The Situation

In mid-2015 an already slow global TiO2 market showed signs of weakening further. An increase in global production capacity, combined with slack global demand, resulted in falling sales and lower prices. Leadership quickly realized they needed to radically address their cost structure to remain a viable and top performer among 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, organization and operations.

Our client’s TiO2 division is a global leader in the production and marketing of titanium dioxide pigment, mineral sands and electrolytic products, with a customer base of 1,000- plus customers in over 90 countries. They are the world’s largest fully integrated producer of titanium ore and titanium dioxide (TiO2). Armed with enough titanium feedstock to meet all of their own TiO2 pigment capacity needs, they provide manufacturers with a reliable supply of high-quality TiO2 pigment to meet international demand for paints, coatings and plastics.

They also sell mineral sands products directly to customers. They are one of the largest titanium high-grade feedstock producers, with approximately 10 percent of the global titanium ore production, and the third-largest producer of zircon, with approximately 20 percent of global production.

Advisian's Role

Based on Advisian’s performance in the client’s recently acquired Alkali Division, we were brought into the TiO2 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 mobilizing the organization to achieve new cost mandates. It was also apparent that success could not be achieved without addressing the client’s complex and varied organizational structure.

Advisian was further engaged to design and implement a simplified and consistent organizational 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 percent RONA at the bottom and providing best of breed returns at the top.”

Approach

“Accelerate!,” the rapid cost management program, kicked off with leadership communications and town halls across four continents and nine sites.

Teams were trained and conducted “Cost Kaizen” workshops in which they rationalized existing initiatives and identified new sources of cost waste. A simplified system for initiative management was installed in which progress and actual cost performance are reviewed against the baseline weekly. Cost management was introduced as a weekly and monthly agenda item at the global leadership level. Capacity and fixed costs were actively managed in line with forecasted volume.

The organizational change program began by establishing a streamlined TiO2 Leadership Team aligned behind a new global organizational structure and vision. An organizational design team with cross- functional and regional representation was chartered to develop a TiO2 organizational template and roles.  This template was then regionally adapted to fit local operations and all final designs were validated by the TiO2 Leadership Team to ensure a clear, consistent and Lean organizational structure aligned to achieve their objectives. The new six-layer global architecture represented a two- to four-layer reduction in management burden and a 10 percent ($20 million) reduction in global labor costs with 5 percent ($10 million) realized in 2015.

Results

By mobilizing the collective effort of the TiO2 organization, $33 million in cumulative cost savings were realized in the second half of 2015 and a sustainable performance of $85 million of annualized fixed cost savings were achieved over the 24-week engagement. When costs enabled by reduced volume are included, the TiO2 organization demonstrated $227 million in annualized cost improvement in December of 2015 vs. their cost position in the first half of 2015.