Emerson Exchange 365

Building a new plant is a major undertaking for any manufacturer in any part of the world. Along with the usual risks and construction costs, there’s the problem of procurement—how to source parts and get them to the site on time and within budget. It’s a concern that becomes especially critical when you’re breaking unfamiliar ground.

Today at the Emerson Exchange Americas in Denver, Will Hanlon and Kurt Larson of Air Products explained how their team tackled the unique supply chain challenges they faced while building the company’s first hydrogen production unit in India.

When it comes online in 2016, Air Products’ new facility in Kochi, India, will provide H₂, H₂/CO syngas, steam, N₂, and O₂ to a nearby refinery complex as part of a $2.6 billion expansion to produce cleaner-burning fuels and petrochemicals. The plant will support India’s largest-ever outsourced hydrogen requirement.

From the outset of the project, the goal of the Air Products team was to mitigate risk while minimizing long-term cost-of-ownership. To accomplish this, Hanlon said, they knew they needed a supplier who had a local presence, who knew how to execute complex projects, who had a full range of product capability, and who could meet global quality standards consistently.

They turned to a pair of familiar partners in Emerson and Proconex, with whom Air Products has had a long, successful business relationship dating back four decades. The strategic location of Emerson’s Fisher valve plant in Chennai and Daniel flow division in Vadodara was also a key factor in the decision.

First, along with navigating the patchwork of regulations that would affect their storage and distribution channels, the project team needed to evaluate the financial impact that India’s tax laws would have on their business plan.

 “Each of India’s 29 states and seven union territories has its own tax code,” Hanlon said. “There are also different economic activity zones and other special tax districts, all of which we needed to understand in order to take full advantage of available tax breaks and economic incentives.”

 “We relied heavily on Emerson’s team in India to answer regulatory questions and help us devise a procurement strategy that was both compliant and cost effective. In the end, we recovered about 15 percent of our tax cost with the deductions we were able to write off by contracting locally.”

Next, the team worked on devising an engineering execution strategy to establish the roles and responsibilities of all the players involved, including Emerson in India and North America, Proconex and the EPC contractor, Technip.  The execution plan covered everything from order processing and shipping to commissioning and startup, as well as workflow and chain of command.

During the FEED process, Proconex acted as a liaison between Air Products and Emerson in North America and India. When Air Products issued a spec, Emerson in India designed the piece to order and sent it to Proconex’s engineers who reviewed it and made suggestions based on their experience working with Air Products in the past.  Emerson’s engineers in Marshalltown would make further changes if necessary and work with the facility in Chennai to oversee the assembly of the final product.

As to be expected, quality control was of utmost concern. “It was very important that we are able to trust the product we were getting,” Hanlon said. “We want to know where the parts are sourced—where they’re actually being machined. There’s too much at stake to have to reliability problems come up at some point down the road.”

“Emerson’s Fisher and Daniel product teams invited us to perform extensive technical evaluations of their local facilities,” Larson explained. “We were able to see for ourselves the quality control procedures in place at every step in the process, from the foundries to the assembly lines. We also observed and evaluated the material handling and performance test capabilities at each plant.”

In the end, having peace of mind was worth more than anything Air Products might have saved by jumping at the first low cost, untried supplier they found in India--to simply “tick the box” of in-country sourcing, Hanlon concluded.

“It’s important to realize that even if somebody says they can meet your specs, it’s not just about the equipment or the price.  It’s about how well you’re able to collaborate and work together for a common cause. We’ve had a great relationship with Emerson and Proconex, and that proven ability to communicate effectively was crucial to this project. Having worked together for 40 years, we knew we could count on them to help us get the job done right.”