A baseline analysis revealed a chemical management cost to chemical purchase cost ratio of approximately 0.6 to 1. Key management costs accrued in inventory, procurement, waste management, and EH&S functions. The baseline analysis also revealed a number of opportunities for Nu-Metal. A CMS program could potentially increase ordering efficiency, consolidate the supply base, utilize a JIT delivery system, capitalize on the opportunity cost of floor space, and utilize the expertise of a supplier.

Despite these drivers, there were key questions to be addressed. First, are there enough chemical purchase costs to justify engaging a CMS provider? Second, is there sufficient cost savings or value from services to justify an onsite chemical manager? Finally, would Nu-Metal see benefits as a result of the previous two opportunities? Early recommendations were to evaluate a leveraged purchasing program plus some basic services using a CMS provider. Some of the services may include, sourcing, supply, and information management. In the long-term, once a program is up and running, a CMS provider could continue to add on more services to drive down chemical use. Establishing a longer-term partnership is important to allow both partners to realize value from a CMS program.

SME Project in Western Pennsylvania
In 2000, CSP completed a similar project to test the CMS model in the tool & die industry sector in western Pennsylvania. CSP took a "shared use" coalition approach, working with 4 different companies and 7 facilities, to achieve the economies of scale sufficient enough to attract a chemical management service provider. CSP's goal in launching such a coalition was to determine whether, and how, a collection of small and medium size manufacturers could engage and benefit from a strategic relationship with a CMS service provider. We believe this effort went far in educating the companies involved about the potential opportunities for CMS in smaller manufacturing settings. Key lessons CSP learned are as follow:

• Economies of scale. There is a real challenge in achieving the necessary economies of scale with SME firms. While the exact dollar volume threshold varies, it is clear that opportunities are diminished when annual chemical purchase costs are under $500,000.

• Value proposition. A critical criteria is a demonstrated cost and time savings for the SME. Because there is often minimal cost savings to be realized from product price reductions, it is necessary to demonstrate value added from chemical services. However, since savings from services are less apparent than product price reductions, and because the facilities are so small, the value proposition for SME programs are tough to make.

• Loss of Flexibility. While many facilities have sufficient maintenance or similar activity to justify the presence of an external chemical service provider, transferring these activities may entail a loss of flexibility for the SME.

Another source of information on CMS applicability to the SME sector
Tom Bierma and Frank Waterstaat, researchers at Illinois State University currently conducting research on applicability of CMS to small and medium sized manufacturers in the metal working industry. (tbierma@ilstu.edu or call 309/438-7121).