Harsco GasServ targets synergy and service

Taylor-Wharton's CRYO-2-GO liquid cylinder repair service brings the repair shop to the distributor's doorstep.

Boyd discusses marketing materials available to the gas and welding distributors with Jeff Clay, U.S. distributor sales manager, and Gabrielle M. Chidester, marketing communications coordinator.

Boyd believes advances in cryo-science technologies offer distributors new growth opportunities for renting cryogenic storage vessels and supplying liquid nitrogen.

New products such as Sherwood's Oxy-Gen 1 valve/regulator combination offer distributors entry vehicles into the growing healthcare, emergency and first responder markets.

Microbulk delivery trucks provide distributors the potential to secure multi-year gas contracts from existing customers.

GWD: How would you characterize Harsco GasServ's relationship with distributors?
Boyd: We always maintained excellent relationships with gas distributors. Our supply channels to the distributor market include the buying groups such as IWDC, AIDC, ADA and BIG, and we also work directly with the smaller independents. I always believed that the independent gas distributor is an essential and indispensable link in the supply chain of industrial gases to the end user. Harsco GasServ recently initiated an agenda to improve relationships with the distributor market segment. The continuing consolidation of points of sale in the domestic gas industry provides this opportunity for us to be proactive in establishing affable covenants with our customers and in developing distributor friendly business platforms to market our products and services. Additional confirmation of our commitment to the gas distributor is our recent promotion of Jeff Clay to U.S. distributor sales manager for our Taylor-Wharton and Sherwood product lines. One of Jeff's primary objectives will be to enhance our relationships with the gas distributor market segment.

GWD: What was reason for the recent formation of an executive management team?
Boyd: Our overall strategy is to depart from the traditional manufacturer's mindset in which product line sales personnel arrive at a customer's doorstep to discuss specific product requirements. Our approach now is to examine entire segment requirements within the gas distribution market and look for the synergies within our organization that allow us to rapidly provide a comprehensive solution. This relationship sales approach is well suited to deliver total solution strategies to our customer base. The executive management organization is aimed at accomplishing those two objectives.

The next management level under the chairman now is a governing committee of vice presidents that continuously examines complimentary operations and capabilities that result in proposals to our customers and that are greater than the sum of their individual units or capabilities. This allows us to react quickly when new opportunities are identified. Harsco GasServ "Alternative Fuel Technologies" is a prime example. It is not a factory or division, but a banner under which all of our brands participate.

GWD: What are your responsibilities under this new structure?
Boyd: My responsibilities include sales and marketing activities within the industrial gas product lines everywhere in the world except Europe. I served in this role for the last six years. However, under our executive governance initiative, I now communicate daily with Jim Cline, our president and governance group executive director, and Don Fabricy, vice president of sales and marketing for our propane products. Together, we constantly assess those dual goals of developing synergies among the product lines and building customer relationships.

GWD: How do you see the distributor's role evolving?
Boyd: As more U.S. manufacturers relocate overseas, the competition among distributors for the customers that remain intensifies. Furthermore, continued industry consolidation exerts additional competitive pressure on the smaller distributors for the fewer points-of-purchase. Independent distributors still can leverage the localized, high quality service that larger firms cannot match, but they must begin to broaden their menu of services. I believe this process has already begun. Some distributors are forming cooperative arrangements to help each other to find better ways to compete. Others are offering specializedprograms and products outside the scope of traditional industrial gas and welding equipment. A few are even restructuring their entire operations. Many are moving completely away from the role of generalized distributor to one of a niche specialist in areas such as laser gases and specialty gases.

GWD: What should distributors invest in to stay ahead of the curve?
Boyd: I would suggest that today's gas distributor should consider investments in the newest product lines and technologies. For example, the trend toward microbulk systems provides distributors with the prospect of securing multi-year gas contracts from their existing customer base. Additional avenues of opportunity are cryogenic nitrogen storage systems to serve the cryo-bio market, and the latest combination valve and regulator products, such as Sherwood's Oxy-Gen 1, that offer entry into the hospital and healthcare markets.

GWD: What type of assistance does Harsco GasServ provide distributors?
Boyd: We offer assistance with product training, marketing materials, sales strategies and technical support. We also can provide the distributor with complete cryogenic systems design as a service to their customers. Our product managers and technical specialists will assist at any point in the process from system diagrams to installation. Our cryogenic specialists can survey the customer's site and recommend a turnkey package that includes tanks, piping and pumps. We invoice the entire project through Taylor-Wharton. In terms of training, we offer the distributor a broad spectrum of sales techniques and hands-on operation of our cryogenic and cryo-science product lines. We conduct these seminars at our principal facility in Theodore, Ala., and we also can dispatch our teaching staff to the distributor's location.

To boost sales, we help the distributor identify specialized market segments and locate potential new customers in their area. Additionally, our sales personnel will help to determine the economic feasibility of changes in supply modes. All of our marketing materials, photography and image library materials are available at no charge to the distributors who carry our products.

