Driving value is the overwhelming focus in the European chemical industry. With significant parts of manufacturing moving out of Europe — to places where things can be made cheaper — it's now more than ever about the survival of the leanest. The Tata Chemicals (TCL) owned Brunner Mond (BM), which has gone through substantial process re-engineering and cost reduction to sustain itself in the past, is now looking at new routes to success in the future.

QSE: the pillars of manufacturing
BM's products — sodium carbonate, sodium bicarbonate, calcium chloride and associated alkaline chemicals — play an essential role in everyday life, being used in a variety of industries, from glass, detergents and biscuits to life-saving dialysis treatments and water purification. Quality, safety and environment (QSE) standards are at the heart of BM's manufacturing philosophy.

The company is registered on all three ISO systems: ISO 9000 (quality), ISO 18000 (safety), and ISO 14000 (environment). "Quality used to be a business differentiator," says John Kerrigan, managing director of Brunner Mond (Europe), "But increasingly it is now the industry norm and it would simply not be possible to do business today in the food and pharmaceutical sectors, for example, without robust quality procedures delivering the highest standards on a consistent basis. Making this mind-shift was a challenge for our people at first, but now it is a way of life."

Safety has always had a high priority at BM and the company is proud of its achievements in this field. However, a few years back, there was concern with the rising number of lost-time injuries (when someone is hurt and can't come to work the next day) each year. So BM instituted a process called SUSA (Safe and Unsafe Acts), which involved observing people and discussing whether they were working safely, as well as whether they felt safe working. "This was a new strategy for us, taking a behavioural approach to safety. At first our people felt awkward about this, but gradually they started to talk and engage. Our accident rate started going down — it was actually inversely proportional to the number of discussions!" says Kerrigan. Interestingly, the company's Delfzijl plant, in the Netherlands, has always had a much lower accident rate. Kerrigan feels it has to do with culture: "The Dutch from childhood learn to be self-reliant and accountable for their behaviour."

Environment is driven by legislation but also by BM's concern to be a good neighbour in the local community. "Wave after wave of environmental legislation has added great complexity and cost to our operations," explains Kerrigan, adding, "But these are important issues for us to control in any event. Many people live close to our factory boundaries and it is very important to us that they see Brunner Mond as an asset to the local community, not a polluter of the environment."

Riding the regulations
In Europe, where higher fixed costs — of labour, components, materials and services — are a major pressure, the company has learned to be more efficient in turning raw materials into products and in turning what most others see as restrictions to its advantage. "Environment regulations have made us more efficient; we waste less raw materials," says Kerrigan.

For example, ammonia is an enabler — a catalyst — not a part of the final product. In theory, it should not be consumed at all. But years ago quite a bit of ammonia was wasted, because companies were not forced by regulation to control minor emissions. As environmental constraints have got tighter, BM's processes have got better, and now, less than one tenth the ammonia goes into the air or water than 20 years ago.

"Regulations can therefore actually improve raw material use and efficiency. You get good at harvesting things if you are not allowed to throw them away. We are now more cost conscious and better cost controlled," Kerrigan points out proudly. "But", he cautions, "There is a point beyond which one can no longer be more efficient; if the goal posts move even a few inches, it can take us beyond the point of viability. In Europe today, legislators need to be aware that we are getting closer to many of these points."

Improving efficiencies
Over the years, BM has implemented specific initiatives to reduce costs and increase efficiency.

Relay 93: In 1991 Brunner Mond faced some substantial challenges after it was spun off from ICI — the company had not operated as an independent business for 65 years and there was no business concept and limited customer focus. "Our attitude had been to make chemicals to fill silos," says Kerrigan. He was assigned to work with Coopers and Lybrand (now Pricewaterhouse Coopers or PwC) to design a business model and reduce the cost base by about 30 per cent, in just 18 months.

