Companies in the chemical industry are caught in the middle. As the price of raw materials rises, the manufacturers that buy these chemicals are less willing to pay a premium, since they have to keep their own prices low. Chemical companies that use information to create efficiencies and cut costs are best positioned to succeed.

Eastman Chemical Co. has seen profit margins squeezed over the past three years, with rising costs of raw materials for its chemicals, fibers, and plastics businesses on one side and customers who need to keep prices low on the other. "We've been the shock absorber for the value chain for years," says Eastman VP and CIO Jerry Hale.

INSIDE CHEMICALS Average portion of 2005 revenue spent on IT 2.0% Companies spending more on IT this year than last 29% Buying directly from foreign suppliers 93% Centralizing control of IT operations in past 12 months 57% Bringing outsourced functions in-house in past 12 months 21%

To help executives more easily and efficiently gather data needed for decision making, the company in the past year has launched its Lighthammer Collaborative Manufacturing Suite, a rapid application development environment. The suite uses XML and Web services to facilitate the development of a variety of applications used to aggregate and analyze data across the company. Improved use of data will help Eastman save more than $10 million this year and next through better decision making and improved productivity, Hale says.

For PPG Industries Inc.--a maker of a variety of industrial and specialty chemical products such as protective and decorative coatings, sealants, and adhesives--satisfying customers means more than simply shipping the right paint to a given auto-repair shop. PPG over the past year has established the Performance Power program, which collects data from estimating and management systems at repair shops, including average repair cost, repair time frames, and customer-satisfaction statistics. PPG analyzes the data and then E-mails performance reports back to its customers. Shops can use these reports to tout performance capabilities to the auto-insurance companies that pay for the repairs, says Chris Caruso, global business IT director for PPG's automotive aftermarket business. The more repair work these shops win, the more PPG products they order.

Air Products and Chemicals Inc. sees growth in demand for the gases and chemicals it sells to manufacturers, health-care facilities, and other industries. Technology's main role is to make sure Air Products can meet the demands of growth while keeping the company's costs down. "If there's one thing that's driving us right now, it's to be able to provide demonstrable value to the corporation," says Alan Jeffery, Air Products' continuous improvement manager for global IT. "We're being driven as directly as we can be by the need to improve the bottom line."

At Air Products, the number of components needed to transform raw materials into finished products is staggering, Jeffery says. "Our best value is helping integrate pieces of data that are related to the myriad components in the supply chain," he says. To improve supply-chain efficiencies in parts of its North American and European specialty gases business as well as parts of its chemicals business, Air Products has created a system called Linear Programming, which combines business-analysis software from Dash Optimization, Microsoft Visual Basic, Crystal Reports, and MapInfo to optimize the delivery of the company's products to its customers. The result, according to Jeffery: a savings in shipping costs of as much as $3 million annually in Air Products' liquid bulk business and about $1 million annually in its chemicals business.

	I.T. BUDGET BREAKDOWN Hardware purchases IT services or outsourcing Research and development 19% 14% 2% Salaries and benefits Applications Everything else 33% 18% 14% Data: InformationWeek Research

Illustration By Paul Watson

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Air Products Strips Out Inefficiencies

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	CHEMICALS * Air Products and Chemicals Inc.   Akzo Nobel   Arch Chemicals Inc.   Ashland Inc.   Bayer Corp.   Cytec Industries Inc. * Eastman Chemical Co.   Elementis Inc.   Engelhard Corp. * Lubrizol Corp.   Milliken Chemical   PolyOne Corp. * PPG Industries Inc. Royster-Clark Inc. Sigma-Aldrich Co. * denotes a top 100 company