Grantee Research Project Results
Final Report: P2 Incentive Contracts Enhancing Diffusion of P2 Technologies in the Metal Plating Industry
EPA Grant Number: R824745Title: P2 Incentive Contracts Enhancing Diffusion of P2 Technologies in the Metal Plating Industry
Investigators: Bierma, Thomas J. , Waterstraat, Francis L.
Institution: Illinois State University
EPA Project Officer: Chung, Serena
Project Period: October 1, 1995 through September 30, 1997
Project Amount: $199,964
RFA: Incentives and Impediments to Pollution Prevention (1995) RFA Text | Recipients Lists
Research Category: Sustainable and Healthy Communities , Pollution Prevention/Sustainable Development
Objective:
This research examines innovative chemical supply programs that promote pollution prevention. The goals of the study are to document existing "Shared Savings Chemical Management" contracts and examine their applicability to the other industries, particularly the metal finishing industry.Summary/Accomplishments (Outputs/Outcomes):
Shared Savings Chemical Management programs were found to have outstanding performance in reducing chemical costs and waste in the North American transportation equipment industry, particularly in auto manufacturing and assembly. Common features of Shared Savings programs include:
- The chemical user no longer "buys" the chemicals. They are owned by the
supplier until used in the production process.
The chemical supplier receives a fixed fee per month or per unit of production in exchange for chemical performance and services.
The supplier profits through chemical volume and cost reduction, not chemical sales.
The supplier provides on-site chemical management, including comprehensive logistic, EHS/compliance, and chemical application services.
One supplier serves as a primary, or "Tier 1," chemical manager, overseeing the supply of chemicals from "Tier 2" suppliers.
Though Shared Savings offers several advantages over traditional chemical supply programs, the primary advantage is that the financial terms align the interests of both chemical supplier and chemical user. In traditional programs, increased chemical volume leads to increased supplier profit. Pollution prevention initiatives generally run against the financial interests of the supplier, limiting supplier involvement and initiative. In Shared Savings programs, however, the supplier increases profits by decreasing chemical volumes. Thus, the supplier not only initiates pollution prevention efforts, but uses its own chemical expertise and resources to help develop and implement new P2 technologies and procedures. Companies in the North American auto industry have been using Shared Savings Chemical Management for over a decade, with remarkable results. Three case histories of auto plants were developed. In addition, one case history of a truck engine plant, and one case history of a locomotive engine plant were developed. These cases are summarized below.
General Motors Corporation
Truck and Bus Assembly Plant, Janesville,
Wisconsin.
The Shared Savings program at General Motors is known as the Chemicals Management Program (CMP). Though GM began implementing CMP programs at some of its plants in the mid-1980s, the program at their Truck and Bus Assembly Plant in Janesville, Wisconsin was begun in 1992. Their supplier, BetzDearborn, is responsible for water treatment chemicals (powerhouse, cooling towers, wastewater treatment, air houses), paint detackification and booth maintenance chemicals, lubricants, maintenance paints, commodity chemicals, and purge solvents. BetzDearborn relies upon Tier 2 suppliers for many of these chemicals.
The plant assumes ownership of the chemicals at the time they are used in the process, but never "buys" them, thus eliminating purchase costs. In addition, BetzDearborn assumes responsibility for many other chemicals costs such ordering, inventory, tracking, distribution, quality control, and assisting in regulatory compliance. For GM, these cost savings substantially exceeded the fees that are paid to BetzDearborn. Though GM has requested that specific financial data be kept confidential, the overall program has proven so successful that GM intends to implement it in all its plants worldwide. In fact, at the corporate level, GM estimates the cumulative savings from their Chemical Management Programs exceed the cost of the Programs. In other words, program savings more than pay supplier fees, and GM receives its chemicals for free.
General Motors Corporation
Electro-Motive Division Plant, LaGrange,
Illinois.
The Chemicals Management Program at GM's Electro-Motive Division (EMD) began in 1994. The plant builds railroad locomotive engines. Their supplier, D.A. Stuart, is responsible for machining fluids (coolants), cleaners, oils, water treatment chemicals and miscellaneous small-volume chemicals. Stuart relies upon Tier 2 suppliers for many of these chemicals.
Stuart receives a fixed monthly fee for their chemicals and services. This produces a strong incentive to find ways to improve chemical efficiency at the plant. The results have been dramatic. Stuart and EMD have implemented a process to control bacterial activity in the plant's central coolant systems by carefully controlling coolant pH. This not only eliminated the need for biocides, but reduced "rancidity" and improved the performance of the coolant. Another program extended coolant life, reducing the volume of coolant usage by over 60%. In addition, sodium nitrite has been eliminated from parts washers by substituting a more effective and less toxic rust preventative.
Chrysler Corporation
Neon Assembly Plant, Belvidere,
Illinois.
The Shared Savings program at Chrysler is known as the Pay-as-Painted Program, implemented at the Belvidere, Illinois plant in 1989. Today, Chrysler's paint supplier, PPG Industries, has assumed responsibility for all chemicals in systems related to cleaning, treating, and coating the autobody. PPG is paid a fee per painted vehicle. The program is implemented through a Pay-as-Painted Team, made up of PPG personnel as well as Chrysler staff from many departments throughout the plant. Though PPG uses many of their own chemicals, they rely on a number of Tier 2 chemical suppliers, as well.
