Haas TCM Chemical Management Services November 09, 2005 www. haastcm. com
Overview of Haas TCM Employees: 300 Gross Revenues: ~$170 million/yr Facilities Served: 250 Countries: - US, Canada, Mexico, Argentina, China, Korea, Brazil, Israel IN PROGRESS – Europe, SE Asia Corporate Operations: - West Chester, PA (HQ) - Austin, TX- Purchasing & Data Center Ownership: Privately Held Haas TCM: the largest “independent” Chemical Management Services company
Chemical Management Services Chemical Lifecycle Management Activities Each step of the lifecycle is an opportunity to reduce cost, use and environmental risk. Haas TCM has direct involvement with the entire chemical lifecycle.
Chemical Management Services Haas TCM Creates Realigned Incentives • Haas TCM compensation is aligned with customer objectives • Our program is not volume/activity based. We generate no income from chemical volume. • We have client lines not product lines.
Chemical Management Services Haas TCM - Focus on the Five “Value Pools” of the Chemical Lifecycle 1. CHEMICALS PURCHASED VALUE CREATION: Chemical Costs METRICS: 1. UNIT PRICE 2. STORAGE & Distribution 2. SPOILAGE, SCRAP $/ LB (or Gal, etc) % of “Spend” 3. CHEMICAL USE 4. Waste • Air • Water • Haz Waste 3. CHEMICAL EFFICIENCY Lbs Chemical per Unit of Production 4. WASTE RATE Lbs Waste per Unit of Production 5. Management Costs, incl Env Health & Safety VALUE CREATION Structural and Carrying Costs + Contingent (Risk) Costs
Customers Haas TCM’s Customer Base by Industry Sector: Aerospace & Defense Boeing Lockheed Martin Raytheon* United Technologies (UTC)* Southwest Airlines* Continental Airlines General Dynamics Automotive General Motors* Electronics Seagate Technologies* Ford DRS Corp Daimler Chrysler Delphi Corp Research & Industrial Manufacturing Laboratory Stanford Sauer Linear Danfoss* Accelerator Arvin Meritor Power Generation Univ Cal Merced (pending) Dana Corp* GEMA BAE Systems Israeli Aircraft Industries (IAI) * - Denotes an “enterprise customer”, or one for whom Haas TCM provides service to all or most of customers’ facilities First Energy Pacific Gas & Elec (PG&E) Food & Beverage Miller Brewing*
US Aerospace Facilities Served By Haas TCM Legend Raytheon UTC Boeing SWA, CAL LMC, GD, BAE, DRS, L 3 Puerto Rico
All North American Facilities Served By Haas TCM Legend Raytheon UTC Boeing SWA, CAL LMC, GD, BAE, DRS, L 3 Non-Aerospace Customer Puerto Rico
Haas TCM’s International Operations Latin America Hermosillo Saltillo Chihuahua Ramos Europe Cuautitlan á Toluca Haifa
Haas TCM - What We Do Bundle Chemical Lifecycle Work Processes Into a Single Solution • Sourcing & Procurement => all chemicals - Direct and Indirect - Catalog and non-catalog items • Inventory management - Offsite and Onsite • Just-In-Time (JIT) delivery • On-site services - Fluid Management, Process Control and Improvement • Automated EH&S compliance and reporting • Hazardous waste management Via Three Service Models
What We Do (1) e-Commerce and Logistics Automation Customer Site 1 JIT Delivery Industrial Chemicals Industrial (mineral. Industrial acids, Chemicals solvents, etc) (mineral acids, Chemicals Receiving and Storage Sites 2, 3. . Customer Competitive Price Delivery Order Placement solvents, etc) (mineral acids, solvents, etc) Waste Services Suppliers JIT Delivery Oils and Oils, Lubes and Fluids Haas tcm. IS Boiler, Water Tmt Boiler, Water Trmt Chemicals JIT Delivery Cleaners JIT Delivery 3 PL Provider Industrial Gases = Electronic Connection & Automated Performance Monitoring Local Storage for “other” Customer Chemicals Plating Chemicals Coatings & Adhesives & Coatings Adhesives
What We Do (2) Offsite Inventory/JIT Delivery
N. A. Facilities Served By Haas TCM & Hub Locations Legend Raytheon UTC Boeing SWA, CAL LMC, GD, BAE, DRS, L 3 Non-Aerospace Customer Existing Haas TCM JIT Hub “Planned” Haas TCM JIT hub Puerto Rico
International Logistics By Haas TCM Philadelphia Hub Ø Consolidation Ø Shipping to Israel, China Ø Compliance To Israel To China
What We Do (3) – Onsite, Turnkey Management Haas Client Facility Bulk Storage O&M WWTP Chem Inv Mgmt Receiving Chem Mfgr, Supplier, Waste Transport TCM Hub Storage Data capture and transaction automation Waste Pickup tcm. IS POU Delivery Fluid Management & Process Improvement . . . Automated/Enabled through tcm. IS, our advanced information & transaction platform.
