Industrial Park Operators Stemming the Downturn

Utility companies are off the hook in times of crisis. Whereas the prices of consumer goods and project-related services come under pressure, those of gas, electricity, water, steam etc. generally tend to remain stable. However, what may have been cut and dried just a few years ago with regard to long-term contracts and obligations has undergone radical changes in recent years: Site service providers and operators now face competition and struggle to provide marketable conditions. “Just a clear division of responsibilities and the ability to concentrate on core business constitute a competitive advantage for companies located in an industrial park”, according to Dr. Roland Mohr, Managing Director at Infraserv Höchst.

Site service providers are thus all pursuing the same goal with their various efficiency programmes: To hold onto tenants as long as possible. However, the economic crisis which began with the collapse of the investment bank Lehman Brothers in September 2008, introduced a further dimension: Far-sighted site operators asked themselves how they could support their customers who were fighting to survive.

A tricky question. Because price cuts alone are simply not enough. There is too great a risk of destabilising pricing structures catering for a range of industrial park tenants of differing economic potential and also the danger of the site operator self-inflicting long-term damage. Dr. Klaus Schäfer, Chairman of the Board at Chempark operator Currenta, underscores: “There is very little room for manoeuvre in price reductions or discounts since we have already reached the best quartile in the pricing of many of our services in recent years.” Thus creativity is called for in times of crisis. “In the current economic environment it is natural not only to strive for long-term, continuous improvements but also to find solutions offering customers immediate tangible benefits”, according to Roland Mohr. “In early 2009 some of our customers were in a difficult economic situation”, reports Dr. Christoph Broßmer, Marketing Director at Industriepark Wolfgang, Hanau: “We therefore quickly agreed upon a package of measures together with our tenants.” In return for discounts and other concessions the site operator concluded long-term contracts for services and recovered business which the service provider had lost to third parties. “The crisis has led to a greater closing of the ranks”, says Broßmer. The same was found to be true at Leverkusen, Krefeld, and Dormagen: “Areas exist in which we have kept prices at Chempark constant for years despite wage and price increases. This concerns mainly services which are manpower-intensive and with fixed costs. In return, these customers support us by placing additional orders for optional services”, Klaus Schäfer reports.

At Höchst Industrial Park the six sigma method has been adopted to attain the short-term goal of relieving the cost burden on customers: “Together with the customer we put together interdisciplinary project teams which identify efficiency-enhancing potential in a wide variety of areas and produce results within just a few months”, Mohr reports and illustrates the benefits with the aid of an example: “Between April and October 2009 the six sigma method was employed in a company located in the industrial park to process 15 infrastructure projects which lead not only to improved quality but also to savings exceeding Euro 1 million.” On analysis of waste streams, waste disposal experts discovered that some of these materials do not have to be incinerated but can be utilised in the on-site biogas plant.

And some of the park operators put another consequence of the economic crisis to good use: “We pass price cuts for primary raw materials such as gas, coal, oil, and electricity directly on to most of our customers. Particularly in the area of power generation and also waste water treatment we react as flexibly as possible to the changing production needs of our customers”, Klaus Schäfer explains.

Park operators are themselves
also affected by the slump

Yet in addition to caring for customers and site occupants, the park operators are themselves also affected by the slump. Lower production volumes in chemical companies mean reduced demand for infrastructure services, energy, waste disposal services, and other services for park operator and service provider. “The broad-based customer portfolio at Höchst Industrial Park means that we have not been hit by the full force of the downturn, for example in the chemical industry”, Roland Mohr reports: “Above all, however, what really pays off in the current situation is that we have implemented extensive efficiency-enhancing measures in recent years and already focussed on our core business as site operator and industrial services provider. Thus numerous six sigma projects have been successfully completed, with annual savings in the double-digit million range.” Hitherto these efforts have prevented the operator from having to undertake extensive restructuring programmes. Mohr: “Regardless of the present upheavals we are continuing to restructure and expand our energy generation and distribution infrastructure in order to be able to increase our present competitive edge in the future.”

The crisis has also led to adoption of practical cost-cutting measures at Currenta: “At the start of 2008 we already undertook a project to prepare ourselves for the impending global economic crisis and developed measures based on various scenarios which we had partly already developed in 2008”, Klaus Schäfer reports and cites the insourcing of third-party contracts as an example: “In some areas the contracts awarded to third parties could be reduced and the services provided by our own employees, e.g. in the case of security at the park gates.” And the energy sector also offers potential: “We have optimised our fuel supplies and the fuel mix of coal and gas and thus further improved our cost efficiency.” Another possibility of short-term savings is seen in the area of maintenance: In some chemical parks non-essential measures are deferred. And other kinds of costs – such as travel and hospitality – are also coming under scrutiny: “We assume that in this way we can offset declining sales and price pressure in the area of optional services. Additional costs such as payments for the pension assurance association can also be compensated by these means, Schäfer reports.

It remains uncertain whether the present economic situation will have long-term consequences for the industrial park sector. On the one hand, the model has proved to be resilient to crises because manufacturing companies in an industrial park remain uniquely unencumbered by tasks relating to infrastructure. On the other hand, industrial park operators use the situation to offer more services – and thus fulfil a wish of the site occupants, says Christoph Broßmer: “Manufacturing companies no longer wish to negotiate with many different companies. The integral model in which a single provider offers complete service packages remains very relevant.”

“The integral model in which a
single provider offers complete service packages remains very relevant”

Dr. Christoph Broßmer is Marketing Director of
the Wolfgang Industrial Park, Hanau

“Implementation of extensive efficiency-enhancing measures in recent years is now paying off”

Dr. Roland Mohr is Managing Director at Infraserv Höchst

“Particularly in the area of power generation and also waste water treatment we react as flexibly as possible to the changing production needs of our customers”

Klaus Schäfer is Chairman of the Board at Currenta