Haas TCM Haas TCM Chemical Management Services November 09, 2005 .

Haas TCM Haas TCM Chemical Management Chemical Management

ServicesServices

November 09, 2005

www.haastcm.com

Overview of Haas TCMOverview of Haas TCM

Employees: 300Gross Revenues: ~$170 million/yrFacilities Served: 250Countries: - US, Canada, Mexico, Argentina, China,

Korea, Brazil, IsraelIN 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 ServicesChemical Management Services

Input Output

Pro

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Use

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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 ServicesChemical Management ServicesHaas 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.

SUPPLIER CUSTOMER CMS SERVICE CUSTOMER PROVIDER

wants to wants to wants to wants to increase decrease decrease decrease

Conflicting IncentivesHaas TCM Model

Aligned IncentivesTraditional Relationship

Material(cost, volume)

Lifecycle costs(materials PLUS

management, including waste management)

METRICS: $/ LB (or Gal, etc) % of “Spend” Lbs Chemical Lbs Waste per Unit of Production per Unit of Production

3. CHEMICAL USE 1. CHEMICALS PURCHASED2. STORAGE

& Distribution

VALUE CREATION: Chemical

Costs

1. UNIT PRICE

2. SPOILAGE, SCRAP

3. CHEMICAL EFFICIENCY

4. Waste• Air

• Water

• Haz Waste

4. WASTE RATE

5. Management Costs, incl Env Health & SafetyVALUE CREATION Structural and Carrying Costs + Contingent (Risk) Costs

Chemical Management ServicesChemical Management Services

Haas TCM - Focus on the Five “Value Pools” of the Chemical Lifecycle

Haas TCM’s Customer Base by Industry Sector:Automotive

Aerospace & Defense Electronics

Industrial Manufacturing

Food & Beverage

General Motors*

Ford

Daimler Chrysler

GEMA

Boeing

Lockheed Martin

Raytheon*

United Technologies

(UTC)*

Southwest Airlines*

Continental Airlines

General Dynamics

BAE Systems

Israeli Aircraft Industries (IAI)

Seagate Technol-

ogies*

DRS Corp

Delphi Corp

Sauer Danfoss*

Arvin Meritor

Dana Corp*

Miller Brewing*

* - Denotes an “enterprise customer”, or one for whom Haas TCM provides service to all or most of customers’ facilities

CustomersCustomers

Power Generation

First Energy

Pacific Gas & Elec

(PG&E)

Research & LaboratoryStanford Linear

Accelerator

Univ Cal Merced

(pending)

US Aerospace Facilities Served By Haas TCMUS Aerospace Facilities Served By Haas TCM

PuertoRico

RaytheonUTCBoeingSWA, CALLMC, GD, BAE, DRS, L3

Legend

All North American Facilities Served By Haas TCMAll North American Facilities Served By Haas TCM

PuertoRico

RaytheonUTCBoeingSWA, CALLMC, GD, BAE, DRS, L3

Non-Aerospace Customer

Legend

China

ChongqingChongqing

ShanghaiShanghai

ShenyangShenyang

LiuzhouLiuzhou

Sao Paulo

Rosario

Latin America

ChihuahuaRamos

Toluca

Saltillo

Cuautitlaná

Hermosillo

HaifaHaifa

Haas TCM’s International OperationsHaas TCM’s International Operations

Europe

Haas TCM - What We DoHaas TCM - What We Do

• 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

Bundle Chemical Lifecycle Work Processes Into a Single Solution

Via Three Service Models

Customer Site 1

Haas tcmIS

Waste Services Suppliers

Sites 2,3..

Customer

Local Storage for “other”

Customer Chemicals

Receiving and Storage

Boiler, Water Tmt Chemicals

Boiler, Water Trmt Chemicals

Industrial Chemicals (mineral acids, solvents, etc)

Industrial Chemicals (mineral acids, solvents, etc)

Industrial Chemicals (mineral acids, solvents, etc)

CleanersCleaners

Cleaners

Industrial Gases

Coatings & AdhesivesCoatings &

Adhesives

Plating ChemicalsPlating

Chemicals

Oils and LubesOils, Lubes and Fluids

JIT Delivery

JIT DeliveryJIT Delivery

JIT Delivery

Competitive PriceDelivery

Order Placement

= Electronic Connection & Automated Performance Monitoring

3PL Provider

What We Do (1)What We Do (1) e-Commerce and Logistics Automation e-Commerce and Logistics Automation

