Jul 6 2005
BASF Aktiengesellschaft has permanently reduced costs a its Ludwigshafen production site by €480 million and has thus exceeded the original target of €450 million. Three years after the go-ahead for the most comprehensive and ambitious restructuring program of BASF’s largest site, site manager Dr. Albert Heuser drew a positive balance at a press conference held today in Ludwigshafen: “We have significantly and sustainably increased the site’s competitiveness by consistently identifying and using existing potential. This is an important basis for the further development of our production site.” The great commitment of all those involved was critical to the success of the project said Heuser: “We would not have achieved our goal without the strong support of our employees and their willingness to help shape these major changes.”
Half the savings are material costs
The basis of the success was a systematic and detailed general inventory of the site. Approximately 20,000 individual measures have been implemented over the past three years. Roughly half of the savings of €480 million has been achieved by reducing material costs. Greater efficiency in production plants and infrastructure and service units have contributed to this. For instance, the number of tank cars was reduced (€5.5 million), externally rented office space was relinquished (€4 million), and residual fuels were utilized more efficiently (€3 million). The other half results from savings in personnel costs. The site project means that there will be approximately 3,000 fewer workplaces at the Ludwigshafen site. “This was really not easy for any of those involved. However, together with the employee representatives, we have developed a variety of instruments for controlling staff levels. We have not resorted to involuntary redundancies, since all the measures have been carried out on a voluntary basis,” said Hans-Carsten Hansen, head of Human Resources at BASF. “The response of staff to our offers of short-working programs for employees nearing retirement, severance pay, work release arrangements or vocational counseling and job placement shows us that we have been able to provide truly fair and acceptable solutions. Our social partnership has shown itself to be very sound.”
Three factors for the success
Three factors were crucial to the success of the project: introduction of market mechanisms, further development of the organization and increased plant efficiency.
More market at the Ludwigshafen site
A central element of the site project was to introduce “more market” into the company. Business relationships between in-house service units and their customers on the site are based on agreements similar to contracts with external partners. For this purpose, all in-house providers of services – from filling to personnel procurement and central building management – have tailored their services in such a way that they can be compared with external service providers. These comparisons will be available for all service products for the first time by the end of 2005, allowing in-house providers to tailor their services specifically.
As an important element for strengthening the market idea, the production units have assumed the role as client for maintenance measures. By using “more market it was thus possible to achieve the goal of permanently reducing costs for maintenance and plant modifications by 10 to 15 percent.
Further development of the organization
Since November 2002, a six-person site management team has represented the interests of the Ludwigshafen production site and acted as a central point of contact. At the same time, it promotes competitive cost structures and regulates the interplay of the units at the site.
Service providers have also been streamlined: For example, the competence center Human Resources has been given an efficient, slim structure. Service and control functions have been separated, thus achieving greater customer orientation and specific professional counseling. Technical Services have also been made product- and customer-oriented. Technically similar functions have been merged in order to be able to improve services and provide them more cost-effectively. Some 10,000 employees work in the reorganized units.
Efficiency significantly increased
In the last three years, all the plants at the Ludwigshafen site have been systematically analyzed to identify room for improvement. Plants have increased their efficiency by further optimizing their facilities and procedures and by consuming less energy and raw materials.
Processes in infrastructure and service units have also been further developed, thus significantly enhancing efficiency. Synergy effects and savings were achieved in particular by networking services at the site better and more consistently.
Idea of the site project remains alive
“With the site project, we have taken a great step forward in securing the future of the site,” explained Heuser. “The site project has shown the strengths and possibilities of the Ludwigshafen production site. We want to further expand on these strengths because global competition will be continue to present us with huge challenges in the future. It is now a question of using the momentum we have achieved to achieve continuous improvement across all units. This is important for BASF as a whole, because the BASF Group will not be successful BASF without a successful Ludwigshafen site.”
Up to 2009, BASF plans to spend a total of €6 billion on capital expenditures, modernization and maintenance of its plants in Ludwigshafen. This corresponds to an annual average of €1.2 billion. Additional, €700 million per year will be spent on research and development into modern processes and innovative products – showing BASF’s clear commitment to the Ludwigshafen production site. “We will continue to ensure that Ludwigshafen remains one of the world’s most dynamic and efficient chemical Verbund sites,” said Heuser in closing.