Research Setting Target Population And Sampling Methodology Accounting Essay

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This chapter explains the research design for the study. It also describes the research setting, target population and sampling methodology to be used in selecting the sample. Instrumentation for data collection is also discussed in this chapter.

3.1 Research Design

Bryman and Bell (2007, p.40) viewed research design as "that which provides a framework for the collection and analysis of data; therefore a choice of research design will reflect the decisions about the priority being given to a range of dimension of the research process". Saunders et al. (2007) in their opinion express research design as general plan which indicate the means through which the research questions and objectives will be answered. These will include the source of data collection, the limitation and the ethical issues that might appear during the execution of the research. Saunders et al. (2007) identified three types of the research design including the exploratory, explanatory and descriptive.

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According to Saunders et al. (2007) the explanatory research design is used to find out "what is happening; to seek new insights; to ask questions and to assess the phenomena in a new light". In addition Saunders et al. (2007) outline searching of literature; interviewing experts in the field; and conducting focus group interviews as the primary ways of embarking on exploratory research. The authors stress the flexibility of using this research design and its ability to adjust to change. The explanatory research design on the other hand, is seen as the extension of the exploratory research design. It provides an appropriate layout of a specific circumstance prior to the data collection (Jancowicz, 2005). The explanatory research design also ascertains the relationship between the variables (Saunders et al., 2007). The descriptive research design is more of survey or observational studies that is used to describe the data collected on a particular subject (Saunders et al., 2007).

From another perspective, Patton (1990) anchored different types of qualitative research in "the kinds of questions a particular researcher will ask". He suggests qualitative research aspects in ethnography and systems theory for example while Merriam (1998) among others identifies basic or generic qualitative study, grounded theory and case study. This study leans towards the latter and for the purpose of this research adopts the components of explanatory and exploratory designs as the researcher tries to explore the issue of equipment selection and replacement.

The case study approach to research is a way of conducting mainly qualitative inquiry, commonly used when it is impossible to control all of the variables that are of interest to the researcher (Merriam 1988). Nonetheless, this case study does not only analyze the qualitative responses to the questions but also figures collected on costs on equipment. The lack of quantitative data on equipment motivated a quite a heavy reliance on interviews. Merriam (1988) points out that the case study's unique strength is its ability to deal with a full variety of evidence, including documents, artifacts, interviews and observations.

The use of a case study approach is determined by four factors: the nature of the research questions; the amount of control the researcher has over the variables under investigation; the desired end product; and the identification of a bounded system as the focus of investigation (Merriam, 1988, p.8). "How" and "why" questions are the most suitable for a case study because the approach draws attention to what can be specifically learned from the single case.

The choice of a case study as a methodological approach was primarily deemed imperative because the considerations of equipment selection are quite multifaceted and needed to be treated holistically. Secondly, the phenomenon - which constitutes an assessment of the economic importance of effective equipment selection and replacement to be assessed, involved a single entity, one company.

As a type of phenomenological framework, case studies seek data which is drawn from a particular site or context, often using personal observations and case-specific data. Perry et al. (2004) defines case study as an empirical method - a defined, scientific, method for posing research questions, collecting data, analyzing the data and presenting the results. He adds that case studies can be used for validating results.

Yin (1984) on the other hand defines it as an 'enquiry that investigates a contemporary phenomenon within real-life context in which multiple sources of evidence are used'. It is an exploratory method which can be used to generate hypothesis for further researches. As a disadvantage, case studies lack generalizability and are liable to be exposed to biased findings and low reliability because of small number of cases. Nonetheless, carefully planned and crafted case studies of real -life situations, issues, and problems have become a widely accepted research method in literature.

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Further, the exploratory analysis will allow the investigation of a single process drawing on all related factors in the various cases as well as intervening variables to give explanations to phenomena or more plainly events. In relation to this, the research sought to find the current practices in respect of equipment selection and replacement and the exact motivations to pursue any process of equipment selection and replacement. The case study thus informed on which holistic set of equipment selection and replacement activity has proven to be significant (economically advantageous) and whether the practice in question is sustainable. To this end, the research adopted partially a case study protocol developed by Yin (1994).

Yin (1994) recommended the use of case-study protocol as part of a carefully designed research project. These are expounded in the section under procedure stating aspects that were applicable in this study.

3.2 Research Setting

The Ghana Ports and Habour Authority (GPHA) is a body that oversees the activities in the various ports of Ghana. The Port of Tema is a place for loading or unloading of goods. It is also a traffic junction, where goods are trans-shipped and transit cargo destined for the hinterlands/landlocked countries of Burkina Faso, Mali and Niger are handled.

The GHPA thus has a huge responsibility of also ensuring that its machinery and plant equipment are working at optimal levels and pursues replacement of any equipment if the need arises.

3.3 Target Population

The target population for this research was the various units under Ghana Ports and Harbors authority that looked at the selection, financing, and replacement of equipment in the ports and harbors of Ghana, using the Tema ports as the main entity. It also involved the machine units or plants which is the main focus of this research.