What We Do (3 a)-“Floor Stock” Management Barcoded Cabinet Barcode Container Mgmt Return to Cabinet • All containers bar coded • Cabinet & Bins bar-coded • Min/Max set for each bin • Cabinets scanned Stocked Items Non-Stocked Items Onsite Chemical Crib or Direct to POU From Chemical Manufacturers or Haas TCM Hub • Automated Replenishment • Shelf Life Management • Usage tracking at Point-of-Use
Cabinet Management Streamlines “Multi-Product” Factory Operations Sikorsky Warehouse & Crib BEFORE Sikorsky Warehouse & Cabinet AFTER
Haas TCM Services to Enterprise Customers Haas TCM Enterprise Customer Total Sites Served by Service Level E-Commerce JIT Turnkey, On-Site GENERAL MOTORS 27 RAYTHEON 45 10 27 8 SEAGATE 10 2 2 6 DANA CORP 52 14 SOUTHWEST AIRLINES 27 27 MILLER BREWING 22 38 5 UNITED TECHNOLOGIES CORP 27 5 10 12
What We Do Process Improvements • Process efficiency improvements and chemical use reduction – Core staff of subject matter experts: • • Metalworking Coolant and Fluids Management Lubrication Systems Management Solvent applications Plating & Coating Adhesive and bonding Gas and cylinder management Water and Waste treatment
Supplier Expertise Augments Haas TCM’s SME’s Haas TCM Suppliers EXPERTISE KNOWLEDGE INFORMATION DATA Haas TCM Subject Matter Experts tcm. IS (and Haas. Tech) efficiently capture and analyze data
What We Do – Transaction Automation and Info Management TCM Hub Internet Corporate Oversight Internet tcm. IS integrates with customers’, enterprise resource planning (ERP) and accounting systems. tcm. IS Data Center Internet Supplier Internet (chems, gas, waste, etc) d-Buy - tcm. IS electronically integrates with suppliers’ order processing and fulfillment systems. Facilities Our tcm. IS Platform Decreases Cycle Time and Improves Information Exchange
tcm. IS – Features & Functions · Automated operational support (Sourcing, purchasing, expediting, tracking, shipping, inventory mgt, & waste mgt) · Automated Material Management System · Customer Inventory Management Tools · Online electronic catalogs with built in AULs by Person, Facility, and Work Area - plus quantity and frequency and cost · Online catalog addition with built-in approval routing · Bar-coded cabinet management, Dispensing & Repackaging · Material Tracking to Point-of-Use & Waste Tracking from Point-of. Generation to Disposition · Online MSDS & Waste Profiles - plus data extraction including composition for material and waste · Speciated usage and generation information in real time
tcm. IS – Features & Functions (con’t) · Compliance automation support (Waste clocks, lists, auto notification of exceeded usage levels, risk & usage reports, etc. ) · Electronic billing & online cost management reports · Systems are Internet-based - integrated information available world-wide
tcm. IS – Creating MR’s Five Options: • tcm. IS onsite Inventory Counting • Cabinet scanning & upload • tcm. IS Catalog drag & drop • Client system extraction & FTP • Ariba, Oracle I-Commerce, SAP EBP, XML, EDI, MRP, etc
Screen Captures of tcm. IS intentionally removed from this presentation.
