IT solutions from
an industry insider
Information disconnect reduces efficiency in the process industry

BASF IT Services, part of the BASF Group, is one of the leading IT
service providers in the European process industry. The company, which has 2,300 employees and an annual turnover of € 450 million, offers services to internal and external organizations and even to customers outside the industry. In the medium term, the company plans to acquire about 20 percent of its orders from external customers.

It is quite common today for companies to spin off what used to be internal departments (IT, Engineering, Marketing/Advertising) as separate companies which offer their services to anyone in the market who is interested. This step is of course usually taken to utilize spare capacity, and the goal is always to reduce cost. However, Christophe Châlons, Business Manager at Pierre Audoin Consultants (PAV) in Munich, used the example of IT companies to explain that these ventures are not always successful. “The companies usually have good IT know-how and very good process knowledge. The problem is that this knowledge is limited to the environment within the parent company.” Despite the fact that the parent company provides the critical mass to be an aggressive player in the market, the new venture does not have sufficient market recognition, and the sales organization is not strong enough. The new companies also lack the right service culture and knowledge of the market. “There is no real will to generate business outside the parent company.”
Since April 2001, BASF has fully consolidated all of its IT activities in BASF IT Services (BIS) with the declared goal of looking for new customers throughout Europe. Will BIS succeed in avoiding the typical errors made by IT spin-offs? As far as the sales organization is concerned, Châlons believes that things are going well: “BIS has hired a lot of field sales personnel and managers who have what it takes in terms of market knowledge.” BIS has a clearly defined product portfolio that is based on a broad analysis of requirements in the process industry
.

Employees with expertise
BIS is also looking for suitable, high-capability partners. In collaboration with Aker Kvaerner, BIS has developed tailored planning software called “SAP-PAS”, a SAP-based product containing the following modules:
software design,
integration of ERP (Enterprise Resource Planning) and PrimaVera (special project management software),
specific expertise in industrial processes and improved best practice,
performance planning methods and strategies.
The joint development of SAP-PAS reflects a combination of Aker Kvaerner engineering services with BIS IT services, and it promises to deliver the end-to-end solutions which are often discussed and which the process industry needs. SAP-PAS can be used to integrate equipment and management information, providing for example an overview of all activities related to maintenance, planned down time and ongoing maintenance projects. The company says that SAP-PAS can be used as a tool to specifically control resources, so that maintenance activity can be brought forward. This reduces cost and improves production throughput.
Efficiency killer exposed
What makes BIS so sure that services of this type are needed in the process industry in particular? A study was performed to investigate this market on the company’s behalf, and the results were very illuminating. The study showed that the flow of information from plant to plant, to management or to other departments such as purchasing or sales is often interrupted, a phenomenon that is succinctly called the “disconnect factor”. In many companies, this often leads to a pigeon hole mentality. Key information is not available to everyone, and as a result decisions are based on incomplete knowledge. Consequences can include low productivity, high material consumption, lower throughput and reduced profitability. Even worse, plants experience unplanned down time that has a direct causal relationship with the disconnect factor. Around 20 percent of engineering time is wasted because employees have to look for data that they need to do what they are actually supposed to be doing. Uwe Krakau, Managing Director Sales & Marketing, described the situation as follows: “41 percent of those surveyed admit that they do not attempt to solve the problem because they do not know where to start.” These facts make BIS believe that it can have a real impact on the process industry, because in Krakau’s words “we have in-depth knowledge which enables us to identify and eliminate information gaps.” It is important to remember that BASF AG is the principle customer, and it will benefit from the growing knowledge base of its IT subsidiary.
Wolfgang Erny, Managing Director Application & Infrastructure, is optimistic that “a critical mass in the external market will give us the benefit of learning curve effects and enable us to discover additional ways of achieving synergies and increased productivity.” This is added value that the parent company is happy to cash in on.
Intelligent use of IT
BASF AG is already in a good position to exploit innovative sales channels. A significant portion of turnover volume in the core businesses is achieved via portals and marketplaces. “These are channels which are based on services that we provide”, said Wolfgang Erny. He explained that his team has broad planning, installation and operations experience with all IT aspects of this network.
Dieter Thomaschewski, President, Region Europe, BASF Group, confirmed this, stating that the intelligent use of IT has “been a significant contributor in our effort to improve our focus on the customer”. He cited a concrete example of this. The World Account gives BASF an global extranet portal for electronic commerce. Company e-commerce turnover now exceeds € 200 million per month, which is a very considerable amount. The World Account acts as a platform for large customers as well as for small and medium size companies and can be used to process orders directly. The global portal, which is available around the clock, has without question proven to be an effective means of increasing efficiency. Figures released recently show that the BASF Styrene Plastics and Technical Plastics Business Divisions more than tripled their e-commerce turnover in 2003 compared to the same period in 2001. By the end of 2003, e-commerce is expected to contribute more than one billion euros to total annual turnover. The company believes that using electronic channels to transact 100 percent of its business within a few years from now is no longer a utopian vision.
The bottom line is that the introduction of new or improved technologies to optimize processes and facilities and at the end of the day to reduce cost cannot be achieved without an adequate IT structure. In the process industry, BASF IT Services has the in-depth know-how that will definitely enable it to deliver the added value that many companies are looking for.