3.4 Sample and Sampling Methodology

The research involved only one entity which was purposefully selected. The use of a sample size of one is appropriate for the purpose of the study which is a case study and there is only one body in the country that oversees the selection and replacement of equipment at the ports and harbors. However, 10 pieces of equipment were selected in the corporation. They were basically transport equipment, (3 saloon cars and 2 buses and 2 tractors) and lifting equipment (3 reach-stackers) at the ports and harbors. Purposive sampling makes for convenience as sampled units are chosen with an intention in mind.

3.5 Instrumentation

In-depth interviews and questionnaires which address the specific objectives of the research were used in the qualitative aspect of the research. The issues which were explained by various authorities bothered around previous and current replacement processes in the ports and harbors of Ghana, and the economic benefit of varying approaches employed.

Issues about machine servicing and technical handling were also discussed to import a holistic situation of the issue of effective selection and replacement of equipment at the ports and harbors. Nonetheless, the interviews guide varied between some engineering staff at the ports and some staff at the finance department.

3.6 Interview

An interview schedule (see Appendix for a copy of interview questions) guided the interviews with personnel of the company. The guide defined issues that were discussed pertaining to criteria for selecting equipment replacement and mode of replacing a piece of equipment. Processes involved in the selection and replacement of some equipment in the past were also reviewed or assessed. As much as possible questions were simple and short to ensure understanding of the subject matter. Interview times were agreed upon by the interviewees and the researcher during interview follow-up questions were asked to solicit for more insight into various activities undertaken with respect to the equipment.

3.7 Questionnaires

The survey questionnaires were given to some engineers and finance managers at the Ghana Ports and Habours Authority. The engineers are personnel who have direct contact with plant and machinery in the engineering department. Prior to filling the questionnaires, the appropriate notification and consent to conduct the research was sought. The researcher had the opportunity to observe the operations of some of the machines and also make personal observations on the equipment and duly documented them. The following specify the informational need to the objects of the study under 'Data collection plan'.

3.8 Data collection plan

Informational Needs of the Different Objectives

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In the following the researcher was only able to satisfy a part of the informational need stated under each objective which she wanted to consider primarily.

First Objective: To investigate the economic advantages in implementing the appropriate replacement process of equipment (this was reflected in the questions in section B and other questions of the interview guide in Appendix 2.

Points to consider in:

defining the appropriate replacement method: outline the protocol for replacement and review it

Determining economic advantage: compare data for (1) before the current replacement process started and (2) after the replacement of the replacement process if there exist any change in replacement process.

Checking the life span of machines and cross checking it with its subsequent economic contribution.

Alternative machines bought and their maintenance costs - cost comparison and effectiveness.

Second Objective: To develop a system that can facilitate the activities on the effective selection and replacement of equipment.

Points to consider:

Software used: capabilities of the software and integration with other facets; how often is a machine checked; under what circumstances is a machine reviewed; accidents to machine and response to it.

Third Objective: To show how systematic data recording is advantageous on decision making on equipment replacement.

Points to consider:

Existence of log book for each machine, how entry is done, when is entry done, detail of entry, entry into software, previews of system log book of selected equipment (check for aggregate of particular problems, which problems are considered serious for a machine.

Fourth Objective: To study the factors that is considered in selecting equipment:

Points to consider:

An engineer does consider depreciation costs, change in depreciation costs, change in maintenance costs and maintenance of machines; available capacity of work to be done; market outlook; government allocation of funds; bureaucracy in re for machine selection. He or she also considers placement of equipment; tax savings from the purchase of the equipment or plant; the profit flows of GPHA, GPHA's cash flows which determine what money is available for plant acquisition, GPHA's gearing ratio (borrowed capital/equity capital) which influences the amount of further borrowing possible. Other factors including: an increase or decrease in the amount of service required from the asset; an increase or decrease in the demand for its product or service; changes that may arise from competitive situations either from competition among producers on a single industry or competition which may arise with substitute products; terminal salvage value are also considered.

Upon prior arrangements some of the engineers and finance managers of Ghana Ports and Habours Authority (GPHA) furnished the researcher with certain statistical data and reports on (1) various plants and machinery that have been already replaced and (2) plants and machinery that are in the process of being replaced (3) the machine strength or specifications for further analysis using various statistical tools and analytical procedures.

3.9 Selection of Equipment

Number of machines to be selected, records of the machines with respect to time, cost and production, manufacturer, specifications of the machine, functions of the machine, estimated costs of maintenance, estimated costs of running, depreciation of machinery age of machine, were entered for analysis for the case study of the equipment.: Below are the specifications of the various machines.

