The client needed to radically address their cost structure to remain a viable and top performer among their peers in this new reality.
The Situation
Our client is a global leader in the production and marketing of titanium dioxide pigment, mineral sands and electrolytic products. With 1,000 plus customers in over 90 countries, the client is the world’s largest fully integrated producer of titanium ore and titanium dioxide. Armed with enough titanium feedstock to meet all of their own titanium dioxide pigment capacity needs, they provide manufacturers with a reliable supply of high quality pigment to meet international demand for paints, coatings and plastics.
In mid-2015, a slow global titanium dioxide market showed even further signs of weakening. An increase in global production capacity, combined with slack global demand, resulted in falling sales and lower prices. Leadership quickly realised they needed to radically address their cost structure to remain a viable and top performer amongst their peers in this new reality. As a recently aggregated vertical operation, they were also faced with the challenge of building a coherent business culture and operations.
Approach
Based on Advisian’s performance in the client’s recently acquired alkali division, Advisian was brought in to the titanium dioxide division to conduct a global scan of operating practices across their nine mining and production facilities located in the United States, Netherlands, South Africa and Australia.
Building on this engagement, Advisian was hired to conduct a global, rapid deployment with the goal of mobilising the organisation to achieve new cost mandates. It was also apparent that success could not be achieved without addressing the client’s complex and varied organisational structure. Advisian was further engaged to design and implement a simplified and consistent organisational structure across their operations – and have it installed before the end of the year. Both of these support areas were key pillars in a comprehensive program with the stated goal of achieving an operation that is “viable at all stages of the market cycle; maintaining 8% return on net assets at the bottom, and providing best of breed returns at the top”.
Advisian provided the following services:
Rapid cost management
- Lean-based cost initiative identification, prioritisation and selection
- Planning, design and management of selected initiatives
- Site, regional and global cost management ECSSM implementation
Global organisational restructuring
- Cross-regional and functional organisational template design
- Regional adaptation of organisational templates and roles
- Global support for regional people selection and implementation
Results
Over the 24-week engagement, by mobilising the collective effort of the titanium dioxide division, significant cost reductions were achieved:
- $33 million in cumulative cost savings in the second half of the year
- Sustainable performance of $85 million of annualised fixed cost savings
When costs enabled by reduced volume are included, the titanium dioxide division demonstrated $227 million in annualised cost improvement in December of that year verses their cost position in the first half of that year, a 20% increased production capacity.
