Managing Chemical Costs

If someone told you that a new product could cut rejects from 2% to less than 1%, slash chemical costs 25%, labor costs by 5% and waste disposal costs by 2% all in a year, would you look at him as though he had lost his mind? Jai Balkissoonsigh, quality assurance and environmental manager for Torcad Co. (Toronto, Ontario) probably did, but he was also desperate to control escalating plating shop costs.

In the plating industry, shops that service the automotive market are in a catch-22 situation with tremendous pressure from customers to reduce service and product costs while internal costs continue to climb. "We are facing so much pressure from customers that we have to focus on cutting costs. We have looked at labor costs, but we cannot cut costs in this area because we are a union shop. Our collective agreement means our costs are fixed," stated Mr. Balkissoonsigh. "And our turnaround time pressure is high. We have to work weekends to meet customer demands."

During the past two years, labor costs have risen because Torcad renegotiated employees' contract. Energy, environmental, maintenance and trucking costs have all gone up for various reasons, and yet customers continue to pressure the company for more competitive (the lowest) price possible.

The company has taken some cost-cutting steps. It has subcontracted maintenance and trucking services. About two years ago, the company looked at chemical costs. At one point, it had close to 50 chemical suppliers, and even more knocking on the door. This required a lot of Mr. Balkissoonsigh's time and kept him from his responsibilities as technical and plant manager. Also, when chemical problems did occur, the chemical vendors pointed their fingers at each other.

Not surprisingly, quality suffered. For a while, Torcad simply survived with the problems. The 10% reject rate was the norm. Torcad figured if the customers could live with it, so could it. But then the company implemented processes for ISO 9000 and QS 9000 accreditation. Quality then became a major issue. That is when the company started the chemical management program.

The company asked itself: Who is accountable for the plating? Torcad determined that the suppliers were because they were experts in the field. "We are platers or material handlers; we are not chemists or R&D specialists," said Mr. Balkissoonsigh. "We do not want to have to worry about the chemistry of the baths. We want to ensure that our customers get quality products on time, and that we are environmentally compliant.

The company developed a partnership with Westbrook Technologies, Scarborough, Ontario). Paul Raymond of Westbrook explained the program. "Instead of simply supplying the Ecomax chemistry for the chloride zinc plating, we put it into the tanks, and Torcad doesn't pay for it. Torcad pays for chemistry when good product is produced, and it pays by the unit of goods product is produces. So the more efficient Torcad becomes, the better product it produces, and the more we get paid. Ecomax is a total waterless system whereby the powder is dissolved in plating solution and returned to the process through automated feeders. No additional liquids are added unless solution growth is reduced.

Torcad is benefiting from its chemical management program. Reject rates have dropped from 2% to less than ½ % in the time the program has been in place. Torcad now plates in five days what used to take six days. Mr. Balkissoonsigh estimates that Torcad has gained about 12% in productivity.

In other areas, chemical costs have dropped by 25%, labor costs have declined 5% and waste reduction has fallen 2% due to higher efficiency, longer bath life and fewer chemical dumps. Westbrook manages paints, waxes, cleaners, plating solutions and other ancillary products, since it can purchase products more efficiently than Torcad. There are other indirect benefits. Because someone else manages the plating operation, Mr. Balkissoonsigh has more time to work with his customers. "I am working now with GM to get a hexavalent chromium replacement. Working with them helps me develop better relationships.

I want to eliminate headaches. I want Westbrook involved in my Quality Assurance Department, working along with us so that when there is a problem, they are there to fix it. They are accountable for the quality of products from our shop and having them run it means I can concentrate on developing our customer base."

Mr. Balkissoonsigh has taken the program to his customers. "When I go to a customer for new business," he said, "I include Westbrook in my team, and tell the customers that we are going to offer them a fixed price for the next four years. I am looking at long-term relationships with my customers. I have just signed the first four-year agreement. I want to change how we do business because in a competitive marketplace we need to look at things differently to ensure that we survive."

There are some drawbacks to chemical management. You are stuck with one supplier and one type of chemistry. As a plating quality manager, one cannot compare chemistries, which is a valuable exercise for many because it gives them the opportunity to learn about different chemistries in the marketplace. Also, if a competing chemical supplier introduces new technology, you will not have access to it. Customers may not like the chemical technology you are working with, so it becomes a challenge to sell your customer on the chemistry, assuring them you have the ability to get the job done.

Despite these drawbacks, Mr. Balkissoonsigh believes this is the future for the finishing industry. As competition for business heats up, finishers will have to make sure they have what it takes to win the contracts and secure their place in the market.