Specifications of Machines

Table 1: Specifications of machines

 

Scrapped machines

 

Replaced with

 

 

Reach stackers

 

 

 

 

 

 

Asset number

Asset description

Asset number

 

Asset description

 

FLT-4501

Reach stackers

FLT-4507

 

Reach stacker

 

Manufacturer: Kalmar

 

Manufacturer: SMV

 

 

 

Capacity :45 tonne

 

Capacity: 45 tonne

 

 

 

Other specifications:

 

Other specifications: 45,35,20, 45 AT 5HIGH

 

 

 

45,35,18,42T @ 5HIGH

 

 

 

 

 

Warranty: 3000hours/18months whichever comes first

 

Warranty: 3000hrs or 18months whichever comes first

 

 

 

Functions: Laden container handler

 

Function: Laden container handler

 

 

 

Year of purchase: July 1997

 

Year of purchase: Jan 2004

 

 

 

 

 

FLT-4505

Asset description

 

 

 

 

 

Reach stacker

 

 

 

 

Manufacturer: Kalmar

 

 

 

 

 

Capacity :45 tonne

 

 

 

 

 

Other specifications: 45,35,18,42T @ 5HIGH

 

 

 

 

 

Warranty: 3000hours/18months whichever comes first

 

 

 

 

 

Functions: Laden container handler

 

 

 

 

 

Year of manufacture: May 2000

 

 

Source: Ghana Ports & Harbours Authority (1997-2010)

Table 2: Tractors:

 

 

 

 

 

4

RTR-3507

Tractor

5

RTR-3607

Tractor

 

Manufacturer:

KALMAR

 

Manufacturer:

MAFI

 

Capacity : 35 tonne

 

 

Capacity : 36 tonne

 

 

Other specifications:

 

 

Other specifications:

 

 

5th Wheel capacity @ 35 tonnes-

 

 

5th Wheel capacity @ 35 tonnes

 

 

Warranty: 3000hours/18months whichever comes first

 

 

Warranty: 3000hours/18months whichever comes first

 

 

Functions: RoRo tractor (used with trailers to transport containers in the GPHA yard and onboard operations

 

 

Functions: RoRo tractor (used with trailers to transport containers in the GPHA yard onboard operations

 

 

Year of purchase: march 1995

 

 

Year of purchase: August 2002

 

Source: Ghana Ports & Harbours Authority (1997-2010)

Table 3: Long Bus

GV.967A

Long Bus

7

GV.130X

Malcopolo Bus

Manufacturer: NEOPLAN

 

 

Manufacturer: Scania

 

Capacity :65 seater bus

 

 

Capacity: 65 seater bus

 

Warranty: 100,000km or 3 years

 

 

Warranty: 100,000km or 3 years

 

Functions: transporting labour (Staff Bus)

 

 

Functions: transporting labour (Staff bus)

 

Year of purchase: January 1993

 

 

Year of purchase: 2005

 

Source: Ghana Ports & Harbours Authority (1997-2010)

Table 4: Saloon cars

8

GR.6636S

Saloon Car PASSAT (2000 Model)

9

GN.88Y

Saloon Car PASSAT, (2008 Model)

 

Manufacturer: VW

 

 

Manufacturer: VW

 

 

Capacity :5 seater manual saloon car

 

 

Capacity :5 seater automatic saloon car

 

 

Warranty: 100,000km or 3 years

 

 

Warranty: 100,000km or 3 years

 

 

Functions: Utility car

 

 

Functions: Utility car

 

 

Year of purchase: July 2001

 

 

Year of purchase: December 2007

 

 

 

 

10

GC.535Z

Saloon car (Toyota Corolla)

 

 

 

 

Manufacturer: Toyota motors

 

 

 

 

 

Capacity :5 seater manual saloon car

 

 

 

 

 

Warranty: 100000km or 3 years

 

 

 

 

 

Functions: Utility car

 

 

 

 

 

Year of purchase: November 2008

 

Source: Ghana Ports & Harbours Authority (1997-2010)

The foregoing tables present information obtained on the equipments and machinery (1 to10) that were sampled during the course of the study.

3.10

Analysis of Data

Reponses to the interview were presented as reports on various groups of equipment and then critically analyzed based upon certain background or standard norms in selecting and replacing equipment. Data on preventive and corrective maintenance costs, fuel cost and labour costs that have been collected over time by the authority on the selected equipment was also sorted out and aggregated appropriately. Cedi equivalences were used in all computations and costs in the old currency notes were transformed into the new currency notes (New Ghana Cedi).

In analysis, costs comparison of equipment lifespan was made with regards to equipment lifespan rather than the use of Replacement models such as the Orenstein's model to make appropriate deductions for future policy. This was because data available was short of details on annual rates of return on equipment and various interest and exchange rate regimes.

CHAPTER FOUR

RESULTS AND DISCUSSION

4.0 Introduction

This chapter presents the analysis of data that was collected from the sample of ten (10) selected pieces of equipment in the Ghana ports and harbours authority. Analysis covers costs in maintenance and other running costs to generate statistics to make meaning of the information that was gathered. Also, the analysis of data is complemented by the discussions of relevant findings in order to achieve the objectives of the research.

