Air Products Strips Out Inefficiencies

There are two kinds of information technology at Air Products and Chemicals Inc.: The applications and other systems that are directly involved in making money for the chemical company, and the IT infrastructure and processes that support those systems.

The company's goal is to reduce the costs of the underlying IT and related processes in order to devote more resources to the business technology that creates value for the company, says Chuck Anderson, director of planning for global IT. That means spending less time on, say, patch-management chores and more on things like a price-management application that can provide a measurable return for the company. "What we're trying to do is run IT more like a business," Anderson says.

Air Products, with $7.4 billion in sales last year, provides gases and chemicals for a range of industries, including energy companies, electronics manufacturers, and health-care providers. Among its products are hydrogen and other gases that oil refineries and petrochemical makers use and specialty gases and chemicals used to produce semiconductors and liquid-crystal displays.

But like the rest of the chemical industry, Air Products is getting squeezed by the rising costs of raw materials such as natural gas, which is a main ingredient in its products. Since it sells commodity products, it's under constant price pressure. So productivity is the watchword among the 950 employees in its IT operation.

Air Products standardized on continuous-improvement methodologies based on Six Sigma and lean manufacturing five years ago to boost its operating return on net assets, a metric to measure shareholder return on Air Products' asset base. The IT operation began using about 40 continuous-improvement tools and practices 18 months ago, says Alan Jeffery, manager of continuous improvement for global IT. The methodologies are used for root-cause analysis, where IT processes are scrutinized to identify wasted time and resources.

Software patching was a case in point. The IT group each month patched Microsoft Windows running on more than 1,000 servers throughout the company--not exactly a value-providing task. Using continuous-improvement practices that provide a picture of each step of the patching process and the time needed for each step, the global IT group, with the help of Jeffery's team, identified inefficiencies and developed standard processes that cut by about a third the number of staff hours used in patching. Altogether, continuous improvement has cut Air Product's IT costs by 20%, which Anderson says adds up to savings in the tens of millions of dollars.

Air Products' quest for productivity improvement has been aided by its installation of SAP applications and the standardization of IT and business processes that go with them, Anderson says. These have allowed the company to retire aging, inefficient apps. For example, Air Products had multiple billing systems that it eliminated as SAP modules were added. The company began installing SAP software four years ago, including enterprise-resource-planning, supply-chain, and human-resource-management apps. Those systems now support more than 80% of the company's revenue.

Anderson says his biggest challenge in the IT department's continuous-improvement quest is building it into the culture and day-to-day processes. Only that way can the department meet the constant demand for more-efficient IT. "Each year," Anderson says, "we need to take it to a new level."

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Illustration By Paul Watson

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