Smooth Road Ahead

Risk Improvements at SKF’s Airasca, Italy, wheel hub manufacturing plant lead to improved supply chain protection, peace of mind for world’s auto manufacturers

Working Together: SKF and FM Global

Working Together: SKF and FM Global

Learn about the unique relationship between FM Global and SKF and the work that went into getting SKF's wheel hub bearing manufacturing facility in Airasca, Italy, to HPR (highly protected risk) status.

Nestled at the foot of the majestic Italian Alps, SKF's sprawling wheel hub bearing manufacturing facility in Airasca has reached the peak of success as one of its Swedish parent company's most prolific sites. And thanks to recent major risk improvements—it is also one of its most resilient.

As a world leader in bearing technology for more than a century, SKF provides a wide range of products to original equipment manufacturers and aftermarket customers in more than 40 industries. Headquartered in Gothenburg, Sweden, SKF has more than 46,000 employees and 140 sites in 32 countries.

In operation since 1962, the Airasca plant churned out nearly 19 million wheel hub bearing assembly units in 2016 on 15 highly automated production channels.

And with a large percentage of the European automotive industry relying on wheel hub bearing units supplied by the Airasca factory, any major disruption in production would have a significant impact on the marketplace—an actuality Klas Iloson knew he needed to address after taking the reins as SKF managing director, Group Risk Management, SKF Reinsurance Co. Ltd.

"The Airasca plant plays a significant role in the world's car manufacturing industry," says Iloson. "If something were to happen there, it could have devastating consequences on the entire supply chain. To prevent this from occurring, we worked with our internal risk specialists and FM Global to adopt a more strategic approach in raising the Airasca plant's risk management profile."

Danilo Giraudo, loss prevention and business development manager at FCA (Fiat Chrysler Automobiles N.V.), a longtime SKF customer whose main brands include Alfa Romeo, Maserati, FIAT, Lancia, Chrysler and Jeep, shares Iloson's concerns, as the success of FCA and SKF are closely intertwined.

"Managing supply chain risk in today's competitive environment is challenging," says Giraudo. "For this reason, it is very important for us to be able to count on an industrial partner who shares the same values. FCA knows how complex it is to become highly protected. It not only requires a significant investment in protection systems, but a cultural change as well."

The road to resilience
SKF has been an FM Global client since 2002. In the ensuing years, FM Global engineers conducted risk assessments at many of SKF's key facilities worldwide and deemed the Airasca site as one of the company's most critical risk locations.

"The Airasca site had been on our radar for some time," says Sofia Teljevik, FM Global vice president, branch manager, Stockholm, Sweden. "And when SKF sought our assistance in bringing the facility to HPR [highly protected risk] status, we were glad to help."

SKF requested that FM Global prepare a proposal to pinpoint risk exposures and enhance the long-term business continuity of its Airasca plant. To help make that happen, FM Global's client service team enlisted the company's Business Risk Consulting (BRC) group to evaluate SKF's risk vulnerabilities. BRC, which includes consultants with financial, commercial and operational backgrounds, helps clients take a quantitative approach to risk management by helping them understand the financial impact of business disruptions and develop tailored solutions.

For its part, BRC performed a business impact analysis (BIA) using details provided by SKF to determine the reputational and financial implications to its critical business operations and supply chain if interrupted because of a disaster, accident or emergency.

"BRC strategically partnered with SKF to help them improve business resilience and protect their competitive position in the market," states Cedric Lenoire, manager of BRC EMEA at the time of this project and now a senior consultant. BRC services are based on the premise that the most optimal risk management decisions are determined by quantitative financial risk measurements."

Because SKF's Airasca plant is one large open-space building, and only 1 percent of the plant is sprinkler-protected, the BIA concluded that SKF would start to lose sales after just two weeks of interruption. Considering the size of the building (633 x 1,106 ft. [193 x 337 m]), the centralized cutting oil system with miles of ignitable liquid and a large rack storage area in one corner, it's easy to imagine that even a small incident in Airasca could have devastating consequences.

