The growth of "business services" has outpaced that of the overall U.S. economy for years. There's been something of a sea change, however, in the scope of these services. More and more target the plant floor. And they are making headway in the chemical industry. An increasing number of plants now rely on suppliers for essential support services such as water treatment and equipment maintenance.
Two well-recognized drivers are sparking this outsourcing trend, say industry experts. Manufacturers want to focus their resources on their "core competency," the activity at which they excel. For most chemical companies this means concentrating specifically on production trains, not ancillary operations. Also, companies are looking for an opportunity to cut costs. Going to an outside provider with a core competency in an ancillary area promises to make plant operations more efficient. Neither rationale is unassailable, if only because such service suppliers are not likely to be as deeply invested in the well-being of a plant as its owner is.
But the painful downturn that the chemical industry experienced during the past three years and the high energy costs that it faces during the current recovery are pushing corporate managers to do whatever they can to improve company margins. "The chemical industry has been forced to restructure for cost reduction," says Charles Bailey, Greenville, S.C.-based vice president for operations at Fluor Corp., Aliso Viejo, Calif. Bailey's group has long provided contract maintenance services to plants. The company consolidated its contract maintenance activities into one division four years ago. Since then, that division has posted 20% sales growth per year; it now brings in more than $1 billion annually and employs more than 10,000 workers. "We've aligned with the growth opportunity," he says.
Not treading water
One of the best-known contract services throughout the chemical industry is water and wastewater treatment. Providers have made a winning argument that they offer an efficient option for running a facility's water resources.
Perhaps the biggest trend in this area is not the nature of the service, but the corporate alignment of the providers themselves. A case in point is GE Water & Process Technologies, East Trevose, Pa., which came into being after GE acquired BetzDearborn, combined it with earlier acquisitions, Glegg and Osmonics, and added internal equipment and service capabilities. "Over the past two years we've built out our footprint in this business," says Bryan Richforth, business leader for the group. "We want to be the leading OEM equipment supplier combined with the leading services provider, and thereby optimize the total life cycle of water systems for our clients."
The services offering is straightforward, Richforth says: A team of GE water and wastewater professionals develop an operational baseline for the water system. The company then proposes equipment upgrades, dosing programs and operational improvements, and offers a contract to provide an agreed-upon level of service, based on water quantities, quality and other performance objectives. Sister company GE Capital can finance the capital improvements if desired. "We can offer the entire range of services, from conventional customized services to designing, building, owning and operating the facility, under the client's ownership or as a sale-leaseback," Richforth says. "At the end of the day, the key question is how to save money for our clients."
Dan Cicero, senior product manager at Nalco Co., Naperville, Ill., counters that argument. "I don't know of many industrial companies that have sold or leased their water systems." But Cicero notes that, beyond a conventional fee-for-service outsourcing arrangement, Nalco engages in what he calls "gainsharing" contracts, in which the company is rewarded for cost savings or performance improvements in the water treatment systems it manages.
Some of that gainsharing is expected to come from Nalco's recently introduced 3D Trasar program, which combines scale or biofouling control with a monitoring system that precisely measures the activity of the treatment chemicals in cooling water systems. The technology (which builds on an earlier version called Trasar that has been on the market for more than a decade) uses chemical taggants in the treatment chemicals. A fluorometer measures the presence of the taggant, factors in other water-chemistry measurements and computes precise chemical loadings.
"Every cooling system we're seeing is under stress, either from being required to run more actively, or from the widely varying quality of inlet water," Cicero says. "So you can think of this as a stress-management measure for cooling water systems." He adds that plant managers in water-restricted areas have to pay particular attention to inlet water quality, as the use of, for example, well water in place of treated municipal water can throw the cooling system out of whack. In perpetually water-short California, the use of "gray water" (untreated water), also known as Title 22 water (for the state regulation defining it), is popular as a cost-savings action, but this, too, can raise the stress level on the cooling system.
GE also has launched new service offerings. One is a mobile water-treatment service, intended for providing temporary or emergency backup. Another is a nondestructive-testing (NDT) technology for monitoring pipeline corrosion to replace metal coupons. A third, named InSight, is a comprehensive control and monitoring system that makes use of automated data collection and Web-connected communication devices to provide a continuous picture of the water system's costs and performance.
There are many other water service providers, including Ecolochem Inc., Norfolk, Va.; USFilter, Palm Desert, Calif.; Severn Trent Services, Fort Washington, Pa.; and the Drew Industrial Division of Ashland Chemical Co., Cleveland.