Background:  Creating an Industry Standard

In 1993 one of Air Products and Chemicals, Inc.'s (NYSE: APD) business units faced a difficult challenge: the company had seventy different regional distribution and logistics hubs spread throughout North America, each operating independently, warehousing products, taking customer orders, distributing products and supporting customers.  As a result, the business had a number of inefficiencies.

After analyzing its strategic options, Air Products arrived at the decision to centralize and automate many of the support functions of the business, including customer orders, deliveries, and production, appropriately referred to internally as an Automated Chemical Replenishment (ACR) management system.

Air Products executed a two part plan to deploy the ACR solution involving: 1) The tools required to automate the supply chain; and 2) changing managerial processes to utilize the automation.  Devices were installed on customer tanks that measured the volume of product contained in the vessel.  Taking the necessary readings and detecting problematic volume changes, these devices would communicate over a POTS (plain old telephone service) line to the back office.  Back-office applications would convert raw data into actionable information for the supply and logistics planners.

Parallel to the technology efforts, a number of business processes were altered to achieve maximum returns on the technology investment.  A call center, which included all route planning activity, was created as a central function, fully reliant on the output of the ACR system.  The call center, and not the sales force or the customer, had the ability to demand when the product would be delivered.  The sales force shifted its responsibilities to understanding the business needs and usage patterns of the liquid gas, feeding that data into the central systems.

With deployment, Air Products recognized operational benefits, while customer service benefits escalated.  Soon after, the other main industrial gas players were forced to follow to remain competitive.  Today, automated replenishment of products is a standard industry operating practice.

Recognizing Opportunity

Coupled with over a decade of experience remotely monitoring and automating aspects of its supply chain, Air Products' management recognized and lived through a convergence of trends including:

•  Rising oil and natural gas costs impacting both raw materials and transportation expenses.

•  Industry consolidation and globalization adding complexity to supply chains, obstructing efficiency and transparency.

•  Automated Customer Replenishment (ACR) technology and communications progressing to a simple and cost effective point to make ROIs significant in most applications. 

Due to these drivers, Air Products searched for a strategy to leverage its remote monitoring experience to provide greater efficiencies and service levels to the chemicals and fuels marketplaces.

"We have tremendous know-how, support systems and technology assets centered on ACR of our products," says Ron Pierantozzi, Director of New Business Development at Air Products.  "We felt this represented an opportunity to commercialize our supply chain technology and know-how."

Air Products selected a partner strategy to provide the business elements not contained in-house: wireless communications connectivity, IT services, and ability to integrate these elements into a seamless business solution.  After a year of analyzing options, Air Products found all the missing components and formed a joint venture with nPhase.

The Future is Now:  The Air Products/nPhase Joint Venture

Air Products recently closed on a joint venture with nPhase of Chicago, a supplier in the Machine-to-Machine (M2M) industry.

"This new venture was created to address the increasingly complex and dynamic supply chain management needs of chemical and fuel distribution industries," says Steve Pazol, CEO of the Venture.

This business will initially focus on providing tailored solutions to chemical suppliers that allow them to automate replenishment of their chemical and fuel products to their customers.  The business will be backed by the know-how, and global field presence of Air Products and the wireless connecting of dispersed assets through nPhase.

"We believe the North American market size is in the multiple billions of dollars and the adoption level is <5%," says Steve Pazol.  "We expect the Air Products/nPhase joint venture to assume the leading market position on a global level within five years.  Our business strategy will be to pursue business opportunities directly, while still working with some of the existing market players where there are mutual benefits of forming a partnership.  The details depend on the types of partnerships we form and the industry sub-segments that we focus on."

Some of the key attributes that will make the JV unique include:

•  Experienceand expertise with remote monitoring in the industrial gases industry.
•  Global field presence for site surveys, installation and support of monitoring devices.
•  Wireless communications abilities.
•  Network Operations Center (NOC) fully staffed 24/7.
•  IT services for tailored solution offerings and integration with customer ERP systems.
•  Forecasting modules

Short Term Plans

The Air Products/nPhase JV is planning to launch this new business under a new business name in the spring 2006.  For questions about the business or to learn about partner opportunities, please contact:  John Tillotson, Chief Marketing Officer for the Venture at 312.664.7000 x267.

***NOTE: This release may contain forward-looking statements. Actual results could vary materially, due to changes in current expectations. 

About Air Products

Air Products (NYSE:APD) serves customers in technology, energy, healthcare and industrial markets worldwide with a unique portfolio of products, services and solutions, providing atmospheric gases, process and specialty gases, performance materials and chemical intermediates.  Founded in 1940, Air Products has built leading positions in key growth markets such as semiconductor materials, refinery hydrogen, home healthcare services, natural gas liquefaction, and advanced coatings and adhesives.  The company is recognized for its innovative culture, operational excellence and commitment to safety and the environment and is listed in the Dow Jones Sustainability and FTSE4Good Indices.  The company has annual revenues of $8.1 billion, operations in over 30 countries, and over 20,000 employees around the globe.  For more information, visit www.airproducts.com.  

About nPhase LLC

nPhase is a recognized leader and pioneer in providing comprehensive high-value Machine-to-Machine (M2M) business solutions.  M2M is about connecting widely dispersed machine or physical assets to information systems and people to extract information advantages.  It is an exciting new industry predicted to exceed $100 billion by 2010.  nPhase clients include Gardner Denver, Air Products, AAT Communications, Checkers Restaurants and others.  Partners include Cingular Wireless, Sprint, Siemens Mobile, Wavecomm, MultiTech, and Opto 22.  In 2004, nPhase was recognized by M2M Magazine as an M2M Pioneer, and was a winner of the Chicago Sun Times Innovation Award.  For more, more information, visit www.nphase.com.

January 2006