In the News

Inventory Weighing You Down?

BELLEVUE, Wash. ," Leanness, especially in today's difficult economy, is critical to every manufacturer's bottom line. The lean manufacturer, according to the Plymouth, Mich.-based Michigan Manufacturing Technology Center, produces "the maximum sellable products or services at the lowest operational cost, while optimizing inventory levels."

Judging by its inventory levels, however, the chemical sector just might be leaning the wrong way.

Richard J. Schonberger, president of Bellevue, Wash.-based Schonberger & Associates Inc. and the author of numerous manufacturing-related books, said the chemical industry came in 32nd out of 35 industries in his recent leanness studies. Moreover, the pharmaceutical sector came in even lower, at number 33. Because chemical and petrochemical plants generally have much lower margins than pharmaceutical companies, however, inventory levels are an even more critical concern.

For the studies, Schonberger tracked inventory trends for 1,000 publicly traded companies in 35 industries.

Although some chemical companies, including Sterling Chemicals and Rohm and Haas, are performing extremely well in the inventory area, Schonberger said, 72 percent of those included in the studies exhibit "patterns of poor inventory performance." And inventory performance, he maintained, is essentially a symptom of other problems in lean manufacturing initiatives.

"Inventory really is there because of failures," noted Schonberger. "You don't maintain your equipment properly; therefore, you have to have a buffer stock of inventory just in case. Your quality isn't dependable, yields aren't dependable; therefore, you have to have a lot of inventory just in case."

Compounding the chemical industry's predicament is the fact that process-oriented industries tend to have inflexible equipment that produces in only large batches, said Schonberger. "It's very hard to change over to another model or product or formula," he added. In addition, plants often stockpile products as a way of dealing with equipment downtime related to maintenance and repair.

Can the industry relieve the symptoms responsible for inventory overload? Yes, insisted Schonberger, but more than a bit of effort will be required.

First, said Schonberger, companies should factor total productive maintenance (TPM) into the lean manufacturing equation. "It's turning over a good share of the maintenance responsibilities to the frontline employees instead of staffing it off to a maintenance department," he explained, "so they keep everything clean and well lubricated on a daily basis and learn how to help with overhauls."

Total quality also plays a part, emphasized Schonberger. "That's documenting proper processes ," the right way to do things ," and doing them that way every time. Quick changeover of equipment is very important," he added, "and it makes a big difference and doesn't cost a lot of money in most cases."

Another area ripe for improvement is the product line. "Some companies just have way too many different items competing for capacity," noted Schonberger. "When you try to do too much, nothing gets done well."

Finally, looking to the future, chemical companies would be wise to build more flexible plants, said Schonberger. These changes depend on a new way of thinking; for example, facilities could construct several smaller reactor towers instead of one giant tower, he stressed.

To learn more, send an e-mail to Schonberger at [email protected].

Kathie Canning

Chemical Sector Bucks the Trend in Foreign Investment

NEW YORK ," The U.S. chemical," pharmaceutical sector led the nation in foreign direct investment (FDI) in 2002, generating 56 percent of total investments, according to a study recently released by Deloitte Research.

The sector's strong showing is at odds with most other U.S. industrial sectors, which saw their FDI plunge significantly. In fact, overall FDI by U.S. companies, said Deloitte Research, fell 37 percent in from 2001 figures.

"Generally speaking, chemicals and pharmaceuticals took more than half the total investments in 2002 ," a very significant piece," said Deloitte Research Director Peter Koudal. "They've been holding up pretty steadily over the last three years, which is also pretty impressive."

Although SARS virus threats and the lingering weakness in the international economy played a role in the FDI downslides of many other sectors, such threats apparently were not enough to keep the chemical,"pharmaceutical sector away. The sector's long-time global standing and a restructuring of business opportunities ," or "smarter" consolidation," likely are behind the sharp rise, maintained Deloitte Research.

"Chemicals, in particular, has been one of the most global industries," said Koudal. "It started first and has a huge stock of investments overseas. That [reality] automatically generates a lot of foreign direct investment."

Smarter consolidation, said Koudal, has replaced the sector's global mergers of the past, which once played a big part in FDI numbers. "Now I don't see as many of those big mergers anymore," he stressed. "It tends to be more spin-offs of divisions. So I think across the industry there's more of a sort of consolidation, but perhaps a smarter consolidation. So rather than take over the entire company, they actually agree to buy a division of yours that fits into [their] portfolio."

