“From Cost Factor to Competitive Advantage”

Interview with Dr. Matthias Fankhänel, Head of Technical Centres, BASF

02.01.2013 Whether plant engineering, machinery, automation and electrical engineering or the coating of heat exchangers - the services offered by the Technical Centers BASF are very wide ranged. Dr. Matthias Fankhänel, head of technical centers of expertise, explains why it is worth it for the chemicals group.


CT: Why does BASF allow itself the luxury of such a broad and profound engineering profile and service offering while the trend among other chemical engineering companies and sites is rather towards outsourcing?
Fankhänel: My impression is rather that the reverse trend towards insourcing is already in full swing. Nor do I believe that we are allowing ourselves a „luxury“. Our engineering profile has long been more than just a cost factor; instead it is a distinct competitive advantage. Because what we are doing is highly profitable.

CT: Could you please explain that standpoint.
Fankhänel: We went through the same thought processes as other companies during the BASF site project back in 2003: Should we outsource some of the engineering, or not? My contention is that the conventional infrastructure company is an unnatural construction. These companies were created because chemical enterprises were being split up and a structure was needed which could continue to support production by providing services. That did not happen here in Ludwigshafen. Nevertheless, we considered how we would position ourselves in the site project with market mechanisms and contractual freedom being uppermost in our thoughts. Our present concept is based essentially on two further pillars: competitiveness and added value for the company. We want our solutions to surpass our clients‘ expectations and to outdo the performance of comparable external service providers. To this end, we conduct regular competition comparisons for all technical services. Internal services are assessed using the same criteria as the services of external providers. And this approach has proved highly successful: All our services are now classified as competitive. We have a competitive edge over external providers primarily in those areas where we can apply our local or chemical know-how. Let us consider the field of automation engineering as an example: Here we are sure to win any competitive comparison because we are less expensive than external competitors and because we can generate considerable added value for the company through our in-house expertise. Our internal clients can confirm this. In contrast, we would not provide our cleaning services ourselves even if we could offer them on the same terms as an external service provider because we would generate no added value for our core business.

CT: A third party can also acquire this know-how during a long period of cooperation. What is your general policy towards external service providers?
Fankhänel: For over 90 percent of our technical service offerings our BASF clients are free to choose whether they wish to obtain the services they need for their production facilities from us or from external providers. Some of our service employees initially found this somewhat disconcerting. Many clients have also tried out external providers but most of them soon returned to the internal service providers in the technical service centres.
In many cases we also make a conscious decision to go outside: Since the level of capacity utilisation varies on a daily basis we have to react in a flexible manner to ensure that our internal workforce is always optimally employed. We have been able to demonstrate that this works during the economic downturn. In boom times this can of course mean that we buy in more services from an external provider.

CT: I have also noticed greater specialisation in chemical parks.
Fankhänel: Technology and operational excellence number among the basic attributes of BASF. This was clearly addressed in the new BASF strategy in November 2011: Technology is one of the foundation stones of BASF, providing the basis for the entire success of the company in the past. And it is our firm resolve to further strengthen this basis. In the aftermath of the economic crisis many of our competitors faced problems in restoring their capacity to deliver. We were in an entirely different situation. Thanks to the combination of production and engineering embodied in our „Verbund“ philosophy and the associated concentration of expertise we were in a position to operate the site at minimal capacity. We undertook rational plant shutdowns and brought forward maintenance measures for shutdowns. That enabled us to ramp up our production really fast when the time came.

CT: Switching to a client and service provider mentality was the most difficult part of the transition process in chemical parks. How did you handle it?
Fankhänel: That was indeed a crucial issue here and warranted just as much discussion with employees as if we had set up our own service company. Clearly we do not have the same operating costs as the service companies. Nor do we have to conclude legally enforceable contracts with one another. That all generates additional expense. Another aspect is that we are able to react fast and set priorities. We can respond to operational changes at short notice by rapid redeployment of our workforce. That cannot be done with external service providers if contracts stipulate when an agreed task is to be considered completed. Our structure offers a very high degree of flexibility in such situations.[AS]

Heftausgabe: Kompendium Industrieparks 2012

About the author

Armin Scheuermann