Sites summon specialists

The recent painful downturn and high energy costs are pushing corporate managers in the chemical industry to do whatever they can to improve company margins.

By Nick Basta

2 of 2 1 | 2 > View on one page

Greasing the wheels
Business relationships comparable to those for water-treatment outsourcing have arisen in lubrication for rotating machinery. Many of the leading lubrication manufacturers, including Castrol, Swindon, England; Shell Lubricants, Houston; and ExxonMobil, Plano, Texas; in recent years have extended their business lines to include outsourced lubrication management. While these service arrangements primarily have targeted discrete manufacturing firms, such as automotive and aerospace companies, and utilities, they are getting more attention within the process industries. For instance, food processors, which require biocompatible machinery lubricants, are becoming regular customers, industry experts say.

Dow Corning, Midland, Mich., which manufactures silicone-based specialty and high-performance lubricants, has recently begun rolling out a service business. The first step was to develop dozens of additional formulations to fill out its product line, says Phillip Grillier, solutions manager for its Molykote Division. "The cost of lubricants is less than 5% of an overall maintenance budget, yet better lubrication management can pay off in lower equipment replacement, fewer breakdowns and optimization of maintenance practices," he says.

At one chemical plant, simply rationalizing the inventory of lubricants saved nearly $50,000. "Typically, each capital-equipment purchase comes with specific lubrication requirements," Grillier says. "We look first if those are the right lubricants, and then if a variety of pieces of equipment can be managed with the same lubricant." Another key step is assuring good housekeeping , looking for where lubricants can become unnecessarily contaminated by water, dirt or other materials. With better housekeeping (verified by regularly scheduled oil analysis), lubrication schedules may be extended, cutting lubricant and waste-oil disposal costs.

Predict, then prevent Dow Corning and other lubrication service providers emphasize the value of sophisticated oil analysis to measure contamination, lubrication quality, the types of metal contaminants and other characteristics. These tests, performed onsite or at the supplier's laboratory, can aid in predictive or "condition-based" maintenance , the ability to forecast the operating condition of machinery and adjust maintenance schedules accordingly.

That's a big theme of Fluor's overall contract maintenance services. When condition-based maintenance is managed properly, maintenance costs can go down even as plant reliability and performance go up, Bailey says. "We typically enter into three- or five-year agreements for contract maintenance," he says. "The first year, you'll see savings in MRO (maintenance, repair and operations) costs , the manpower requirements of the maintenance staff, and the cost of consumables such as oil and replacement parts. The second year, you'll see reliability improvements and capacity increases out of existing equipment. The third year we're able to do things like root-cause failure analysis that can lead to process optimization and the like." Bailey says that after several years, a project undergoes "regrounding" to develop a new baseline of performance and maintenance requirements before the client considers renewing the contract.

The trend is definitely moving toward pay-for-performance, he adds. Three years ago, hardly any such contracts were awarded to Fluor; now, 50% of all new contracts include that component. Bailey boasts that, on average, clients can see a 5 to 10% improvement in uptime while experiencing a 20% reduction in maintenance costs.

A new formula
An evolving business practice for the chemical industry , both as potential customers and potential vendors , is chemical management services (CMS). This approach evolved first in the automotive and electronics industries, where the major manufacturers pushed chemical suppliers to take over management of the chemicals used in their plants, especially paints and surface treatments in automotive, and process gases in semiconductor fabrication. It's now common practice in these industries. Paint suppliers such as PPG and DuPont now handle many chemical inventories besides paints in the automotive industry, and gas suppliers such as BOC, Praxair, Air Liquide and Air Products do the same in microelectronics.

The concept is straightforward: with rising regulatory requirements for storage, disposal, workplace safety and emissions, manufacturers hire chemical suppliers to manage their inventories, gather necessary regulatory data and optimize material use. According to a variety of estimates, for every $1 a company spends on chemicals, it may spend an additional $1 - $10 to manage this inventory.

In the past few years, so-called "pure-service" CMS providers , those that do not manufacture the chemicals they manage , have popped up. "We've had a 30% annual growth for the past few years," says Thad Fortin, president of Haas TCM, West Chester, Pa., and this does not include the impact of its acquisition of another leading CMS company, Radian TCM, in 2002. Other players include a Boeing spinoff, AvChem, St. Louis, Interface Corp., Greenville, S.C., and Chemico Systems, Birmingham, Mich. Meanwhile, companies that are big in chemical distribution, such as Henkel, Gulph Mills, Pa., and Ashland, Dublin, Ohio, have similar business units.

CMS is getting a boost from an environmental group, the Chemical Strategies Partnership, San Francisco, which has organized a trade group, the CMS Forum. "This is a proven concept in industries like automotive and aerospace; we want to help promote it in other industries," says Jill Kaufman Johnson, executive director. She concedes, however, that "this works best in companies that do not consider chemical management to be a core competency, and most chemical companies don't want to give that up." Haas TCM's Fortin says his firm has had discussions with chemical manufacturers but no deals have been completed yet.

Nick Basta is editor at large for Chemical Processing magazine. E-mail him at

2 of 2 1 | 2 > View on one page
Show Comments
Hide Comments

Join the discussion

We welcome your thoughtful comments.
All comments will display your user name.

Want to participate in the discussion?

Register for free

Log in for complete access.


No one has commented on this page yet.

RSS feed for comments on this page | RSS feed for all comments