and received no response. Instead, it told LubesnGreases, ATIEL supports any initiatives and standards, such as IATF 16949, that assist to improve the quality of lubricants in the market place. Meanwhile, the secretariat of the Union of the European Lubricant Industry redirected LubesnGreases to its member organizations for comment.

Off-the-record discussion at a recent compliance audit training course centered on the time companies had invested in attempts to stay in the business. One industry insider who asked not to be identified claimed that the impact on a large supplier could be many months of preparatory effort, spread across tens of supply chain and support staff. Some attendees also suggested that no one wanted to publicize the degree of effort involved to avoid revealing to competitors how hard they were working on the transition.

All of this does not paint a reassuring picture of the lubricants industrys compliance readiness.

Headaches

The biggest challenge for lubricants manufacturers looks to be documenting and satisfying what is known as customer-specific requirements, defined as the interpretations of or supplemental requirements linked to a specific clause(s) of IATF 16949:2016. While BMW has only five requirements, published as a single slide show, FCA has issued separate documents for the United States (48 pages) and Italy (31 pages). The Italian document cross-references 27 separate sub-sections of IATF 16949:2016 to pre-existing Fiat Group standards. Almost all have an impact on lubricants suppliers, from records retention, which would probably require a minor adjustment to any ISO 9001 procedures, through to customer-directed sources, also known as directed-buy, which could have significant impact on procurement and logistics procedures.

In an online article published in July, Chris Owen, chief executive of Industry Forum – the organization set up by the U.K. government, the Society of Motor Manufacturers and Traders and vehicle manufacturers to improve the competitiveness of the U.K.s auto supply chain – revealed that many holders of the ISO/TS 16949 quality management certificate were struggling to achieve compliance during the nine-month transition to the new IATF 16949 standard. This was reflected in off-the-record comments from people within the lubricants industry, where the reluctance to discuss progress has been interpreted by some as an indication that the process is difficult and slow.

That progress is audited by companies such as Lloyds Register, and the impression among industry bodies is that progress had been patchy.

IATF 16949 audits are uncovering less rigorous risk management processes in departments supporting manufacturing, such as purchasing and HR. IATF 16949 also requires new ways of working in internal auditing and the documentation of corrective actions where non-compliance is uncovered. Interpreting the regulations is proving something of a challenge, Owen wrote.

In the same article, he went onto say that, Global IATF 16949 audit result data reveals several hundred companies have faced major non-compliances in areas such as non-conformity and corrective action alone, with problem-solving, control planning and contingency planning were also catching manufacturers out. Of course, many of these might not be related to lubricants manufacturers, but no one appears to be saying.

Final Barrier

The underlying reason for the standard is to ensure that IATF members per-unit profit margins are not wiped out by an incident that stops production. But the cost of compliance could discourage new entrants and leave incumbent suppliers in a stronger position. Conversely, non-compliance with the standard could be a barrier to new entrants to the auto supply industry or jeopardize existing suppliers business.

With global consultants Kline & Co. reporting in July that OEMs wish to increase the proportion of OEM-genuine oils, spelling even lower margins for marketers, and vehicle electrification on the horizon for IATFs members, the next few years are going to be very uncertain at the interface between lubes marketers and auto OEMs.

Trevor Gauntlett has more than 25 years experience in blue chip chemicals and oil companies, including 18 years as the technical expert on Shells Lubricants Additives procurement team. He can be contacted at trevor@gauntlettconsulting.co.uk