Demand for chemical management services to grow
Survey results show purchasing takes lead on chemical outsourcing initiatives
Susan Avery -- Purchasing, 10/28/2009 11:24:16 AM
Results of a new survey of customers and suppliers of chemical management services (CMS) show that despite the global economic recession, the CMS industry will more than triple in size in the next 5-10 years.
Right now, the market in the U.S. is estimated to be approximately $1 billion, according to the CMS Industry Report 2009, conducted by the ChemQuest Group, for the Chemical Strategies Partnership, a non-profit organization in San Francisco founded to help reduce chemical use, waste, risks and cost by transforming the chemical supply chain.
Until recently (2006 through 2008), CMS providers saw revenue growth of more than 30% annually. The industry, like others closely related to manufacturing, has been hard hit of late by the downturn in the auto industry. New growth is coming from facilities in Western Europe, Mexico, Canada and China.
Under the CMS concept, CMS providers partner with customers to manage the entire chemical lifecycle and reduce costs by leveraging purchases, improving inventory management, reducing chemical use and waste, and enhancing IT (information technology) infrastructure.
According to the report, customers who implement CMS can reduce costs by up to 50% in the first year of the program, and continue to see savings five or 10 years into their programs. Customers responding to the survey represent such companies as Intel, Lockheed Martin, Chrysler, Delta Air Lines, Ford, Delphi and United Technologies Corp. (UTC)
Of these respondents, 73% say that at their companies corporate purchasing leads development of the CMS initiative and selection of the CMS provider. Seventy percent of customer respondents purchase more than $1 million in chemicals and gases per year, resulting in an average CMS contract (chemicals and services) of $12.1 million per year per contract.
At UTC, Scott Little, global commodity manager, manages the CMS program as reported recently in Purchasing. Under the company's program, provider Haas TCM supplies CMS services to UTC sites in North America, Canada, the United Kingdom, Italy, Poland and Singapore. UTC realizes cost savings benefits of 5% to 10% from leveraging the buy for materials in the first year per site. Other benefits, Little says, include productivity enhancements and increased inventory turns.
Survey results also show that the CMS supplier base has grown since the last CMS industry report in 2004. It now includes new providers in the U.S., Sweden, Korea and China.
Says Thad Fortin, CEO at provider company Haas TCM, "The value of a CMS program goes far beyond getting a better unit price for a chemical. It is about reducing the multitude of costs and resources associated with storing and managing inventory, delivery, data tracking, compliance reporting and waste handling. These costs often far outweigh the actual cost of the chemical. "
Vice President of Purchased Services
10/26/2007
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