From its two mines in South Africa and one on the western side of Australia near Perth, Tronox Ltd. supplies its plants in Kwinana, Australia; Botlek, the Netherlands; Hamilton, Miss.; and customers worldwide. “We have a complex vertically integrated supply chain that has unique elements depending on the specific grades of the material,” explains Scott Preston, vice president of Tronox’s global supply chain and chief procurement officer. “Each mine sends titanium feedstocks to all three pigments plants, so with three mines and three pigments plants, our inbound pigments supply chain comprises nine routes.”
Titanium dioxide is used in applications including paints, plastics, paper and even sunblock. “If you look at an iPhone and the white case around it, titanium dioxide goes into those types of applications,” Preston says. “In this case, it’s used to color plastic.”
The feedstocks are mined from naturally occurring mineral sands formations. “Our mineral sands division leverages GPS and other technologies to efficiently extract the ores,” Preston says. “Tronox supply chain and engineering teams partner together to acquire the best equipment to meet these needs. We then transport them on third-party trucks or rail hopper cars to separation plants to upgrade into saleable ores. A determination is then made to either use these products internally or sell to third parties.”
Once refined, from 6,000 to 40,000 metric tons of ore is loaded into holds that Tronox leases on dry bulk vessels. The ore’s grade, the customer’s location, a plant’s manufacturing capability and production planning requirements help determine an ore’s final destination.
Ore inventory is kept strategically positioned closest to Tronox’s pigment plants to afford the company the flexibility to ramp up production quickly to meet customer needs. “Lately, with the benefits we’ve been getting from the vertical integration, we’re keeping less in a central location in South Africa,” Preston says. “This facilitates the right sizing of our ore inventories as opposed to larger quantities in final end stocking. We have more inventory that is closer to the plants, and that gives us the flexibility of adjusting plant operating rates to meet changing demand patterns.”
Lead times on average are 45 to 60 days to ship saleable ores from the mines to the pigment plants via water transport. At the pigment plants, the ores are combined with process chemicals to produce titanium dioxide. Tronox is one of five major international manufacturers of pigments.
“For finished pigment, lead times are significantly compressed – from one day to less than three weeks,” Preston estimates. “That’s why we have strategic positions for inventory closer to some of those key accounts that are really driving the volume.”
Supply chain planning begins early. “Our planning horizon starts at a year out, and then we do more of a detailed planning at the six-month point,” Preston says. “Then by the time we get to 90 days, we’ve made the majority of our commitments.”
Among the challenges of the business is doing more with less. “We’re really like a $2 billion start-up,” Preston quips. “When I came into the corporate supply chain, I was employee No. 1. The goal has been to build our capability while being lean on head count and delivering above-market returns. Part of our global complexity is operating on four continents with different languages and a mixture of different corporate lineages.”
Preston intends to continue to build supply security and innovation. “We want to continue to grow our base of suppliers,” he says. “They’re not just someone who can provide something at a good price, but they are supplying us with the right value.”
Another weapon in Tronox’s lean supply chain operations arsenal is a proprietary toolset developed internally. “We have built a proprietary optimizer tool that we utilize for how we want to distribute our ores both internally and to third parties,” Preston says. “We see it as providing some unique benefits to us in terms of inventory optimization as well as cost reduction to derive the total least-cost supply chain alternative.”
Tronox Ltd. contracts with third-party logistics and trucking companies. “We do not have our own trucking fleet,” Preston emphasizes. “We leverage third parties for all aspects of logistics.”
For the future, Preston has several ideas to streamline Tronox’s supply chain. “We’re doing a couple of things,” he says. “The first is that we are looking at embracing some technology for areas like data analytics. We have a lot of data from a couple of different systems. So as we move to one data platform, along the way we’re going to need the right type of data analytics technology.”
Preston also plans to concentrate on increasing the efficiency of indirect material procurement. “The second is creating the ability to do electronic RFP/RFQs and automated contractual management,” he says. “We started out on direct materials. Now we’re heavily focused on indirect material spend. In addition, logistics capability continues to be a key focus as we optimize our supply chain.”