The idea that one minor event to a single production line could lead to months of downtime was an eye-opener for SKF and highlighted the need for the company to further invest in its resilience. In a worst-case scenario, the BIA determined that a major interruption could result in significant long-term loss of market share for SKF.

To address these issues, FM Global recommended installing a new booster pump taking suction from a 264,172-gallon (1,000,000-liter) gravity tank, sprinklers at ceiling level throughout the main building and interlocks on the oil supply.

Aurelio Nervo, head of business and product development, SKF Automotive and Aerospace, cites the BIA findings as the impetus for SKF proceeding with the necessary risk improvements at its Airasca plant. "The BIA helped us better understand the risk and its potential negative impact on our supply chain, facility and customers. After that, we knew we had to address our risk issues head-on."

A sound investment
Since this was a complex facility upgrade, the financial commitment from SKF's senior management was vital for the project to move forward. However, the impact of the financial crisis on the global automotive industry at the time would have impeded efforts to obtain the capital for risk improvements in Airasca.

In a combined effort, SKF Group Risk Management, FM Global's client service team and a private fire engineering design company provided the senior management of Airasca and SKF Group Corporate Finance with data illustrating how the substantial investment required to improve risk in Airasca would be money well spent.

Thanks to the compelling presentation, SKF's senior management quickly committed the financial support to upgrade the Airasca site's risk profile to meet HPR standards. Marco Terzago, head of SKF Group Risk Engineering and area risk managers' global coordinator, confirms that this strategic decision has proven to be the correct one.

"In the past, when capital investment for a strategic risk improvement project was high, the approach was to spread the investment and work over two or three years," says Terzago. But this time, due to the conviction of everyone who presented, senior management decided to invest in the Airasca improvements up front."

With funding now approved, SKF turned its attention to the physical improvement efforts in Airasca. But before any work could commence, there were a few stumbling blocks to overcome.

Gennaro Sinisi, Airasca loss prevention site coordinator, worked closely with FM Global to devise a plan to install the sprinklers and other upgrades without interrupting the facility's three daily shifts of production. To do this, engineers used pre-mounted subsystems and assembled them mainly on weekends, and only tested interlocks during shutdowns. "FM Global helped us find the best solutions to keep our factory running at full capacity without stopping production," says Sinisi. "This was a big challenge that required input from both sides."

There was also concern that forklifts would damage the sprinklers and cause water damage or structural collapse. To prevent this risk, barriers were installed inside the racks—eliminating this problem.

Michael Richtsteig, FM Global's assistant vice president and senior engineering specialist whose expertise was invaluable to the project, says that SKF was aligned with the FM Global engineers from day one and cites the willingness of both to work together as pivotal to the successful implementation. "My job was to make sure that everything was installed according to our standards. I was there to guarantee that SKF received the most return on its large investment."

SKF + BIA = HPR
In the end, the SKF installation was a resounding success, resulting in an HPR designation and award for the Airasca site.

Teljevik explains that transforming Airasca into a highly protected risk was one of the main objectives of the project from the start. "HPR is our highest standard and it must be earned. I can confidently say that the Airasca plant is more resilient than ever."

Giraudo says that SKF should be proud of the HPR award and acknowledges the hard work of those who made it happen. "This award represents the highest level of loss prevention practices and protection standards and recognizes management's strong commitment to these principles. Improving the resilience of the Airasca plant makes both our companies stronger and safer."

With respect to the state of the SKF/FM Global partnership, Terzago declares that the relationship is sound and confirms that the success of the Airasca project has heightened awareness of the importance of loss prevention within SKF. Consequently, SKF has several future risk improvement projects planned for other key revenue-generating sites around the world and will rely on FM Global's expertise to combat business interruption at all of them.

"We are very proud that the Airasca site earned the HPR designation," says Terzago. "We couldn't have done it by ourselves. The knowledge and guidance of everyone involved helped make this project go smoothly and will bring benefits to both the company and customers in the future."