4.1 Response from Interviews

The engineering department of the Ghana Ports and Harbours Authority was established around the year 1986 (http//www.ghanaports.gov.gh). Prior to 1986 GPHA had a department that performed engineering activities though it was not on a very wide and varied scale as it is presently. The basic functions of the Mechanical Engineering Department GPHA is to maintain and repair GPHA equipment such as: reach stackers, trailers, forklifts, tractors, mobile cranes, generator sets, buses, pick-ups, saloon cars and fire fighting equipment (http// www.ghanaports.gov.gh). The port has 184 heavy-duty equipment and a fleet of 140 vehicles. Most of these pieces of equipment come from the European Union, notably UK, Spain, Germany and also from USA, India and Japan. The Authority categorizes its equipment by tonnage and main functionality and vehicles by capacity. GPHA has the following broad range of equipments (http// www.ghanaports.gov.gh):

Vehicles (Transportation equipment) such as saloon cars, buses, pick-ups and cross country.

Civil engineering equipment (i.e. digging or earth moving machines)

Lifting equipment such as reach stackers which are used to lift containers from vessels, mobile cranes for lifting heavy components, forklifts for stuffing and unstuffy containers.

Tractors and trailers which pick containers form the quays and send to the stacking yards for unloading and reloading to the vessels.

Generator sets which are mainly power supply machines

Septic emptier and sewage machines: the septic emptier carries excreta to the pumping station and the sewage machine pump treated excreta into the sea.

Fire fighting equipment: this includes a fire tanker, water tanker and hydrants. The water tanker is also used to serve water to vessels that berth at the port for a fee.

4.2 Facts About Replacement of Machines

Since its inception the GPHA has replaced in excess of 300 equipment and about 30 machines are selected for replacement every other year while about 66% of requests are affected. The most replaced equipment is the reach stacker, tractors (terminal and RoRo) and saloon cars. It is important to note that equipment is selected for replacement through evaluation. (Alhaji Huseini Suleiman, General Manager, Engineering, personal communication).

4.3 Analysis of Cases

A conclusion on the economic advantage of equipment selection and replacement is reached based on the responses from managers of the engineering department. It is also based some empirical data that suggest to the researcher the performance of the equipment of the authority. Ten pieces of equipment were selected for this purpose.

4.4 CASE 1: Cost Comparison and Evaluation of Reach Stackers

FLT-4501 was scrapped and replaced with an SMV machine. Cost analysis shows that a KALMAR reach-stacker is a better buy compared to an SMV reach-stacker. This is in regards to both preventive and corrective maintenance costs and fuel costs. Both machines have equal guaranteed life span and price of the asset vary, with the KALMAR commanding the higher price.

Table 5: Cost Comparison and Evaluation of Reach Stackers

FLT-4501

FLT-4507

FLT-4505

Costs

Corrective maintenance

Costs

269,762.00

7,187,130.80

3,394,476.55

Preventive maintenance

Costs

23,194.42

1,782,630.12

795,753.01

Fuel costs

234,000.00

97,632.00

34,596.00

526,956.42

9,067,392.92

4,224,825.56

Labour costs

732.70

1,438.60

769.24

Total

527,689.12

9,068,831.52

4,225,594.80

Source: Ghana Ports & Harbours Authority (1997-2010)

Comparison of FLT-4501 (KALMAR) and FLT-4507 (SMV) is made with respect to FLT-4505 (KALMAR). Total costs comparison between the scrapped and replaced machine show that the scrapped machine bore far less costs until it was scrapped than the new machine (i.e. 5.8% of the replacement). However, the KALMAR which was purchased in 1997 was said to be an exceptional case as it was scrapped early but replaced after some years, said Mr. Alhaji Huseini Suleiman, General Manager of GPHA, Engineering Division. A substantive analysis is then made between the new replacement FLT-4507 SMV and FLT-4505.

Though the KALMAR was bought earlier than the SMV, it has attracted less cost (46.6% of cost incurred on SMV) than that incurred for the latter. To factor out the effect of labour which is independent of the equipment, the costs incurred for the KALMAR is about 46.59% of costs expenditure for SMV. This is partially explained by the average downtime of the machines. While the KALMAR breaks down twice a month on average, the SMV breaks down 4 days in a month. With a manufacturer's lifetime of 10 years for both equipments, each equipment is made to run 250 hrs or for 1 month whichever comes first after which it is serviced. Thus on running costs and output, the KALMAR FLT-4505 is cost effective and efficient than the SMV FLT-4507 in the light that average downtime is loss of productivity or loss of revenue. Taking the purchase price of a machine into consideration, the total expenses (purchase price and running costs) of an SMV outstrips that of a KALMAR as can be seen after six years use of SMV and 10 years of KALMAR.

CASE 2: Cost Comparison and Evaluation of Tractors

KALMAR (35 tonne), RTR-3507 was scrapped and replaced with a MAFI (36 tonne), RTR-3607. The figures at a glance show that the replacement was advisable. Furthermore, cost analysis in Ghana cedis shows that a pursuit of preventive maintenance is better than a corrective maintenance, all things being equal [If we denote things in ghana cedis, inflation could cloud the real cost of things and lead us to make wrong inferences].

