insights on tio2 costing and profitability - levers for procurement negotiations | beroe webinar...
DESCRIPTION
Conventionally, large titanium dioxide (TiO2) volume buyers fail to realize the difference between potential cost savings and their actual cost savings. Another prevalent scenario is faced when TiO2 buyers often hear suppliers state “Production costs, especially raw material costs for titanium dioxide have risen considerably and hence prices need to be revised upwards”. Due to buyer’s lack of knowledge on detailed costing aspects, negotiation with TiO2 suppliers during procurement becomes increasingly difficult. Low negotiation power and inability to pass on increased costs to their customer results in heightened cost pressure and squeezed profit margins for the TiO2 buyers. Watch Beroe’s Industrial Pigment expert, Vaishnavi Jayaraman to gain insights on costing and profitability aspects of TiO2. In this webinar Vaishnavi has focused on regional re-allocation of procurement practice, to solve the problem of bridging the existent gap between potential and actual savings. To know more about Beroe's Procurement intelligence expertise, Please contact us at [email protected]TRANSCRIPT
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TiO2
Observation On Estimated and Actual Cost Savings
Insights on Costing and Profitability of TiO2
When To Negotiate ?
5
Pric
e T
ren
d U
SD
/M
T
2010 2012 2011 2013 2014
1
LCCS Prices
International Prices
6
260
270
280
290
300
310
320
330
Total Initial Spend Spend After Shifting
Base
Millio
n U
SD
Esti
mate
d
Savin
gs
32
5.1
1
28
3.1
1
0
5
10
15
20
25
30
35
40
45
Estimated Saving Actual Savings
Millio
n U
SD
REALITY
18.00
42.00
Potential 15%-42 Mil. USD Cost Savings By Shifting Procurement Base to LCCS.
7
HOW DID THAT HAPPEN ?
Procurement Procedure
2 Lab Trial of Sample
3 Plant Trial
4 Placement of Order
1 Request of Sample
5 Bill of Lading
6 100% Wire Transfer
9
20% Unusable
40% Perfect Conformance to Buyer Specification
40% JUST Useable without great loss of FINAL PRODUCT quality
Shipment at Buyer’s End
1 Disperse technical personnel at suppliers site
3 Oversee TiO2 weight and packaging quality
4 Issue certificate prior to payment
2 Monitor aspects of pre-paid TiO2 procurement
10
Inspection Costs –
Of
~20,000 USD Annually
0
5
10
15
20
25
30
35
40
45
Estimated Saving Actual Savings Potential Savings
Millio
n U
SD
11
42.00
18.00
41.98
2
12
Can you Save More ??!?
Feedstock Process Chemicals Fixed Costs Waste Treatment Utilities
Recen
t P
ast
% of Feedstock Costs in Total Costs
~27%
~34%
~31%
~36%
~44%
13
Generic Cost Structure
0%
100%
Feedstock Fixed Costs Utilities Process
Chemicals
Waste
Treatment
% o
f To
tal
Co
st
23%
16%
14% 2%
45%
Challenge
Buyer’s lack of knowledge on detailed TiO2 costing aspects
thus, Lower negotiation power with Suppliers
14
15
Known Generic
Cost Structure
Unknown Region Specific Cost Structure
Cost Aspects to Focus During Negotations
Cost Aspects to Avoid During Negotations
VS
TiO2 Cost Structure Comparison Generic Vs. China
0%
100%
Generalised Cost Structure China Sulphate Process - High
TiO2 Blend
China Sulphate Process - Low
TiO2 Blend
% o
f To
tal
Pro
du
cti
on
CO
st
45%
14%
23%
16%
20%
18%
10%
28%
14%
15%
18%
22% 1%
2%
Feedstock Process Chemicals Fixed Costs Waste Treatment Utilities
16
20-30% Cost
Advantage
TiO2 Cost Structure Comparison Generic Vs. China
0%
100%
Generalised Cost Structure China Sulphate Process - High
TiO2 Blend
China Sulphate Process - Low
TiO2 Blend
% o
f To
tal
Pro
du
cti
on
CO
st
45%
14%
23%
16%
20%
18%
10%
28%
14%
15%
18%
22% 1%
2%
Feedstock Process Chemicals Fixed Costs Waste Treatment Utilities
17
20-30% Cost
Advantage Negotiation Lever
Feedstock Costs
TiO2 Cost Structure Comparison Generic Vs. North America
0%
100%
Generalised Cost Structure NA Chloride Process - High TiO2
Blend
NA Chloride Process - Low TiO2
Blend
% o
f To
tal
Pro
du
cti
on
CO
st
Feedstock Process Chemicals Fixed Costs Waste Treatment Utilities
45%
14%
23%
16%
2%
57%
11%
20%
4%
8%
54%
15%
20%
9% 2%
18
TiO2 Cost Structure Comparison Generic Vs. North America
0%
100%
Generalised Cost Structure NA Chloride Process - High TiO2
Blend
NA Chloride Process - Low TiO2
Blend
% o
f To
tal
Pro
du
cti
on
CO
st
Feedstock Process Chemicals Fixed Costs Waste Treatment Utilities
45%
14%
23%
16%
2%
57%
11%
20%
4%
8%
54%
15%
20%
9% 2%
19
Negotiation Levers
Utilities, Process Chemicals
TiO2 Cost Structure Comparison Generic Vs. Europe
0%
100%
Generalised Cost Structure Eu Chloride Process - High TiO2
Blend
Eu Sulphate Process - High TiO2
Blend
% o
f To
tal
Pro
du
cti
on
CO
st
Feedstock Process Chemicals Fixed Costs Waste Treatment Utilities
45%
14%
23%
16%
2%
7%
20%
9%
61%
10%
20%
14%
54%
3% 2%
20
TiO2 Cost Structure Comparison Generic Vs. Europe
0%
100%
Generalised Cost Structure Eu Chloride Process - High TiO2
Blend
Eu Sulphate Process - High TiO2
Blend
% o
f To
tal
Pro
du
cti
on
CO
st
Feedstock Process Chemicals Fixed Costs Waste Treatment Utilities
45%
14%
23%
16%
2%
7%
20%
9%
61%
10%
20%
14%
54%
3% 2%
21
Negotiation Levers
Utilities, Process Chemicals
Plant Profitability •Region - Specific •Capacity - Specific
22
High Medium Capacity Index Low ~100-250
KT ~40-90 KT ~10-25 KT
Plant Capacity: Avg. Operating Rate: 80%
Profitability Index: 55%
Plant Capacity: Avg. Operating Rate: 59%
Profitability Index: 38%
Plant Capacity: Avg. Operating Rate: 63%
Profitability Index: 10%
North America
23
Plant Capacity:
Avg. Operating Rate: 84%
Profitability Index: 49%
Plant Capacity:
Avg. Operating Rate: 73%
Profitability Index: 28%
Europe
24
High Medium Capacity Index Low ~100-250
KT ~40-90 KT ~10-25 KT
Plant Capacity:
Avg. Operating Rate: 90%
Profitability Index: 42%
Plant Capacity:
Avg. Operating Rate: 60%
Profitability Index: 20%
APAC
25
High Medium Capacity Index Low ~100-250
KT ~40-90 KT ~10-25 KT
3
26
2011 2012
Titaniu
m D
ioxid
e P
rice T
rend U
SD
/MT
2015 2013 2014
27
Future
?
Invest pragmatically to bridge your gap in estimated and actual cost savings 01
Acquire knowledge to gain UPPER hand during procurement negotiations 02
Utilize the CURRENT Market Scenario to your advantage 03
Leverage Costing-Profitability Knowledge NOW
28