Manufacturers look to outsource chemical management
By Brian Milligan -- Purchasing, 11/4/1999
As more and more OEM companies continue to focus exclusively on product design, development, and manufacturing, purchasing continually seeks suppliers that can take on additional tasks. Chemical management is high on the list.BetzDearborn, a supplier of water-treatment chemicals, systems, and services, says it can help OEM companies stop worrying about chemical management. And it says it can do it cheaply.
BetzDearborn has introduced a new chemical supply chain management program called Link Sourcing. The program is designed to help customers lower costs while at the same time complying with environmental mandates.
Through Link Sourcing, the Pennsylvania-based BetzDearborn provides a customer with chemical management expertise and impacts just about every aspect of their chemical supply chain. The program is designed to consolidate chemical procurement and services, follow chemical management through its life cycle, reduce overall chemical consumption, and provide technical support in engineering departments. Through software programs, it examines a company's chemical management data, monitors trends, and looks for improvement possibilities.
Outsourcing chemical management
The Link Sourcing program is designed to give customers more time to focus on their own core competencies. Essentially, the program leaves all worries about chemicals and their disposal to BetzDearborn employees.
"They are trying to buy as cost-effectively as they can to provide a procedure that will work for AM General," says Judi Brinley, senior purchasing manager for the Indiana-based AM General Corp. BetzDearborn is now in the process of setting up a Link Sourcing program at the company.
The program is also designed to reduce customer costs by streamlining procurement procedures, inventory management, reduced environmental liability, and improved process performance.
Link Sourcing provides a customer with three levels of support. These include on-site aids and clerical workers who help attend to a facility's supply chain needs. It also provides technical-support workers who are available 24 hours a day, and a site manager who acts as a liaison between the supply chain and the customer. The system starts by providing teams that give manufacturers expertise on information systems, purchasing, engineering, distribution and technology, as well as service and operations management. The teams work with the customers to find solutions designed to improve the company's bottom line.
Supply chain operation
To do this, the Link Sourcing teams look over their customer's chemical supply chain operation. In some cases, they attempt to find more affordable solutions through different supplier partnerships. The team members try to find the right mix; one that would provide cost reduction and better solutions to chemical waste management. They take over electronic commerce, budgeting, purchasing functions, inventory, invoices, and management of certain tools.
"We sit down with the customer and jointly explore the different areas of cost reduction," says Ted Lawson, director of marketing for BetzDearborn's North America operation. "Once we've identified them, we develop project teams and time lines to carry them out, assign objectives, and then work through the project."
"It is the industry expertise we bring, the engineering approach," says Carl Hagen, marketing manager for transportation manufacturing at BetzDearborn.
Each program is tailored specifically to the customer. The programs either stand on their own or are blended into their supply chain scheme. Lawson says in this situation, Link Sourcing teams may naturally expand their sphere of influence in the operation.
"We find that as we go about normal service activity, if we turn around in a plant and see something that through an engineering and technology mindset that doesn't look right, we ask questions," Lawson says. "We find a lot of cost savings can be realized in areas outside of the normal scope of involvement."
Link Sourcing provides three software programs. They include programs on chemical supply chain management, chemical application and performance, resource management, environmental reporting, and productivity improvement.
Lawson says the company began to formulate the Link Sourcing plan after watching customers' increased concerns and exasperation about chemical-related costs and disposal.
"We noticed in the past few years, customers were more aware of additional costs they incurred in dealing with chemicals," Lawson says.
Dealing with problems
Lawson explains that the cost per pound of different chemicals was only one of the problems the companies were dealing with. Add to this the cost of moving chemicals, storage, disposal, worker safety, containers, and a myriad of other things. He says BetzDearborn's plan was to take away the worry and costs and help the companies gain a competitive edge.
"We said, 'How can we make their situation better?' Hence, Link Sourcing," he says.
In effect, the Link Sourcing teams take over most of the operation when it comes to the use of chemicals. "We become the new sheriff in town," Lawson says.
In many ways, this is all well and good for Link Sourcing customers like AM General Corp., which builds the military's Humvee and the civilian model, the Hummer. Brinley says AM General was eager to find chemical experts who were willing to step in and take over the more troubling aspects of chemical management. "We want one responsible party," she says.
"We had to find a source that would reduce cost and work with us in providing services and chemicals for our operation," she continues. "We wanted them to be responsible from beginning to end--from the processes to the purchasing of chemicals to the disposal of waste created by those chemicals. The main objective of course was to reduce cost."
Brinley says AM General chose BetzDearborn's program after it underwent a selection process.
An ironic challenge
But Brinley says it can be challenging to make Link Sourcing work. Brinley says a major stumbling block involves getting unions to buy into the process--and the fact that someone new is calling out the orders.
"It has not been an easy task and there are obstacles to overcome," Brinley says. "The culture requires change and it is imperative to get the hands-on employees to buy into the program by having them share in the decision-making."
Brinley says AM General is trying to work with the union now, convincing it that chemical experts are needed if the company is to save money.
"We're not there yet, but we are making headway toward reducing our costs with our chemical management program with BetzDearborn," she says.
Michael Young, area manager for BetzDearborn, agrees that this can be a sticking point. But he says companies must try hard to get union members to see the benefits of a program like Link Sourcing.
"It's a challenge, but it's not something that's impossible," says Young. "You have to work with the union workers. Once you've bridged that gap, it makes it a lot easier to get things done. If you have their opposition, it will make things a nightmare for you."
Mike Merrick, environmental engineer for the Wisconsin-based General Motors Truck Assembly, has used Link Sourcing as a tier-one chemical management supplier since 1990. Merrick says it was indeed a challenge to convince the union to believe in it and work with it.
"We've had our challenges with unionized people," Merrick says. "But the issue from my viewpoint isn't so much somebody telling them what to do. You have got to look at what motivates somebody."
Merrick says the Link Sourcing representatives were able to get around the problems by approaching them in a way that was non-threatening. Instead of trying to tell them how to do their jobs, they took the approach of teaching them how to use chemicals more efficiently.
"They don't want a chemical manager to come in and have someone else do their work," Merrick says. "That is where we run into problems. If they perceive you are threatening their job, you've got yourself a battle. But if they perceive you are here to make the job run more efficiently, you've got yourself a buddy."
Merrick says the good points of Link Sourcing far outweigh the challenges. He says the program accomplishes what it promises to accomplish. It frees up automakers from worrying about chemical management and allows them the time they need to focus on building cars. Meanwhile, he says Link Sourcing saved the assembly plant 20% on its purchasing costs. Fritz Benton, site manager for Merrick's plant in Janesville, says he has documented $6.5 million worth of savings at the plant through Link Sourcing.
Merrick says Link Sourcing accomplished this by eliminating unnecessary chemicals from the plant and greatly reducing the amount of other chemicals used. This saved money and saved time.
"My focus is on building trucks. I am not a chemicals man," Merrick says. "That is why I hired BetzDearborn. Now I can focus on my core business."
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