BM launched a change programme called Relay — it meant relaying the foundations of the business, as well as a 'relay race', where one hands over a baton; here, it meant passing on skills. They set up teams for around 100 tasks that had to be done over a 12 to 18 month period and involved the full cross section of employees in working on the tasks. Relay 93 delivered 75 per cent of its very ambitious targets, and achieved a strong buy-in from employees into the new business.

The bicarb story — 9+9+9: In the face of increasing competition and declining profits, in 2004, BM launched an ambitious programme called Project 999 — based on forecasting 9 million EBITDA each from BM and Magadi, and another 9 million from new business. ('999' is also the emergency services' phone number in the UK — striking a chord of urgency in the project's title.)

Unfortunately, things did not pan out as expected. Magadi reached its goal, but BM could only manage six million. Kerrigan worked with a small team and identified seven key ideas that could generate the third 9 million. The major initiative they turned up was the growth potential of the sodium bicarbonate business; with new product applications emerging and sales of established applications expanding fast (including pharmaceutical, food and flue gas treatment uses), they put up a case for building a bicarbonate plant in Delfzijl.

"The value of our bicarb business came out of 999.Now our bicarb is sold in 60 countries, and we work at the high-quality end of the business," says Kerrigan. Including Mithapur, TCL-BM now has three plants producing a total of 1,80,000 tes per year.

Looking into the future
Two thirds of the world's soda ash is made synthetically, with one third produced from naturally occurring deposits, principally in the USA. 'Natural' ash has an inbuilt manufacturing cost advantage although freight costs from the USA somewhat reduce this. If the dollar stays weak, Kerrigan feels, American soda ash can be very attractive in Europe. "As much as 0.6 million tonnes of soda ash comes in each year from the US. This is very significant compared with
our capacity of 0.9 million tonnes in the UK and 0.3 million tonnes in Delfzijl."

But a bigger issue going forward is the trend for manufacturing to be moving out of Europe. BM's largest customers are the glass and detergent industries whose factories in Western Europe are key consumers of BM's product. "There are moves to create more glass furnaces in China, India and in Eastern Europe, and if this were to lead to a rationalisation of Western European capacity, it would be a challenge for us," says Kerrigan.

BM therefore remains on the look-out for further opportunities to diversify its business. Already the bicarbonate investments are reducing the reliance on soda ash as the main product and one of the company's new strategic thrusts is 'greening' the business — taken from the Tata sustainability theme.

STEP
In the first half of 2006 'Project Fusion' was the vehicle created to integrate the newly-acquired BM businesses (the European business and the Magadi Soda Company of Kenya) into TCL. Teams from TCL, Kenya and Europe did benchmarking of the businesses in Mithapur,Magadi, the UK and Delfzijl. Three main opportunities emerged — the need for a coordinated approach to the existing soda ash businesses of the three companies; a significant push to develop the bicarb business on a global scale; and last, but by no means least, learning from India to reduce the high cost base in Europe.

The last objective was formalised as STEP (Sustainable Total Excellence Programme).While BM's raw material and energy use is efficient, its fixed costs are high. A dedicated project team, including three secondees from India, worked in the UK for six months to launch the programme, looking at gaps and ways to reduce costs. The work involved professional input from McKinsey, and time spent at Mithapur.

"STEP is about reducing costs and increasing production in order to grow our bottom line. It's also about turning over stones we have not turned in a while — opportunities to sell or make more products; sourcing raw material more effectively; sourcing more engineering components through India or China; working on better operational efficiency...," Kerrigan explains. It's a synergy that can sustain. TCL, too, has a lot to gain from BM, especially business process reengineering and cost reduction initiatives to build operational excellence.

The last word
"One fundamental benefit that many don't realise is that Brunner Mond is once more part of a chemicals company, Tata Chemicals, which has a long-term vision," says Kerrigan. "It is very different from most of the last 15 years when venture capitalists owned us; they looked mainly at the short term, with a view to being able to sell on their shares at the earliest opportunity for the highest possible gain. Just the name Tata — which after the Corus acquisition is now such a huge name in the UK — puts us ahead in so many ways," he smiles.

Sujata Agrawal