Name of Program: Chemical & Gas Management
This Customer entered into a comprehensive, far-reaching
partnership with their service-provider, Radian, in May 1999. The
5-year contract covers the entire lifecycle of chemical management
for all chemicals and gases including procurement, inventory, delivery,
waste disposal, and data management. The contract includes incentives
for gainsharing, or "shared savings," for reductions in
chemical use and purchase price and improved process efficiency.
This customer is one of the world's leading diversified
technology companies with worldwide 1998 sales of more than $19
billion and more than 100,000 employees. Their core businesses span
defense and commercial electronics, business aviation and special
mission aircraft, and engineering and construction. CSP engaged
in a collaborative effort with their Air Force Plant in Tucson,
Arizona in 1996. The specific objective was to identify chemical
use reduction opportunities and consider chemical management services
(CMS) as a strategy to improve their chemical management system.
Following this initial pilot project in Tucson, the
customer recognized the potential value of a CMS program and launched
a company-wide initiative. Today, their CMS program includes over
70 facilities at more than 30 sites.
• Sourcing and procurement of chemicals
• Supply side management of cylinder
and bulk gases
• Inventory Management (offsite)
• Just-In-Time Delivery
• Delivery to point of use (optional)
• Technical support and process optimization
• Data management and EH&S reporting
(MSDS, use tracking etc.)
• Management and disposal of wastes
• 5 year contract covering over 30 sites
• Service fee
• Incentives for gain sharing or "shared
• Bonus for chemical use reduction
• Reduce chemical lifecycle cost at each
• Outsource areas that were outside of
• Seek strategic alliances with suppliers
• Reduce purchase and inventory costs
by leveraging across the Company
• Reduce waste
• Improve data management for environmental
• Desire to become one company
despite multiple systems, cultures, and procedures that resulted
from recent merger
worked with the customer to:
• establish a cross-functional
site team including representatives from purchasing, environmental,
warehouse and delivery, quality, finance, engineering support and
• conduct a process mapping
exercise to determine how chemicals move through the facility;
• conduct a materials accounting
analysis of one painting operation to determine material emissions
and the cost of material cost;
• conduct a chemical management
cost analysis to assess the total cost of chemical use for the facility;
• expand the chemical management
cost analysis to the top 10 chemical using facilities in the company;
• develop the scope of a
new chemical services program (Chemical Gas Management Program)
and issue an RFP; and
• review and help negotiate
a final agreement with Haas TCM, formerly Radian International,
with specific incentives for cost and chemical use reduction.
• The process map identified
six different information systems and more than twenty discrete
organizational functions supporting chemical management.
• The cost analysis revealed
chemical management costs of $1 for every dollar of chemicals purchased.
• Paint shop analysis provided
necessary information to validate a move to powder paint and other
investments in transfer efficiency technologies. In the same area,
efforts are underway to eliminate redundant inks and paints that
often result in needless waste generation.
• The customer replicated
the materials analysis in the printed wiring board shop and proposed
significant changes to the facility's waste treatment processes
to result in reductions in energy use, treatment chemical use, and
hazardous waste generation. Conservative estimates suggest annual
operating savings of $400,000.
• Operations streamlined
via automated ordering and tracking system - (tcmIS): ~20,000 chemicals
& gases, ~1,000 waste profiles on-line
• Improved service and quality
- On time delivery & purchase order (PO) cycle time reduced
10-20% - Scrap Rates Reduced By 250%
• 10-20% net savings in
first 2 years (5 Yr. ~ 30-40%) - Direct (commodity) and indirect
• Reduced waste - Consolidated inventories
& higher inventory turns
• Customer satisfaction
continually improved - Supply, tech center, supply optimization,
service, cost savings areas recognized
• Based on the results of
the materials accounting (MA) analysis, the facility took steps
to improve its paint application efficiency in its main painting
area, resulting in an estimated 71% decrease in paint waste.
• The Chemical Manager implemented
an internet enabled chemical lifecycle outsourcing program with
aligned incentives for cost reductions and process efficiency improvements,
including chemical use reduction and cycle time reduction.
Some examples of specific benefits
|• Commodity savings: minimal
||• Commodity savings: 15.5%
|• Accounts payable: 5
||• Accounts payable: 1
|• Purchase orders/yr: 43,000
||• Purchase orders/yr: 0
|• 6 Sites on Program
||• 34 Sites on Program
|• Suppliers: 1300
||• Suppliers: 1
|• MSDS processed/yr: 2000
||• MSDS processed/yr: 200
|• Inventory turns: 3-4 Months
||• Inventory turns: 1 week
|• Square footage: 67k sq. ft
||• Square footage: 17k sq. ft
|• Scrap: $750K/YR
||• Scrap $62K/YR
|• Acceptance rate: 96.63%
||• Acceptance rate: 99.74%
|• Headcount: 75
||• Headcount: 35 Key
|• PO cycle time: 3-7 Days
||• PO cycle time: 2 Days (73%)
• The CSP cost analysis
and the initial successes of the materials analysis justified moving
ahead with a comprehensive program.
• This cost analysis was
replicated at the top 10 chemical using facilities. The information
provided the basis for the RFP.
• The major goals announced
by the new CEO of Raytheon were directly in line with the CMS program:
reducing costs and usage and implementing an integrated, nationwide
• The Department of Defense
imperative for cost reduction, forced commitment from upper management
to consider major changes.
• The merger created an
atmosphere of change thus making it easier to propose a new program
for managing chemicals.
• This was the third attempt
at implementing a CMS program, and there was much skepticism.
• Union labor was generally
opposed to the idea.
• Inherent cultural bias
at Raytheon that "we know best" created some resentment
by the team to outsource this function.
• Once cost analysis was
in hand, the Team struggled to define what their vision for chemical
management should be.
• Lacked involvement and
support from an upper management champion in the beginning. It was
a round-up effort.
• The process-mapping exercise
should have been conducted in one of the first meetings. It brought
to light for the entire team the complexity and costs of chemical
• Continuity of program
management-key personnel continued to change and depth in the site
team was necessary for follow through.
• Cultural differences between
legacy companies posed challenges to implementation.