Air Products and Chemicals Organizes to Meet

Global Challenges
Air Products and Chemicals, an industrial producer of gases and
chemicals headquartered in the eastern United States, designs and operates
production facilities worldwide. Unfortunately, industrial buyers are
increasingly viewing the companys products as commodity items, which,
along with intense global competition from China and other countries, has
created extensive downward price pressures. This has created the primary
challenge that Air Products facesmargins are under pressure, yet the
company has made strong performance commitments to shareholders.
Air Products has operated historically as an engineer-to-order
company, which implies a great deal of engineering and design work
customized to each new facility and project. Engineers traditionally design
new facilities without considering previous designs or leveraging
commonality across design and procurement centers. Management now
recognizes the company must pursue standard-design and off-the-shelf-
product-based thinking. The companys objective is to enter the global
marketplace as a global rather than regional company. Achieving that
objective demanded the development of a globally integrated engineering
and procurement process.

GLOBAL ENGINEERING AND PROCUREMENT PROCESS

Responding to the call to globalize engineering and procurement, the
director of project and logistics supply assembled a leadership team to
develop, sell internally, and launch the companys global process. The
process that Air Products developed involves an extensive analysis between
the U.S. and European design centers to determine areas of commonality
and synergy. Although the process began with focused commodities, projects
became broader in scope once the cost-saving possibilities became obvious.

ORGANIZATIONAL SUPPORT MECHANISMS

Perhaps the major reason Air Products has enjoyed success with its
global engineering and procurement process is due to the organizational
design features the company has put in place. These features include two
steering committees, a globalization manager, and extensive use of cross-
functional/cross-locational teams.
Steering Committees

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 Two steering committees support the global processan executive
steering committee and an operating steering committee. The executive
steering committee consists of senior managers from engineering,
procurement, and operations. Financial representatives support the group as
required. This committee brings higher-level commitment and exposure to
the global process. The committee also allocates the budget that supports a
globalization manager and staff along with travel and living expenses for
team members.
A globalization manager, a project procurement manager, and the director of
Asian sourcing (who commits a part of his effort to the global process)
comprise the core operating steering committee. The steering committee,
working with the globalization manager, assumes some important
responsibilities. This committee identifies and prioritizes global opportunities,
establishes cross-functional teams, and identifies savings targets. Committee
members also work to remove any hurdles that affect the process. The
operating steering committee also has responsibility for maintaining online
support documents, updating the status of projects on the companys
intranet, and conducting lessons-learned sessions with teams at the end of
each project.

Globalization Manager
Consensus exists among managers concerning the importance of the
globalization manager, a position created specifically to oversee the global
engineering and procurement process. This manager, who is also the
operating steering committee leader, is a well-respected engineer with 25
years of experience. He reports to the vice presidents of engineering in
Europe and the United States. This is an important consideration because the
two design centers must work together during global projects. He has
located his office with the procurement group at U.S. headquarters, which
facilitates teamwork and trust between engineering and procurement.
The globalization manager commits 100% of his time to supporting the
global process. His responsibilities include working with the operating
steering committee to identify future projects, monitoring the status and
progress of current projects, and determining where to spend budgeted
funds. He also approves all operating steering committee expenditures and
identifies team members for project teams, including working with other
managers to gain support and member time. The globalization manager also
plays an important role in helping teams establish project milestones.

CROSS-FUNCTIONAL / CROSS-LOCATIONAL TEAMS

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 Air Products relies extensively on cross-functional/cross-locational
teams to support global engineering and procurement. These teams, which
typically have four to six members, are responsible for developing and
proposing global sourcing strategies. The steering committee selects
members on the basis of experience and confidence in an individuals ability
to support the team. Each team has representatives from the United States
and Europe
participating. Project teams follow a nine-step global process, which includes
regular reporting of progress to the operating steering committee. Perhaps
the most important responsibility performed by these project teams is the
development of a hypothetical material cost that identifies where savings
can be realized. Savings occur primarily in three areas: (1) material savings,
(2) currency savings, and (3) savings due to opening a purchase requirement
to competition.
Has Air Products been successful? With over 100 projects completed,
the company is averaging 20% cost savings compared with previous
agreements. Executive management considers the global process to be one
of the more important internal processes in place at Air Products today.
Success would not be possible, however, without careful attention to the
right organizational designa design that recognizes the importance of
leadership, coordination, communication, and resource support.

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