What We Do (2) What We Do (2) Offsite Inventory/JIT DeliveryOffsite Inventory/JIT Delivery

Number Aerospace Chemicals Stocked @ Haas TCM Hubs ~8,000

Number of Order on Request (OOR) processed - 46,000/yr

Haas

Haas tcm IS

• Receiving, Inspection, Quarantine• QA/QC – Testing, Cert review• Custom Labeling• Stocking (min/max)• Shelf Life Management

- FIFO- Lot/Receipt Monitoring- Recertification

• Inventory Management- Demand Pattern Analysis- Lead Time Monitoring- Exception Processes

• JIT Delivery• Container Management• Waste Consolidation

Plant A

Plant B

Plant C

Plant D

Plant E

Milk Run

JIT Delivery and WastePickup/

Transport

HaasHaasHub Services: HaasHaasHub Services:

N.A. Facilities Served By Haas TCM & Hub LocationsN.A. Facilities Served By Haas TCM & Hub Locations

PuertoRico

RaytheonUTCBoeingSWA, CALLMC, GD, BAE, DRS, L3

Non-Aerospace Customer

Existing Haas TCM JIT Hub

Legend

“Planned” Haas TCM JIT hub

International Logistics By Haas TCMInternational Logistics By Haas TCM

Philadelphia Hub

Consolidation

Shipping to Israel, China

Compliance

To China

To IsraelTo China

Chem Mfgr, Supplier, TCM Hub Fluid Fluid

Management Management & Process & Process

ImprovementImprovement

Chem Inv Mgmt

Bulk Storage

Haas Client Facility

Waste Storage

Receiving

tcmIS

POU Delivery

Waste Pickup

Data capture and transaction automation

Waste Transport

O&M WWTP

...Automated/Enabled through tcmIS, our advanced information & transaction platform.

What We Do (3) – Onsite, Turnkey ManagementWhat We Do (3) – Onsite, Turnkey Management

What We Do (3a)-“What We Do (3a)-“Floor Stock” ManagementFloor Stock” Management

Onsite Chemical Crib or Direct to POU

BarcodedCabinet

Barcode Container Mgmt

• All containers bar coded

• Cabinet & Bins bar-coded

• Min/Max set for each bin

• Cabinets scanned

• Automated Replenishment

• Shelf Life Management

• Usage tracking at Point-of-Use

Stocked Items

Non-Stocked Items

Return to Cabinet

From Chemical Manufacturers or Haas TCM Hub

Cabinet Management Streamlines “Multi-Product”Cabinet Management Streamlines “Multi-Product”Factory OperationsFactory Operations

Sikorsky Warehouse & Crib BEFORE

Sikorsky Warehouse & Cabinet AFTER

Haas TCM Services to Enterprise Customers Haas TCM Services to Enterprise Customers

Haas TCM Haas TCM Enterprise Enterprise CustomerCustomer

Total Total SitesSites

Sites Served by Service LevelSites Served by Service LevelE-CommerceE-Commerce JITJIT Turnkey, On-SiteTurnkey, On-Site

GENERAL GENERAL MOTORSMOTORS

27 27

RAYTHEONRAYTHEON 45 10 27 8

SEAGATESEAGATE 10 2 2 6

DANA CORPDANA CORP 52 14 38

SOUTHWEST SOUTHWEST AIRLINESAIRLINES

27 27

MILLER BREWINGMILLER BREWING 5 5

UNITED TECHNOL-UNITED TECHNOL-OGIES CORPOGIES CORP

22 10 12

• 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

What We Do -What We Do -Process ImprovementsProcess Improvements

DATA

INFORMATION

KNOWLEDGE

EXPERTISE

tcmIS (and HaasTech) efficiently capture and analyze data

Haas TCM Subject Matter Experts

Supplier Expertise Augments Haas TCM’s SME’sSupplier Expertise Augments Haas TCM’s SME’s

Haas TCM Suppliers

d-Buy - tcmIS electronically integrates with suppliers’ order processing and fulfillment systems.

What We Do – Transaction Auto- What We Do – Transaction Auto- mation and Info Managementmation and Info Management

tcmIS DataCenter

Internet

Internet

Internet

InternetCorporateOversight

TCMHub

Supplier (chems, gas, waste, etc)

Facilities

tcmIS integrates with customers’, enterprise resource planning (ERP) and accounting systems.