Table 6: Cost Comparison and Evaluation of Tractors

RTR-3507

RTR-3607

Costs

Corrective maintenance costs

676,013.12

19,892.34

Preventive maintenance costs

3,165.93

8,569.02

Fuel costs

169.35

7,920.00

679,348.40

36,381.36

Labour costs

664.10

634.10

Total

680,012.50

37,015.46

Source: Ghana Ports & Harbours Authority (1997-2010)

At current status of KALMAR and MAFI tractors, the expenditures on the latter which is the replacement is far less; about 5.4% of the expenditure already borne on the scrapped machine. The major part of the cost was attributed to the corrective maintenance of the equipment. The cost alone accounted for 99.5% of total expenses by which the sum itself is over and above the cost of procuring the asset. This incidence could also be indicative of the flaws in the many parts of the KALMAR. A mere GH₵165.93 was spent on preventive maintenance. The preventive maintenance however on the replacement was higher (270%) of the corresponding figure for the scrapped tractor.

CASE 3: Cost Comparison and Evaluation of Long Buses

Mitsubishi long bus, GV.967A was scrapped and replaced with a Malcopolo bus, Scania GV.130X. Cost analysis in Ghana Cedis shows that on the whole the GV.130X is cost effective to operate compared to the GV.967A.

Table 7: Cost Comparison and Evaluation of Long Buses

GV. 967A

GV. 130X

Costs

Corrective maintenance costs

21,287.84

10,768.74

Preventive maintenance costs

352,919.86

4,425.05

Fuel costs

33,600.00

34,284.60

407,807.70

49,478.39

Labour costs

694.00

664.10

Total

408,501.70

50,142.49

Source: Ghana Ports & Harbours Authority (1997-2010)

Bought in 1995, the 65 seater long bus incurred running costs in excess of GHC400, 000 which is more than twice the price of the bus The Malcopolo bus just about 5 years old on the other hand has already incurred a little in excess of GH50, 000.00. Though over different time periods, the preventive maintenance costs of the GV.967A is approximately 80 times (7975%) of the corresponding figure for the long bus which is currently in existence. The bulk of the costs was in the preventive maintenance costs. The corrective maintenance for the scrapped vehicle was also more than twice the corresponding figure for the Malcopolo. It must however be noted that both vehicles incurred just about the same fuel cost: GhC 33,600 for the scrapped bus and GhC34, 284 for the new bus. Both buses had a guaranteed life span of 10 years. Therefore, decision on cost-effectiveness should be in favour of the new bus GV.130X taking the cost of fuel as a reference for analysis. The premise is that, having incurred the same amount of fuel cost, the runtime of these equipment are probably the same irrespective of the time they were acquired.

CASE 4: Cost Comparison and Evaluation of Saloon Cars

A VolksWagen saloon was scrapped and replaced with a Toyota Saloon.

Table 8: Cost Comparison and Evaluation of Saloon Cars

GR.6636S

GC.535Z

GN.88Y

Costs

Corrective maintenance costs

700.53

70.00

328.21

Preventive maintenance Costs

218.50

61.93

253.19

Fuel costs

4,853.52

612.53

951.13

5,772.55

744.46

1,532.53

Labour costs

350.10

57.80

110.50

Source: Ghana Ports & Harbours Authority (1997-2010)

Total

6,122.65

802.26

1,643.03

The Volks Wagen Saloon (GR.6636S) which was scrapped and replaced with a Toyota (GC.535Z) has much of its expenditure in fuel costs. However, given its time of acquisition compared to the age of its replacement (i.e. Toyota), any comparisons could be biased. The comparison is thus made of the Toyota Saloon and the GN.88Y (acquired earlier), which is a VW model, Passat. The two vehicles are only 11months apart on dates of acquisition. Over the years, two-year period for the Toyota and 3 year for the Passat, the latter has incurred over running costs of more than twice of the figure for the former. This is reasonable as the Passat was acquired first.

It also gives the impression that as the equipment aged, its maintenance costs grew (see maintenance costs for Passat, GN.88Y and Toyota GC.535Z-Appendix 3). Nonetheless, all things being equal, the average expenditure on maintenance (excluding fuel costs and labour) for the Passat is very high (440.6% of expenditure for the Toyota) in comparison with the Toyota Saloon. It is too early to decide however, which is a cost-effective brand and decide on pursuance of a vigorous preventive maintenance or not.

4.5 On Systematic Data Collection and Replacement of Equipment

The activity of equipment selection and replacement starts from a daily inspection and information on the condition monitoring report on equipment. To pursue this effectively the authority has an engineering service request form which states the description of faults within a machine upon inspection or when in use. Engineers are prompted to check on equipment based on the readings on hour meter of the machine. Hence when the machine runs for 250 hours, after which its engine oil is changed and after 20,000 hours all lubricants in the equipment are changed. It is for this reason that an equipment service life is measured by the hour meter, the engineer explained.

