Haas TCM
Total Chemical Management
HAAS TCM - Total Chemical Management Services

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What is Chemical Mangement Services?

Chemical Management Services (CMS) is a business model in which a customer engages with a service provider in a strategic, long-term contract to supply and manage the customer's chemicals and related services.

The CMS model

Traditionally, suppliers' profits are tied to chemical volume-the more chemicals sold, the more profit generated. Under CMS, the providers' compensation is no longer based on volume, but on the quality and quantity of services delivered. This shift to chemical services often aligns the incentives of the supplier and their customer to reduce chemical use and costs. Results to date indicate that the CMS model lowers total chemical costs, and both parties achieve bottom line benefits via reduced chemical use, costs, and waste.

CMS Model with Aligned Incentives

Fig. 1: Aligning incentives

With CMS, chemical service providers offer a range of services across the chemical lifecycle (fig 2). For example, a chemical service provider may purchase and deliver chemicals, manage inventory and MSDSs, provide data for environmental reports, research chemical substitutes, and implement process efficiency improvements. By sharing cost savings, the chemical service provider has an incentive to continuously reduce costs and chemical use.

In a more mature relationship the service provider is often paid a fixed fee for each product successfully produced (e.g., a fixed fee per 100 car doors painted or 1000 circuit boards cleaned). Thus, the chemicals themselves become a cost center which the supplier has an incentive to minimize.

CMS is far more than leveraged purchasing. It is focused on optimizing processes, continuously reducing chemical lifecycle costs and risk, and reducing environmental impact.

CMS Model The Chemical Lifestyle

Fig. 2: The Chemical Lifecycle

Markets

CMS began in the auto sector in the 1980s as a supply chain management strategy. Today approximately 50 to 80 percent of the auto sector uses CMS due to the strategic and cost benefits of the model.

In other chemical-intensive sectors (e.g., electronics, aerospace, metal finishing), penetration is lower. However, CMS is growing quickly in these sectors, and the CMS industry expects strong growth in all sectors to continue. The growth projections reflect the close linkage between CMS and key management trends, including outsourcing based on core competency, supply chain management, and strategic partnering.

The Chemical Strategies Partnership

The environmental and cost benefits realized by initial CMS programs in the auto sector raised two questions: is the CMS model applicable outside the auto sector-and, if so, how can its environmental benefits be maximized?

In 1996, the non-profit Chemical Strategies Partnership (CSP) was founded to explore these issues — to investigate, through demonstration and application, the utility of CMS as a business model for continuously reducing chemical use and waste in a variety of industry sectors.

Towards these ends, CSP has pursued a varied program rooted in hands-on collaboration with manufacturing firms. Having demonstrated the business and environmental value of the model, CSP is increasingly focused on disseminating the model and introducing CMS into new sectors. Major efforts of CSP to date include:

CMS program development with pilot companies

CSP has collaborated in-depth with 10 companies to help develop their CMS programs. Initial collaborators were Nortel, Raytheon Company, AMP, Inc., and a coalition of small and medium sized enterprises in Western Pennsylvania.

CSP assistance ranged from chemical cost baselining to RFP development, contract negotiation, and implementation tracking. (The collaboration with Raytheon resulted in a $200mn, 5 year national contract, one of the largest to date in the industry.)

Currently, CSP is conducting a regional pilot program in Silicon Valley funded by the U.S. EPA. Partners include Seagate Technologies, Analog Devices, IBM, and the Stanford Linear Accelerator Center.

Tools manual and costing methodology

A key barrier to CMS is poor understanding of the actual costs of chemical management. CSP's baselining studies indicate that manufacturers typically spend an additional $1 to $10 to manage every dollar of chemical they purchase. Most management accounting systems do not attribute these costs.

In an effort to address these barriers and disseminate the CMS model more widely, CSP developed its how-to manual, Tools for Optimizing Chemical Management. The manual includes CSP's costing methodology, spreadsheet costing tool, and presentation material for educating colleagues and upper management about CMS.

The CMS Forum

Other barriers to CMS include confusion in the marketplace and lack of standards. To address these issues, CSP and a number of CMS providers came together to create the CMS Forum (www.cmsforum.org). The Forum is a membership coalition of chemical management service providers, their customers, Tier II chemical suppliers, and other stakeholders focused on growing the awareness and practice of economically and environmentally beneficial CMS.

Industry Report 2004

Chemical Management Services: Industry Report 2004 is the first-of-its-kind CMS industry report. Based on an extensive survey of CMS providers and customers, the Report provides a profile of current CMS practices, estimates potential market size on current CMS penetration, and details industry structure.

CSP: Institutional Profile CSP

is a 501(c)(3) nonprofit project of the Tides Center. Initial funding was provided by the Pew Charitable Trusts and the Heinz Endowments.

CSP is staffed by California Environmental Associates (CEA) and the Tellus Institute. San-Francisco based CEA (www.ceaconsulting.com) is responsible for overall management of the CSP program and houses the CSP head office.

For More Information

CSP is on the web at www.chemicalstrategies.org

Principal contacts are:
Jim Kauffman Johnson
Executive Director
423 Washington Street, 4th Floor
San Francisco, CA 94111 USA
+1.415.421.3405
+1.415.421.3304
jill@chemicalstrategies.org

 

Follow the links below for additional information:

Case Study

USA Automotive - This program was transitioned from a previous Chemical Manager ... more »

Case Study

Defense and Aerospace -
The 5-year contract covers the entire lifecycle of chemical management ... more »

important news

Haas TCM Provides Total Chemical Management Services To Raytheon Corporation
(click here to download the word document) ... »

 
 

 

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