Original Date: 09/14/1998
Revision Date: 01/18/2007

Raytheon Corporation launched a major effort to reduce its operating costs through full/partial closures of 26 facilities and 16 offices. When complete, this effort will result in a 20% decrease in facility space, a 10% reduction in personnel, the creation of Centers of Excellence, and aggressive measures for reducing material costs. In this context, Raytheon set up a Chemicals and Gases Technology Team to handle cradle-to-grave management of production/non-production chemicals, bulk/cylinder gases, and chemical waste services across the corporation.

Since 1996, Raytheon Missile Systems Company’s (RMSC’s) manufacturing plant at AFP44 has been a partner in the Chemical Strategies Partnership (CSP), sponsored by the PEW Charitable Trusts. The sponsor is geared toward identifying the existing drivers of chemical usage, making these drivers known to industry, and bringing tools/expertise to the partners. CSP’s goals are to reduce the use and release of chemicals; restructure the relationship between partners and chemical suppliers; and foster a corporate organizational commitment to integrate cost-effective P2 into strategic business objectives. By pursuing these avenues, CSP strives to establish EH&S as a business driver.

In the past, chemicals were viewed as a way to produce quality products in a cost-competitive and timely manner. Many businesses looked only at the procurement aspect of chemical management, and failed to see the associated costs which materialized over the life cycle of the chemical. Today, the manufacturing sector is redefining how chemicals are sold and used. Supply chain management now manages chemicals throughout the commodity’s entire life cycle (e.g., procurement, inventory, internal delivery, emergency response, handling, use reduction, monitoring, reporting, collection, disposal). By improving the chemical management system for each part of the life cycle, businesses can reduce costs, enhance production quality and efficiency, and improve safety and environmental protection. The CSP methodology (Figure 2-5) addresses these issues by incorporating process-level material and cost accounting. The methodology involves mapping the chemical process, reviewing the production history, and calculating the material output as accurately as possible. Next, chemical management cost accounting is developed to determine the actual costs for each chemical at every stage as well as identify how much chemical waste occurs at the manufacturer’s facility. If 35% of a company’s material is waste and half of this waste requires costly handling/disposal efforts, then the manufacturer will be motivated to reduce the consumption of that material.

RMSC performed materials and cost accounting at its printed wiring board shop, and estimated its savings at $400,000 annually. Currently, the company is working with its suppliers to develop incentives and renegotiate contracts. RMSC plans to benchmark best practices for chemical management; publish materials and cost accounting results; and distribute a how-to manual with sample supplier contracts. Supplier involvement is critical because it creates incentives to reduce chemical use; allows the company to concentrate on its core business; and focuses on function instead of products. Another partner in CSP developed service contracts with its suppliers. As a result, this partner reduced procurement and chemical management costs by 60%; decreased procurement time from 15 days to one; achieved a 20% reduction in chemical purchasing costs via consolidation; and regarded the chemical management program as being instrumental in obtaining its ISO-14001 registration.

RMSC presented the CSP methodology to the Chemicals and Gases Technology Team. As a result, a single Tier I supplier was chosen to handle the corporation’s chemical, gas, and waste services. Supplier compensation is based solely on incentives. This approach will enable Raytheon to become an industrial leader in hazardous chemical use reduction.

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