To make the above process more effective, the engineering department switched to a digital collection of data using computers by entering data onto software in 1999 (Alhaji Huseini Suleiman, General Manager, Engineering, personal communication). This process was experimented for a year before. The software is made to capture registration numbers, engine numbers, chassis numbers, make and year and model of equipment. It also captures: the permissible gross weight, net weight, persons allowed unto an equipment, amortised life, rate of depreciation, annual licence, indent/invoice number supplier, purchase date, price paid F.O.B, price paid freight, price paid C.I.F, cost of body work and total costs. The others do with specifications such as tyres of moving equipment, repairs and maintenance, monthly mileage, expenses and earnings and oil change for engine, gear box, transmission and back axle and steering.

It takes the Authority on a year to get equipment to the shores of Ghana following a purchase request and it takes about six (6) weeks to set up that equipment for usage upon arrival (Alhaji Huseini Suleiman, General Manager, Engineering, personal communication). Succinctly, the replacement policies of the GPHA are 5 years for saloon cars, 8-10 years for shore-handling equipment. Nonetheless there are times that it takes a longer period for machines to be replaced as it is replaced as and when it breaks down beyond repairs.

4.6 Financial Methods and Financing of Replacement of Equipment

Equipment is financed using excess internal funds, and tax money from government. Some financed are pursued using loans from banks, while others are financed by grants where the Government of Ghana offers a sovereign guarantee of the loan facility (Alhaji Huseini Suleiman, General Manager, Engineerring, personal communication). There are also external grants which are mostly from the manufacturing country. There are also budget allocations for replacement of equipment. In replacing equipment decision making process and proposals go through a number of stages as shown below.

Budget meetings are organized

Reports are sent to GPHA Board for approval

Engineer supports with proposal to change equipment

The Board seeks approval from the Ministry in charge of the Port.

Figure : Decision Making Process with Regards to Equipment Selection and Replacement

The budget meetings normally have the finance department in attendance where the department usually advises on how the equipment selected for replacement can be purchased. The Board usually requests information on costs to preventive and corrective activities. This is normally requested from the financial management committee. The interview also revealed that the finance department uses a software which outlines the costs of specific expenditures on individual equipment are not traceable.

4.7 Discussions of Findings

The process of equipment selection and replacement in the Ghana Ports and Harbours Authority seems deficient in its basics. The basic element of selecting equipment for replacement and subsequent replacement starts from simple cost comparisons of two models or brands of equipment that perform the same function. Given that they have the same life span, the KALMAR and SMV reach-stackers for example present equal alternative in utility only with respect to guaranteed life span (Alhaji Huseini Suleiman, General Manager, Engineering, personal communication). A consideration of purchase price tips the SMV equipment as choice for replacement but expansion of the cost analysis to include running costs show that the KALMAR offer more value for money in terms of utility and cost savings than the SMV.

The comparison of KALMAR and MAFI tractors also concludes that a pursuit of preventive maintenance might help to save a lot of expenditure on corrective maintenance and the MAFI has more value for money than the KALMAR tractor. Again, analysis of the cost for the long buses shows that Malcopolo bus comes with less running costs and thus the choice as a replacement has been fruitful. However, analysis on the saloon vehicle is quite inconclusive as the vehicles for comparison have only been used for a short while though the VW brand shows a higher annual average maintenance costs.

The total research analysis and prior data collection also proved the difficulty and challenges of the Authority to embark on systematic data collection. In addition, a brief review of financial methods for replacement of equipment, though exhaustive in terms of protocol, is deficient in considerations of an expert's advice on appropriate replacement given the subsequent outcomes of purchases of equipment. A stringent policy which has a sole object of reducing costs in the long run could be formulated and consistently adhered to. Further an integrated system of policy complemented with the appropriate use software which should be consistently upgraded could define a system that facilitates the activities on replacement of equipment.

The following paragraph will discuss: results on the specific machines used for the case study and the paragraphs that follow after will discuss the economic advantages in implementing an appropriate replacement of equipment and a system that can facilitate the activities of the replacement, while discussing the advantages of systematic data collection to that effect.

4.8 Discussion of Cases of Equipment Selected

The introduction of other intervening variables such as: inflation rate, rate of depreciation, overhead costs, insurance, availability of funds, terms of payment of asset, foreign exchange rate risks, and after sales service, apart from simple costs analysis as presented in the preceding, could probably have a bearing on the overall cost considerations for the assets being compared. Available data on exchange rate regimes especially within the immediate past decade and after sales service and financing of equipment does not provide a peculiar cost advantage for either the SMV or the KALMAR or any of the groups of equipments being compared. Against all indications the KALMAR reach stacker, presents a better alternative in terms of overall costs (which includes both acquisition and maintenance) compared to the SMV. Maintenance costs excluding cost of labor for the SMV is more than twice the figure for a KALMAR. Though the acquisition costs of the SMV is quite lower, it has very high maintenance costs. However, cost comparison of tractors presented a different scope of analysis.

