Category managers need to be in know of TiO2 cost structure to obtain favorable price

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By: Sakthi Prasad --

29 April, 2014

Category managers need to be in know of TiO2 cost structure to obtain favorable price
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What does the white cream inside biscuits, white paint on the compound wall of your gymnasium and white pages stacked in your notebook have in common? Titanium Dioxide or simply TiO2 in chemical terms.

TiO2 can be termed as the "Queen of Pigments." Without its existence, we would find it tough to produce artificial white color that goes into so many of our daily use products: from paper to chic paint on our favourite car.

With an annual estimated demand of about 6.3 Million MT, TiO2 has a pride of place in the pigments market, according to Beroe's pigment expert Vaishnavi Jayaraman.

However, Jayaraman said that large buyers of TiO2 have typically not focused on cost and price aspects of the pigment. The buyer's unfamiliarity with such factors can lead them to pay an unfavorable price, she added.

A category manager cannot realize full potential savings only by procuring TiO2 from low cost countries. Instead various factors need to be considered to obtain a favorable price.

For example, from 2008 to 2013, the percentage of feedstock cost in total costs has gone up by 50%. And intuitively one would assume that there isn't much room for price negotiation.  However, that is not the case as buyers are generally not aware of the breakup of the cost structure, Jayaraman said.

TiO2-Consumption-Trends

The generic cost structure of TiO2 is usually known; but what is not known is the region specific cost structure.

It would serve well if the category manager focusses on negotiation levers such as feedstock costs, and expenses incurred on utilities and process chemicals, according to Jayaraman.

TiO2-Cost-Structure

In general, only 40 percent of the TiO2 shipment conforms to buyer's specification. The other 40 percent is just about usable without much loss of the final product quality. Whereas the remaining 20 percent is unusable.

And to prevent such wastage, category managers can send their technical personnel to supplier sites.  The personnel can oversee TiO2 weight and packaging quality and could issue quality certificate prior to making the payment to suppliers.

Total annual inspection costs could work out to be about $20,000, as per Jayaraman's calculation.