The Belvidere Assembly plant saved over $1 million in the first year of their program with PPG. There have been considerable additional savings in the years since then, many of which have involved improved chemical use efficiency. For example, the Pay-as-Painted Team researched methods to reduce waste from the electro-coat process by the more efficient placement of the electro-coating electrodes. The improvements reduced the amount of electro-coat chemical needed for the process. The Pay-as-Painted team implemented a powder coat anti-chip application that increased finish durability while dramatically reducing emissions of volatile organic compounds (VOCs). They also implemented a water-borne primer system that reduced VOCs. Recently, they developed an improved technology for paint repairs. Previously, the paint touch-up process required the use of high VOC materials. However, the new process makes use of the same low VOC materials used in the original painting process, and produces a better finish.
Ford Motor Company
Taurus Assembly Plant, Chicago, Illinois.
The Chicago Assembly plant began its first Shared Savings chemical supply program in 1988 with the detackification of overspray from the paint booths. Today, this has evolved into two major Shared Savings programs, known as Total Fluids Management and Total Solvent Management. These two programs cover most chemicals in the plant, with the exception of paints, sealers and lubricants. Their chemical supplier, PPG/Chemfil, relies upon Tier 2 suppliers for many of these chemicals.
PPG/Chemfil and a Tier 2 water treatment chemical supplier were instrumental in modifying wastewater treatment operations to reduce sludge generation by 27%. Ford's decision to introduce certain aluminum body panels meant that sludge from wastewater treatment would become legally "hazardous", greatly increasing waste disposal costs. The reduction in sludge generation saves Ford $50,000 annually.
Probably one of the most important benefits has been the reduction in VOCs. Ford faced severe regulatory restrictions in the Chicago ozone "non-attainment" area. Under the Total Solvent Management program, PPG/Chemfil worked extensively with Ford personnel to study the usage of VOC-containing solvents throughout the plant. Together they were able to reduce VOC emissions 57% within the first 18 months of the program. Most of these reductions were produced by finding more efficient ways to use the solvents. This significantly reduced hidden chemical costs for Ford by reducing compliance costs and avoiding potential legal costs. The reduced emissions also reduce employee exposures to VOCs. These improvements benefited PPG/Chemfil as well. The increased efficiency of solvent use meant that PPG/Chemfil had to supply less solvent, reducing their own costs.
Navistar International
Engine Plant, Melrose Park, Illinois.
Navistar's engine plant in Melrose Park has had a Shared Savings program longer than any of the other plants studied. Known as Chemical Management Services (CMS), the program was started by Navistar and their supplier, Castrol Industrial, in 1987.
The benefits for Navistar have been dramatic, though they have changed as the relationship has evolved. The first area that Castrol focused on was process applications. Gaining greater control of process chemistry and the compatibility between coolants, cleaners, equipment, and metals reduced production downtime and improved product quality. Rework on engine blocks and heads was reduced by 93%. Following this, Castrol personnel focused on reducing chemical usage and waste. Ultimately, coolant usage was reduced more than 50%. Coolant waste was reduced by more than 90%.
Conclusions:
The chemical waste and "headaches" experienced by many companies today can be linked, in part, to a chemical supply strategy which has not kept pace with changes in the business environment. The traditional chemical supply relationship uses financial incentives that promote waste. In today's markets, few companies can afford such a drain on competitive strength.
Shared Savings Chemical Management has proven effective in reducing both waste and the overall costs of chemical use. Supplier revenue is linked to chemical performance, rather than chemical supply, harnessing the resources of the supplier to assure and improve chemical performance. Financial incentives reward chemical volume reduction, promoting continuous improvements in chemical use efficiency. Responsibilities are divided according to the core competence and expertise of each party, reducing overall chemical costs and allowing the chemical user to devote more resources to its core business.
Companies have structured their Shared Savings programs in a variety of ways, depending upon their own needs and circumstances. Programs usually begin small, and expand as both parties build trust in each other. The benefits have been dramatic, with significant decreases in chemical use and waste, as well as reductions in overall chemical costs. The success of Shared Savings has been demonstrated in many manufacturing plants, with some having over 10 years of experience.
Some creative changes in Shared Savings may be needed to apply the strategy to smaller manufacturers, or manufacturers with a highly fluctuating production rate or product mix. However, it appears to be currently applicable to a large number of manufacturing plants throughout the world. The primary barrier limiting application of Shared Savings will be resistance to the types of changes this relationship entails. However, the competitive edge will go to those companies who are first to overcome this resistance.
Journal Articles on this Report : 2 Displayed | Download in RIS Format
Other project views: | All 19 publications | 3 publications in selected types | All 2 journal articles |
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Type | Citation | ||
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Bierma TJ, Waterstraat FL. P2 Assistance from your Chemical Supplier? How Shared Savings Contracts Work.. Pollution Prevention Review. 1997;. |
R824745 (Final) |
not available |
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Blanchard LA, Waterstraat FL. P2 assistance from your chemical supplier. P2 Pollution Prevention Review Wiley, . 1996:13-24 |
R824745 (Final) |
not available |
Supplemental Keywords:
surface finishing, waste minimization, supplier relationships, Scientific Discipline, Sustainable Industry/Business, cleaner production/pollution prevention, Chemistry, Economics, Social Science, automotive supply chain, cleaner production, chemical use efficiency, small business, pollution prevention technology diffusion partnership, metal plating industry, supply chain analysis, chemical processing, tottal fluids management, pollution prevention, metaphorical analysisRelevant Websites:
http://www.chemicalstrategies.org/ Exit
Progress and Final Reports:
Original AbstractThe perspectives, information and conclusions conveyed in research project abstracts, progress reports, final reports, journal abstracts and journal publications convey the viewpoints of the principal investigator and may not represent the views and policies of ORD and EPA. Conclusions drawn by the principal investigators have not been reviewed by the Agency.