The analysis suggests that a pursuit of preventive maintenance for tractors is more advantageous than a corrective maintenance. As the latter accounted for 99.5% of costs on the existing MAFI equipment. However, this should be pursued against the background that the component to be replaced of the equipment has an increasing failure rate. In addition, the cost of preventive maintenance must be less than the overall cost of a corrective action. Here corrective costs included; ancillary tangible and/or intangible costs such as downtime costs, loss of production costs, lawsuits over the failure of a safety-critical item, loss of goodwill among others.

The case of the MAFI tractor however, is in contrast to the situation with the Mitsubishi long bus. The Mitsubishi long bus had huge preventive costs which inflated the overall costs to be about 8 times (818.9%) of costs for maintaining its replacement, a Malcopolo. Data suggests that management has diverted to pursuing more corrective maintenance. A plausible explanation to the high preventive costs of maintenance could be that the preventive maintenance of components has an exponential distribution where there is always a constant failure rate.

4.9 The Economic Advantages in Implementing the Appropriate Replacement of Equipment

The economic advantages in implementing an appropriate replacement of equipment are not farfetched. Opinion of the engineering department and literature reviewed run parallel. The engineering department recognizes the reduction in general overall cost, reduction in cost of labor as technicians experience curve goes up. Enhancement of efficiency in the management and use of working capital, competitive edge, sustainable competitiveness, enhancement of the corporate image of the company and 'motivated workers' are also seen as very important advantages if the outfit were to pursue a vigorous and efficient process of selecting and replacing worn out or depreciated and faulted equipment.

Empirically or rather incidentally, all these advantages are still relevant in GHPA. This is because the Authority cannot be seen to be pursing an appropriate replacement program yet. Grant (1950) in this respect provides procedures for analyzing and reaching solutions to the economic replacement problem. He proposes that three factors be seriously considered:

(1) More efficient equipment is to be introduced before replacement,

(2) The value of money should be constant over the life of the equipment and,

(3) The annual operating cost of the equipment is non-decreasing.

In a discussion with some of the engineering staffs, they admitted how protocols and financial constraint faced by the authority does not allow the most efficient equipment to be purchased. Nonetheless, the cause of this seeming deficiency could also be attributed to very poor data collection and the lack of a conscientious study of the various variables that affect the lifespan of a machine to inform analysis and decisions. Some of these variables in question are an ideal length of time of usage of equipments per day and adherence to specified tonnage capacity of equipment. For example, a tractor or reach-stacker is supposed to work for about 8 hours in a day. However, they are stretched beyond that time limit most often. This has an effect on the machine in the long run and could prompt for high corrective and preventive maintenance costs.

4.10 The Advantages of Systematic Data Recording in Decision Making on Equipment Selection and Replacement

Systematic data collection has been quite elusive in GPHA. Systematic data collection involves a conscientious effort to collect data consistently over time. GPHA has the perfect platform to collect all data that could ultimately inform quite exhaustively selection of equipment for replacement. As stated in the first major section of this chapter, the software, called Main saver, introduced in 1995, tracks all activities of the harbour. With an interface that allows the various departments to enter and retrieve data, the software could give prompt and detailed information on individual equipment. However, the retrieval of data for this research which met very serious difficulties makes underlines the fact that the workers of the various departments are not thorough in entering data.

The evidence of poor data entering and monitoring is that the Authority has spent so much on maintenance costs and in some situations, fuel cost has been high. An ideal data collection process comprises entering into the main saver all activities (variables) pertaining to an equipment. These variables include costs of direct labour (hourly wage rates) and direct materials (unit material costs), rate of production, a measure of labour efficiency, amount of scrap produced, and earnings on a machine taking into consideration its condition. These variables can provide detailed information on the overall performance or productivity of a machine. This helps to make decision-making on which equipment should be scrapped easier and faster.

Subsequently decision as to which is the best replacement with optimum economic value becomes very feasible. This is so because the Authority has different brands of the equipment. In an ideal case, data that has been consistently collected would certainly provide reliable performance charts that would help effect an efficient comparison of the alternatives available.

A decision on purchases becomes more important than as variables considered are wide ranging and have gone beyond educated guesses. In this light it is important that the authority formulate and implement an efficient policy that automatically brings equipment up for selection to be replaced.

4.11 A System that can Facilitate the Activities on the Replacement of Equipment

In furtherance to the above, any proposed policy should be integrated with the Main saver (software used at the GPHA) activity in such a way as to prompt workers in the engineering department of which equipment is likely to be selected for replacement. This will enable prior financial, utility or capacity evaluations, and cost-benefit analysis of the selected equipment and possible options for replacement to be made. Pursuance of this would help to determine whether the proposed system (herein) can effectively facilitate the replacement of equipments. This should help answer our third research question.