Case Study #1 – Raytheon Corporation
Case Study: Raytheon Corp Drivers to Initiate Raytheon’s Chemical and Gas Management Program (CGMP): • Become one company despite multiple cultures, procedures, and systems • Reduce chemical lifecycle costs • Desire to focus on core competencies • Better data management of hazardous materials • Diverse and large supply base • Lack of material & process standardization
Raytheon Program At-a-Glance • Goals: • Ensure that quality chemicals and gases are supplied dependably to Raytheon’s operations – On Time • Continuously reduce Raytheon’s use and costs of chemicals Program Overview: • Multiyear agreement awarded in February 1999 • Deployment initiated May 1999 • Three regional hubs implemented: Salem, Dallas, & Tucson • Over 45 sites participating, representing 98% of the dollars spent in North America
CGMP scope of services Procurement • Chemical Gatekeeping • Sourcing • Supplier Consolidation & Rationalization • Volume Leveraging Hazardous Waste Management · Waste Pick-up and Disposal Mgmt · Long Term Liability Reduction · Volume Leveraging · Emergency Response Inventory Management • Incoming Inspection/Testing • Labeling and Shelf-life Control • Catalog Maintenance/Part Number • Consolidation • Controlled storage Database Management · Chemical Usage/Haz waste Tracking · MSDS File · Electronic Catalog · EH&S Reports Distribution • Point of Use Ordering/Delivery • Just-in-Time Delivery • Emergency Service Technical Support · Process Improvements · Hazardous Waste Reduction · Toxic/Hazardous Chemical Reduction
Result 1. Streamlined & Automated Operations • Automated ordering and tracking through tcm. IS (Online: ~20, 000 chemicals & gases, ~700 waste profiles) • Chemical gate keeping - managed work flow approval • Online MSDS & EHS data for reporting • Chemical usage/waste generation tracking • Centralized electronic invoicing • Leveraged sourcing, procurement & inventory management
Result 2. Improved Service & Quality On-Time Delivery Min/Max Material (24 HR) Year 1 Baseline: Year 4 Goal: Year 4 Average: 82% 95% 96% Scrap Rate Year 1 Baseline: Year 4 Goal: Year 4 Average: 3%. 47%. 45%
Result 3. Reduced Costs - Breakdown
Result 4. Reduced Scrap & Waste Consolidated Regional Inventories Greater Supply Flexibility & Turn Rate Lower Scrap Rate + Process Improvements Reduced Usages & Wastes
(Presented by Raytheon at 9 th Annual CMS Forum, San Francisco, CA) Gainshare for Process Improvements Challenges • • Collecting baseline data How to share savings and for how long Management/process owner approval Validating savings are sustained Examples • Business Process Improvement – automation of labor-based, material management processes (“gate keeping”, handling, etc); • Manufacturing Process Improvements: BENEFITS EXAMPLES Reduced Cost Reduced Usage Reduced Waste 1) Precious metals recovery X X 2) Technology transfer for chemical stripper process modification X X 3) Changed mode of chemical delivery (pipeline to on-site storage) X X X
Raytheon Program Goals Performance Historical Material Cost Reductions Reduce Material Costs 50% 40% Cost Reduction, Adjusted for Producers Price Index-Chemicals 30% 20% 10% Nov-99 Mar-00 Jul-00 Nov-00 Mar-01 Jul-01 Nov-01 Mar-02 Jul-02 Nov-02 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 0% Cost Reduction, Not Adjusted for Producers Price Index-Chemicals Reduce Cycle Time Gross Program Savings Continuous Improvement Across Chemical Lifecycle Percent of Chemical Spend (Excluding Haas TCM Service Fees) 80% Avoided Material Costs 60% Structural Savings PEI 40% 20% 0% Y-1 Y-2 Y-3 Y-4 Program Year Y-5 Y-6 Material Cost Reductions