If a distributor is considering buying a microbulk truck we will help pre-sell a sufficient quantity of Taylor-Wharton's EasyFill liquid cylinders to justify the investment. We also will contribute to a promotional blitz and offer to supplement the distributor's sales force with our own reps.

Of course, we also can support distributors with problem-solving expertise in every area associated with gas technologies. Troy Stukey, our industrial gas technical specialist based in Columbus, Ohio is dedicated to that service.

GWD: What is your new "on-site" liquid cylinder repair program?
Boyd: Liquid cylinders that have been in service for six to 10 years need to be cleaned, polished, revacuumed, and have their valves and components evaluated. A new liquid cylinder costs approximately $2,500 while refurbishing an older cylinder costs between $400 and $700. Although it makes economic sense, many distributors previously had to ship their cylinders to repair facilities located as far as 1,000 miles from their business locations. There are considerable shipping costs and downtime associated with such off-site repairs.

Our Cryo-to-Go program brings the repair facility to the distributor. We have trucks based in Charlotte, N.C., Theodore, Ala., Pittsburgh, Pa., and St. Louis, Mo., that transport two-man repair vans to distributor locations in the surrounding areas.

Our mobile repair facilities are capable of refurbishing liquid cylinders and beverage carbonation cylinders. We will also repair competitors' models.

If no single distributor has enough cylinders to justify a visit, we locate our truck at a central hub and several distributors can deliver cylinders for repair. Beyond the cost savings, distributors appreciate that their cylinders can be returned to service as soon as each cylinder is refurbished. It is not necessary to wait until an entire batch is completed and returned. As our Cryo-to-Go program expands, we will consider locations in Mexico and Canada, and perhaps construct permanent repair facilities onsite for some distributors.

GWD: Where do you see the best opportunities for growth for distributors?
Boyd: One of the best opportunities is in specialty gases. Microchip production requires hazardous gases such as phosphine, silane, sulfur hexafluoride and boron triflouride that require special skills to handle. Most chip manufacturers are not gas experts and the distributor brings this area of expertise to the table.

Cryo-science is a key area where advances in stem cell research and cord blood storage offer excellent opportunities for the distributor to rent cryogenic storage vessels and supply the liquid nitrogen.

Another growth area is global export. Traditionally, distributors have operated within a 50-mile radius of their home facility. With the recent development and acceptance of the ISO-9809 specification cylinder, we now have an internationally approved container that is accepted throughout Europe and most of Asia. This provides distributors with the opportunity to ship exotic gases, ultra-high-purity gases and gas mixtures to areas in the world where they are not readily available.

Finally, propane sales offer new opportunities not only for recreational use, but for home heating and cooking. For example, in the northeast area of the country, many upscale suburban homes include 1,500-gallon propane tanks buried in the yard. We see increased orders for this type of tank application every day.

GWD: What potential do you see for distributors in beverage gases?
Boyd: The trend in carbon dioxide is to move from gas to liquid delivery because liquid cylinders are easier to handle and can be filled round-theclock. At least 40 percent of the convenience stores and restaurants in America still use high-pressure gas cylinders and eight to 10 new restaurant chains spring up every year, offering plenty of growth opportunity for the distributor.

GWD: How would you say Harsco GasServ differs from other manufacturers supplying distributors?
Boyd: Harsco GasServ is unique in the broad range of services we provide and the extensive menu of products we offer under the Taylor-Wharton and Sherwood brands. Our menu of products includes a complete range of cryogenic equipment, gas and liquid cylinders, valves and regulators, and propane tanks through our American Welding and Tank business.

GWD: How does the Thermadyne/Victor Group supply channel benefit distributors?
Boyd: Our relationship with Thermadyne/Victor opens a second avenue of access for our Sherwood products. Distributors now have the choice of purchasing medical manifolds, valves and regulators through the Thermadyne/Victor Group or from Sherwood's regional distribution network.

GWD: What kind of growth have you seen in sales overseas?
Boyd: Our overseas sales have increased significantly in the last few years. We built a new plant in Malaysia for our cryogenic businesses and relocated our cryogenic manufacturing facilities from Germany to Kosice, Slovakia, to expand capacity throughout Europe. We also broke ground for a new plant in Beijing, China, that is 50-percent larger than our existing facility. Additionally, we are increasing our market share in Central and South America with product from our U. S. facilities. We also believe that the major worldwide gas producers are perfect candidates to take advantage of the synergies available from our multiple brands and product lines. We have promoted Mark Fleischer to the position of Director — Global Accounts & Buying Groups to take advantage of his considerable experience and expertise in developing major accounts on a global scale. Mark's extensive product knowledge also fits seamlessly with our efforts to offer the international gas community total solutions to gas related applications.

GWD: Which markets will heat up in the next two years?
Boyd: The demand for medical products for organ transplants, respiratory applications and home health care is exploding. That trend is driven by advances in technology coupled with the shifting demographics associated with the baby boomer generation nearing retirement.