Europe, Latin America and Asia are key destinations for the U.S. chemical," pharmaceutical sector, noted Koudal. Unlike some other sectors, this sector is not looking to circumvent high labor costs by manufacturing overseas, he stressed, but instead is building to be close to its markets.

Kathie Canning

Grant Furthers PHA Plastic Development

CAMBRIDGE, Mass. ," Metabolix Inc.'s research into the use of microbial fermentations in polyhydroxyalkanoates (PHA) plastics, an alternative to petroleum-based plastics, received a boost from the U.S. Department of Commerce's Advanced Technology Program (ATP). The biotechnology company announced that it will receive an ATP award worth $1.6 million, which will enable its scientists to reengineer the central metabolism of E. coli for highly efficient conversion of renewable sugars into PHA plastics.

Commercializing renewably based thermoplastics, or PHAs, ultimately will benefit the United States by reducing its dependence on oil and gas for producing plastics, which will in turn result in a "smaller environmental footprint," explained James Barber, president and CEO of Metabolix. In some applications, the PHAs' property profiles are superior to current materials, and their products are biodegradable, he added.

Metabolix's PHAs range from rigid to highly elastic for use in film, fiber, adhesives, coatings and molded goods and within other plastics.

"The ATP grant is focused on taking these microbial production systems, which are already quite efficient, and making them even more so," Barber said. "The target in terms of manufacturing costs for these materials would be down in the range of 50 cents per pound."

According to Metabolix, lower costs for PHAs make them more cost-competitive with the large volumes of plastics currently in use worldwide.

The ATP program provides cost-shared funding to industry-led teams to help support challenging, high-risk research and development projects that might significantly advance important broad-based economic or social benefits for the United States.

Sue Garrison

Dow Chemical Testifies on Water Management

WASHINGTON ," Remember when you paid little attention to how much water you used, much less to what happened to that water after you used it? Times sure have changed ," almost everyone now understands how critical water management is to a sustainable future across the globe. That understanding, however, does not necessarily translate into action.

During testimony before the U.S. House of Representatives Subcommittee on Water and the Environment in May, Paul Dean, North American manufacturing director for The Dow Chemical Co.'s environmental operations business, emphasized the importance technology, conservation and efficiencies can play in avoiding a national ," and global ," water shortage.

"We tend to think of water as inexpensive, plentiful and clean," Dean told committee members. "But since 1940, water consumption has quadrupled and will continue to increase as the world's population grows."

Dow said it was invited to offer testimony by Rep. John J. Duncan Jr. (R-Tenn.), chairman of the committee, because of the leadership the company has shown globally in water management. "What we're really advocating is that we need to get all of our collective heads together, if you will ," the private, public and environmental sectors ," to ultimately advise a sustainable solution to this issue," said Dean.

Dow's accomplishments in the water area include a restructuring of the water treatment system at its Terneuzen site in The Netherlands to recycle 80 percent of the site's nonsalty wastewater. The changes halved the total wastewater discharge per pound of product.

At a facility in Texas, Dow developed a better method to manage water as it moves from its freshwater reservoirs to the manufacturing site. The improvements now prevent the loss of 13,000 gallons of water per minute, said the company.

Dow is one of only a few global manufacturers to treat resource management as part of a business unit. This business unit focuses on the management of water rights, conveyance, treatment and use for the entire company.

"We realize water is a finite resource," Dean told Chemical Processing. "It's the key to the sustainable operations of our facilities and, naturally, our future."

Dean said Dow relies on both "hard" and "soft" technologies to manage water issues. The hard technologies include replication and leveraging of the company's membrane technologies. "We use those in our processes to clean water for reuse or second-pass reuse," he said. "We also have experience with constructed wetlands for treatment and polishing, and the water could be used again after leaving the wastewater treatment plant."

What Dean terms "culture management" makes up the soft technology side. "What we're trying to do is to educate our folks on the true value of water," he stressed. "There's a cost to acquisition of the water; there's a cost to movement, treatment and monitoring. So we've looked at cost models on the culture side to educate our folks ," that drives a conservation behavior."

Finally, said Dean, the company has applied many of the Six Sigma methodologies "to do data mining to optimize sections of the water envelope that hadn't really ever been looked at."Even smaller companies, said Dean, can make changes that protect our precious water supply. "When I talk to my folks across North America, I speak to the concept of incremental daily improvement," he stressed. "As membrane technology improves, the scale of manufacture rises, which improves efficiency and also drives down the cost."

Kathie Canning

Building Boosters

U.S. Construction Chemical Demand ($ millions)