Summary of Other Benefits to Raytheon • Supply base consolidation to a single first-tier provider • Improved delivery to point of use • Reduced overhead costs, such as accounting, accounts payable, suspense and incorrect charges • Reduced labor (75 FTE), inventory elimination ($12 million), floor space recovery (~60, 000 ft 2) • Material leveraging & process efficiency improvements • Reduced chemical purchases and non-production waste • Improved EHS Stewardship, including reduced chemical usage, reduced liability & 100% MSDS access • Improved data management & reporting • “Best In Class” information management system
Case Study #2 – Sikorsky Aircraft Corp, Stratford, CT
Chemical Management Sikorsky Aircraft Sustained focus on Savings and Process Improvements 9 th Annual CMS Forum San Francisco, CA Bob Melnick, Scott Little October 20, 2005
Why Chemical Management at Sikorsky? • Focus on core business processes • Lean manufacturing principles • Process improvement • UTC Initiatives (UT 500 & EHS 10 X)
Chemical management business case – Sikorsky Function Before After Procurement 2 P. T. Buyers, 1 F. T Buyer P. T. Planner oversight ~10% PPV Internal Delivery 2 F. T M. Handlers, Haas Point-of-Use 1 P. T. Handler delivery Inspection Quality 2 P. T Material Inspectors Haas DQR Certified MSDS Mgmt $75 K/yr 0$ (tcm. IS) Scrap Chemicals 18% 6% Inventory $1 M Consigned Environmental Tracking Consultant + 1 P. T. EHS manager Consultant + tcm. IS Displace Internal Costs to Supplier
Performance Gets Recognition
Case Study #3 – Seagate Technologies
Scope of Seagate CMS Program Seagate, Other NA Seagate, MN Ops Seagate Int’l - Ireland - Asia Haas TCM SUPPLY CHAIN MGMT tcm. IS Material Suppliers Integrating Platform On Site Services • e-Commerce • Lifecycle Tracking • Record Keeping & Reporting • EHS Stewardship • Product Information Haas TCM • POU Delivery • Waste pickup • Other Onsite Svcs Air Products and Chemicals • Gas Services • Cylinder Mgmt • Emergency Response Haas TCM • UPW • Waste Water • Optimization “D-Buy” • Chemicals • Gases • Waste Services Rinchem Inc. • Offsite Inventory Mgmt • JIT Delivery/Stocking • Container Mgmt • Emergency Response
Seagate View - Productivity Progress • • Before CMS 22 Chemical Related Seagate Employees 149 Direct Tier 1 Suppliers 868 Chemical POs 7 Direct Supplier Contracts and Risk No Electronic Chemical Catalogs Manual Chemical Approval/MSDS Process ~$800 K Chemical Inventory On Site • • After CMS 18 Chemical Related CMS Employees Single Integrated Supplier Single E-procurement Vendor Contracts Novated Under CMS Supplier/Less Risk Single Consolidated Web-Based Electronic Catalog Web-based Approval CRA/MSDS Process No Working Capital – Seagate Pays Only at Point of Use.
Lower “scrap”= Reduced Chemical Use
CMS is platform of continuous cost improvement "Total" Chemical Costs - Seagate Normandale and Shakopee 16, 000 14, 000 $ per Year 12, 000 10, 000 Management Fee 8, 000 Management Costs Chemical Costs 6, 000 4, 000 2, 000 0 Baseline FY 2002 Actual FY 2003 Actual Year FY 2004 Actual
Our Compensation Model Produces Alignment Three Part Compensation: 1. Service Fee – Based on Costs to Serve; Service Level Based on Customer BCA 2. Chemicals Costs – At Haas TCM’s cost 3. Savings Gainshare: - Chemical Costs; and - Process Efficiency Improvements
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