GWD: How does the firm's size affect its operations?
Boyd: It is precisely our size and relationship with our parent company, Harsco Corporation, that provides us with the luxury of capital to invest in developing products and technologies for the future. However, a larger company is also a management challenge. Our administration monitors 14 plants, 7,000 part numbers and four diverse product lines.

GWD: Are you introducing any new products for developing markets?
Boyd: The Oxy-Gen 1 is a new addition to our Sherwood product line. The Oxy-Gen 1 is a combination valve/regulator that fits within the footprint of a standard Medical-E cylinder. We developed this product after substantial dialogue with the healthcare, fire, rescue, EMS and first responder industries. The Oxy-Gen 1 literally was designed by the marketplace.

Sherwood also recently introduced a new brass diaphragm valve that is a significant step above traditional brass industrial valves. This new valve is intended for use with less expensive specialty gases and is equipped with innovative internals that make it easy to operate.

In the first quarter of 2006, we plan to launch an entirely new product line of ultra-high-purity stainless steel valves for ultra-high-purity specialty gas customers such as semiconductor manufacturers. This new line of valves will have an innovative feature that makes them replaceable and repairable in the field. These valves will be expensive. However, they will provide a real solution for market segments that demand ultra-clean environments. In these applications, lowering contaminants by a single ppm can save millions of dollars.

GWD: Do you see any technological changes in cylinders on the horizon?
Boyd: The ultimate goal with highpressure cylinders has changed little since our Taylor-Wharton facility in Harrisburg, Pa., produced the first seamless cylinder in the United States in 1902 — improve the weight to payload ratio. The challenge is to maximize the amount of product in the package without making the package heavier. This means moving to higher pressures. The European market has already moved to 300-bar (4,351 psi) service pressures. That is significantly more than the 2,400-psi standard currently used in North America.

GWD: Will aluminum or composite materials soon become more attractive?
Boyd: If steel prices continue to rise, aluminum and composite material cylinders certainly will become more attractive for widespread use. A composite cylinder weighs half as much as aluminum and one fourth as much as a comparable steel cylinder. There are several emerging markets for those willing to pay for that weight advantage. Firefighters, rescue workers, medical equipment users and CNG/hydrogen fuel tanks are examples of market segments and applications that demand the lightest weight pressure vessels possible.

GWD: What trends do you see in bulk supply?
Boyd: The major gas producers are finding that it is increasingly expensive to supply tanks with less than a 1,500-gallon capacity. Often, this business is turned over to local distributors. Distributors equipped for microbulk delivery already have a truck and can supply customers piped with either a microbulk tank or a smaller bulk tank. Just as customers can advance from traditional cylinder packages to microbulk, more are now moving up to small bulk tanks. We observed a recent increase in sales for tanks ranging in size from 1,500 to 11,000 gallons.

GWD: What technological developments and trends do you see as the most significant for distributors?
Boyd: The technology is now available to store large numbers of tissue samples in a single liquid nitrogen vessel. Pharmaceutical companies, labs and blood storage facilities can have as many as 80,000 vials at a single location. Our Taylor-Wharton facility in Theodore, Ala., produces cryogenic freezers in 20K, 40K and 80K configurations. Cryogenic storage is an excellent area of potential growth for the gas distributor.

Laser gas delivery applications are a growing trend in Ohio, Michigan and Northern California. We have seen increased demand for our laser-pak systems in those geographical areas.

Sales are also on the rise for pure nickel cylinders used for highly toxic gases by semiconductor manufacturers.

Stainless steel cylinders are gaining in popularity. They are less expensive than nickel, and we can provide them at three levels of internal cleanliness to suit price and application.

In the valve market, the pressure retention model is also gaining in popularity in North America. The PRV design already accounts for 90 percent of the European market. The pressure retention system guards the internal contents of a cylinder by allowing gas to exit while blocking contaminants from entering.

GWD: What do you see as the major issues confronting the North American gas industry?
Boyd: Over the past two decades, we have a major decrease in overall number of independent gas distributors in the United States. That said, there is currently an emergence of a new group of welding distributors who sense a void in the service side of the market. Many customers still want to deal with a local company that is easily accessible and can deliver personalized service. This trend exists especially in the Southeastern and Western areas of the country. At the same time we observe consolidation in Illinois and Connecticut, we see new distributors opening in Florida and Texas. Consolidation also is occurring among gas producers. I suspect we will see at least one more global gas producer either merge with or buy out another in the near future.

The high cost of raw material is another key issue. It impacts both the gas and welding equipment manufacturers and the distributors. As steel prices escalated throughout 2005, we had no choice but to pass along the increases to our customers in the form of surcharges. We could not absorb the increases, nor can our competitors. Additionally, rising fuel costs add a significant burden to the transportation of gases and new equipment purchases. The prevailing challenge in 2006 for both manufacturers and distributors will be to operate our businesses profitably in the present cost escalation environment.