In this light, first, the equipment analyst who is the engineer must define the scope of the following proposed factors in considering alternative replacements:

the investment required the equipment's service life,

its terminal salvage value, the rate-of-return requirement and

the annual revenues and operating costs associated with each alternative.

The estimation of values for these variables or factors should be thorough and efficient. It then becomes pertinent that estimates of initial investments, service lives, salvage values, revenues, and operating costs, requires that management establish a minimum attractive rate of return.

Secondly, the procurement policy needs to be streamlined to be able to attend to situations that need prompt action. This ultimately would help save costs in terms of reduction in downtime, and meeting demand (a function of profitability) promptly. Recognising these advantages, a well-integrated system of policy and upgrading of Main saver to do more effective prompting should be pursued. This system should be characterised by a total quality management (TQM) and a strong drive for efficiency from various personnel. Much of the onus, however, lies on labour to do what is desirable. Currently the main saver is capable of evaluating the costs and earning or otherwise, productivity of the various machines which data is collected on. In this respect, an efficient measure of productivity is very important. As interview with the some of the engineers of the engineering department revealed that there is not any monetary value assigned to the output of machines, for example. A use of the hour meter on a machine as a proxy could present computational problems.

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.0 Summary of Findings

The study found from discussions with the engineering and finance departments that, protocols and financial constraint faced by the Authority does not allow the most efficient equipment to be purchased. Nonetheless, the cause of this seeming deficiency could also be attributed to very poor data collection a lack of a conscientious study of the various variables that affect the lifespan of a machine to inform analysis and decisions. Systematic data collection has been quite elusive in GPHA. Systematic data collection involves a conscientious effort to collect data consistently over time.

Also, as an example, against all indications the KALMAR reach-stacker, presents a better alternative in terms of overall costs (which includes both acquisition and maintenance) to the SMV. Maintenance costs excluding cost of labour for the SMV is more than twice the figure for a KALMAR. Though the acquisition costs of the SMV is quite lower, it has very high maintenance costs.

The evidence of poor data entering and monitoring is that the authority have spent so much on maintenance costs and in some situations fuel cost have been high. An ideal data collection process which comprise of entering into the main saver all activities pertaining to an equipment including costs of direct labour (hourly wage rates) and direct materials (unit material costs), rate of production, a measure of labour efficiency, amount of scrap produced, and earnings on a machine taking into consideration its condition can provide detailed information on the overall performance or productivity of a machine.

5.1 Conclusions

In conclusion, there are difficulties confronting the port and harbours industry in its attempt to apply the theory of equipment replacement in practice. Also, it is concluded that a pursuit of preventive maintenance might help to save a lot of expenditure on corrective maintenance that accrue to the companies in the industry all over the world. It is incumbent on management of companies in the sector to adopt practical and result oriented methods that will ensure efficiency in operations and also guarantee cost reduction in the process.

In doing this, there are a number of simplifying assumptions, and role-of-thumb techniques as the short pay-off period requirement for equipment maintenance and replacement. Also, management of ports and harbours must take cognizance of the fact that judgment and experience must play the most important role in this area of decision-making when buying and disposing of equipment and machinery. This is because theoretical approach can make its intended contribution only if fairly precise estimates can be made of the future.

5.2 Recommendations

Based on the findings, it is recommended that GPHA must employ the services of experts in supply chain management to advice on appropriate replacement given latter outcomes of purchases of equipment. Such experts should guide and implement stringent policy which has a sole object of reducing costs in the long run could be formulated and consistently adhered to. However, in doing this, it must be emphasized that, such policies should not stifle the smooth operations of GPHA.

Further, GPHA should put in place an integrated system of policy complemented with the appropriate use software which should be upgraded continually to facilitate the activities on replacement of equipment. There should be more efficient equipment to be introduced before replacement, the value of money should be constant over the life of the equipments, and the annual operating cost of the equipment is non-decreasing.

There should also be reliable data kept and stored in a database of all equipment which will be continually monitored to keep track of the company's machinery and equipments. Such a database will serve as a quick source of reference for information for all equipment of GPHA as it will track the lifespan right from when it was purchased until it is disposed. Records of periodic maintenance of all equipment should also be kept in such a database. This will ensure that, GPHA will have the perfect platform to collect data systematically that could ultimately inform quite exhaustively selection of equipments for replacement.

Also, it is further recommended that, any proposed policy should be integrated with the main saver (software used at the GPHA) activity in such a way as to prompt workers in the engineering department of which equipment is likely to be selected for replacement so that prior financial, utility or capacity evaluations, and cost benefit analysis of the selected equipment and possible options for replacement can be made.

Recognizing these advantages, a well-integrated system of policy and upgrading of main saver to do more effective prompting should be pursued. This system should be characterized by a total quality management (TQM) and a strong drive for efficiency from personnel in finance department (management accounting systems-MAS) and Procurement.

Lastly, the procurement policy needs to be streamlined to be able to attend to situations that need prompt action. This ultimately would help save costs in terms of reduction in downtime, and meeting demand (a function of profitability) promptly.