Our tcmIS Platform Decreases Cycle Time and Improves Information Exchange

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

tcmtcmISIS – Features & Functions – Features & Functions

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

tcmtcmISIS – Features & Functions (con’t) – Features & Functions (con’t)

• tcmIS onsite Inventory Counting

• Cabinet scanning & upload

• tcmIS Catalog drag & drop

• Client system extraction & FTP

• Ariba, Oracle I-Commerce, SAP EBP, XML,

EDI, MRP, etc

Five Options:

tcmtcmISIS – Creating MR’s – Creating MR’s

Screen Captures of tcmIS intentionally removed from this presentation.

Case Study #1 – Raytheon Corporation

Case Study: Raytheon CorpCase Study: Raytheon Corp

• 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

Drivers to Initiate Raytheon’s Chemical and Gas Management Program (CGMP):

Raytheon Program At-a-GlanceRaytheon 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 servicesCGMP scope of servicesProcurement Hazardous Waste Management• Chemical Gatekeeping · Waste Pick-up and Disposal Mgmt• Sourcing · Long Term Liability Reduction• Supplier Consolidation · Volume Leveraging & Rationalization · Emergency Response• Volume Leveraging

Inventory Management Database Management• Incoming Inspection/Testing · Chemical Usage/Haz waste Tracking

• Labeling and Shelf-life Control · MSDS File• Catalog Maintenance/Part Number · Electronic Catalog• Consolidation · EH&S Reports• Controlled storage

Distribution Technical Support• Point of Use Ordering/Delivery · Process Improvements • Just-in-Time Delivery · Hazardous Waste Reduction • Emergency Service · Toxic/Hazardous Chemical Reduction

• Automated ordering and tracking through tcmIS (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 1. Streamlined & Automated OperationsResult 1. Streamlined & Automated Operations

On-Time Delivery Min/Max Material (24 HR)

Year 1 Baseline: 82%Year 4 Goal: 95%

Year 4 Average: 96%

Scrap Rate

Year 1 Baseline: 3% Year 4 Goal: .47% Year 4 Average: .45%

Result 2. Improved Service & QualityResult 2. Improved Service & Quality

Result 3. Reduced Costs - BreakdownResult 3. Reduced Costs - Breakdown

BASELINE COSTS - Pre-TCM

0

3

6

9

12

27

15

An

nu

al C

os

ts ($

Mil

lion

/ye

ar) EHS Labor

Purchasing

Use & Distribution

Logistics

Waste Disposal

Chemical Purchases

LIFECYCLE COMPONENT

24

21

18

30

HaasService Fee

NET SAVINGS

Post - TCM COSTS

Chemical Costs

Chemical plus other lifecycle

costs

Chemical plus other lifecycle costs plus

Svc Fee

Pre-TCM

Post-TCM

= $ ~3 Million, FY 2001

At 12 Raytheon Facilities, Year 3 Snapshot – 15MM$ Chemical Spend

Result 4. Reduced Scrap & WasteResult 4. Reduced Scrap & Waste

Consolidated Regional Inventories

Greater Supply Flexibility & Turn Rate

Lower Scrap Rate+

Process Improvements

Reduced Usages & Wastes

Gainshare for Process ImprovementsChallenges• 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:

BENEFITSEXAMPLES Reduced Cost Reduced Usage Reduced Waste

1) Precious metals recovery X X

2) Technology transfer for chemical stripper process X X X modification

3) Changed mode of chemical delivery (pipeline to on-site X X

storage)

(Presented by Raytheon at 9th Annual CMS Forum, San Francisco, CA)(Presented by Raytheon at 9th Annual CMS Forum, San Francisco, CA)

Raytheon Program Goals PerformanceRaytheon Program Goals Performance

Historical On Time Delivery

0%

20%

40%

60%

80%

100%

Ma

y 9

9

Oct

99

Ma

r 0

0

Au

g 0

0

Jan

01

Jun

01

No

v 0

1

Ap

r 0

2

Se

p 0

2

Fe

b 0

3

Jul 0

3

De

c 0

3

Ma

y 0

4

MM

OOR

Historical Material Cost Reductions

0%

10%

20%

30%

40%

50%

Nov

-99

Mar

-00

Jul-0

0

Nov

-00

Mar

-01

Jul-0

1N

ov-0

1

Mar

-02

Jul-0

2

Nov

-02

Mar

-03

Jul-0

3N

ov-0

3

Mar

-04

Jul-0

4

Cost Reduction,Adjusted forProducers PriceIndex-Chemicals

Cost Reduction, NotAdjusted forProducers PriceIndex-Chemicals

Reduce Material Costs

Reduce Cycle Time

Continuous Improvement Across Chemical Lifecycle

Gross Program Savings(Excluding Haas TCM Service Fees)

