Raytheon entered into a comprehensive, far-reaching
partnership with its 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.
Raytheon Systems Company
Strategic Agreements Manager
Name of Program
Chemical & Gas Management Program (CGMP)
Program Start Date
Raytheon 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. Raytheon's core businesses span defense and commercial
electronics, business aviation and special mission aircraft, and
engineering and construction.
CSP engaged in a collaborative effort with Raytheon's
Air Force Plant #44 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, Raytheon
recognized the potential value of a CMS program and launched a company-wide
initiative. Today, Raytheon's CMS program includes over 70 facilities
at more than 30 sites.
All chemicals, gases and wastes
Scope of Services
• 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 garnishing or "shared
• Bonus for chemical use reduction
Drivers For Program
• 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
CSP Pilot Program
CSP worked with Raytheon to:
• establish a cross-functional site team
including representatives from purchasing, environmental, warehouse
and delivery, quality, finance, engineering support and waste management;
• 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 (CGMP) 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.
Results of the Analysis
• 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 evry 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.
• Raytheon 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.
(The changes were not implemented due to the merger with Raytheon
and transfer of the PWB Fab out of Tucson).
• 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
- Scrap Rates Reduced By 250%
• 10-20% net savings in first 2 years
(5 Yr. ~ 30-40%)
- Direct (commodity) and indirect (structural) costs
• Reduced waste
- Consolidated inventories & higher inventory turns
• Customer satisfaction continually improved
- Supply, tech center, supply optimization, service, cost savings
• 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.
• Radian 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%)
Key Elements for Success
• 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 solution.
• The Department of Defense imperative
for cost reduction, forced commitment from upper management to consider
• The merger created an atmosphere of
change thus making it easier to propose a new program for managing
• This was the third attempt at implementing
a CMS program, and there was much skepticism.
• Union labor was generally opposed to
• 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
• Lacked involvement and support from
an upper management champion in the beginning. It was a round-up
• 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 management.
• 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.