Chemical Management Services

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Chemical Management Services:
Good for Business, Good for the Environment

By Jill Kauffman Johnson
Executive Director, Chemical Strategies Partnership

Voicemail. While some argue that it is an impersonal, cold way to communicate, the great majority of us view this service as the answer to staying in touch with others in today's fast-paced environment. Over the last decade, many consumers have chosen to use a voice-mail service instead of purchasing an answering machine. Why? Customers realize that it is possible to enjoy an efficient answering service without purchasing the physical product, the answering machine.

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The shift towards voicemail from answering machines demonstrates that we seek the function of the product (getting messages), not necessarily the product itself (the machine). This ultimately benefits the consumer as well as the environment. How? Substituting services for products cuts material costs to customers and rewards suppliers for superior performance instead of increased product sales - reducing the demand for resources and cutting waste. Suppliers of carpets to photocopiers to chemicals are realizing that selling services rather than physical products can increase profitability. Thus we are seeing carpet companies changing into "flooring services" companies, photocopier manufacturers transforming into "document" companies and chemical suppliers becoming "chemical service providers".

Take the case of chemicals. The U.S. manufacturing sector, which uses about $112 billion worth of chemicals per year, is slowly waking up to this new service orientation by adopting "chemical management services" -- or CMS. CMS is a proven strategy for cutting total chemical costs, use, and pollution in manufacturing. A customer no longer buys their chemicals from a chemical supplier, but a chemical service provider. The service provider manages the chemical system: from purchasing to inventory to process efficiency improvements to waste. When suppliers become chemical service providers, they are paid for successfully delivering and managing chemicals - not for selling chemicals. With profitability no longer directly linked to selling more and more chemicals, the chemical service providers help their customers drive down chemical use which means less chemicals, less costs, less pollution.

Who has already adopted CMS? Many are Fortune 500 companies, including General Motors, Ford Motor Company, Honeywell International, Raytheon Company, Texas Instruments, and Delta Airlines. General Motors reports that its shift from buying chemicals to chemical management services has resulted in an average reduction of 30% in chemical use. In one GM plant, the CMS provider reduced the amount of paint needed for each car by 38% without compromising quality. This translates into significant costs savings and drops in VOC emissions and chemical-related wastes.

To characterize the emerging CMS trend, the non-profit group, Chemical Strategies Partnership, conducted a survey of the industry and published the Chemical Management Services Industry Report 2000 in November 2000. The report states that customers like General Motors and other major manufacturers are indeed realizing both cost savings and environmental benefits from CMS. Customers are achieving net savings of 5 to 25 percent per year while getting significant environmental benefits from reduced chemical volume, reduced emissions, reduced risk and better reporting. Furthermore, as chemical service providers rack up these impressive results for their customers, they are growing their own profits. Providers surveyed for the report, ranging from large chemical manufacturers to smaller service-based companies, report profit margins from 5 to 30 percent in 1999. All expect continued growth.

Chemical management services is a quiet revolution taking place both in the chemical industry and their customers' operations. Just as voicemail is a welcome service innovation in our homes and offices, a more sustainable chemical management system should be established on our factory floors. It is good for business and good for the environment.

# # #

A project of the Tides Center, Chemical Strategies Partnership (CSP) was founded in 1996 with funding from the Pew Charitable Trusts, with additional support from the Heinz Endowments, US EPA, The San Francisco Foundation, the Steven and Michele Kirsch Foundation, and CMS Forum member companies. CSP, a non-profit organization based in San Francisco, California seeks to promote chemical management services as an innovative, cost-effective means of achieving chemical use reduction.