0%

20%

40%

60%

80%

Y-1 Y-2 Y-3 Y-4 Y-5 Y-6

Program YearPer

ce

nt

of

Ch

em

ica

l S

pe

nd

AvoidedMaterial Costs

StructuralSavings

PEI

Material CostReductions

Summary of Other Benefits to RaytheonSummary 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 ft2)

• 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 ManagementChemical Management

Sikorsky AircraftSikorsky Aircraft

99thth Annual CMS Forum Annual CMS ForumSan Francisco, CASan Francisco, CA

Bob Melnick, Scott LittleBob Melnick, Scott Little

October 20, 2005October 20, 2005

Sustained focus on Sustained focus on Savings and Process Savings and Process

ImprovementsImprovements

Sustained focus on Sustained focus on Savings and Process Savings and Process

ImprovementsImprovements

Why Chemical Management at Why Chemical Management at Sikorsky?Sikorsky?

• Focus on core business processesFocus on core business processes

• Lean manufacturing principlesLean manufacturing principles

• Process improvement Process improvement

• UTC Initiatives (UT500 & EHS 10X)UTC Initiatives (UT500 & EHS 10X)

FunctionFunction BeforeBefore AfterAfter

ProcurementProcurement 2 P.T. Buyers, 1 2 P.T. Buyers, 1 F.T BuyerF.T Buyer

P.T. Planner P.T. Planner oversight ~10% PPVoversight ~10% PPV

Internal DeliveryInternal Delivery 2 F.T M.Handlers, 2 F.T M.Handlers, 1 P.T. Handler1 P.T. Handler

Haas Point-of-Use Haas Point-of-Use deliverydelivery

Inspection QualityInspection Quality 2 P.T Material 2 P.T Material InspectorsInspectors

Haas DQR CertifiedHaas DQR Certified

MSDS MgmtMSDS Mgmt $75K/yr$75K/yr 0$ (tcmIS)0$ (tcmIS)

Scrap ChemicalsScrap Chemicals 18%18% 6%6%

InventoryInventory $1M$1M ConsignedConsigned

Environmental Environmental TrackingTracking

Consultant + 1 Consultant + 1 P.T. EHS managerP.T. EHS manager

Consultant + tcmISConsultant + tcmIS

Chemical management business case – SikorskyChemical management business case – Sikorsky

Displace Internal Costs to SupplierDisplace Internal Costs to SupplierDisplace Internal Costs to SupplierDisplace Internal Costs to Supplier

Performance Gets RecognitionPerformance Gets Recognition

Case Study #3 – Seagate Technologies

Scope of Seagate CMS Program

Air Products and Chemicals

Haas TCM

• Gas Services• Cylinder Mgmt• Emergency Response

• POU Delivery• Waste pickup• Other Onsite Svcs

On

Sit

e S

erv

ices

Haas TCM

• UPW• Waste Water• Optimization

tcmIS

Seagate, Other NASeagate, MN Ops

Seagate Int’l- Ireland- Asia

Integrating Platform• e-Commerce• Lifecycle Tracking• Record Keeping & Reporting• EHS Stewardship• Product Information

Haas TCM

Rinchem Inc.• Offsite Inventory Mgmt• JIT Delivery/Stocking• Container Mgmt• Emergency Response

• Chemicals• Gases• Waste Services

Material Suppliers

“D-Buy”

SUPPLY CHAIN MGMT

Seagate View - Productivity Progress

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.

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• ~$800K Chemical Inventory On

Site

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Apr

-01

May

-01

Jun-

01

Jul-0

1

Aug

-01

Sep

-01

Oct

-01

Nov

-01

Dec

-01

Jan-

02

Feb

-02

Mar

-02

Apr

-02

May

-02

Jun-

02

Jul-0

3

Aug

-03

Sep

-03

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%Chemical Spend

% of SpendShrinkage/Obsolete

Lower “scrap”= Reduced Chemical Use

"Total" Chemical Costs - Seagate Normandale and Shakopee

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

Baseline FY 2002-Actual

FY 2003-Actual

FY 2004-Actual

Year

$ p

er

Ye

ar

Management Fee

Management Costs

Chemical Costs

CMS is platform of continuous cost improvement

Our Compensation Model Produces AlignmentOur 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