ONLINE EXCLUSIVE: Digging for Solutions

August 1, 2004
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Raw material suppliers are finding creative ways to help their customers compete in a global market.

A clay mine. Photo courtesy of Old Hickory Clay Co., Hickory, Ky.
Several decades ago, few ceramic manufacturers gave much thought to sourcing their raw materials. Local suppliers were plentiful, and the service was always personal. The types and purity levels of materials were important, but characteristics such as specific particle size ranges and special blends weren't included in most specifications. Optimizing production usually involved changing forming, drying or firing practices, not materials-after all, clay was clay.

Today, the raw materials are some of the most important variables in a ceramic manufacturing operation, and they are almost infinitely adjustable. Although the materials at their source have not changed, suppliers have become increasingly more sophisticated in how they mine, process and package those materials to provide the maximum benefits to their customers. The supply landscape has also changed-thanks to the Internet and an increasingly global economy, today's manufacturers can source their materials from virtually anywhere in the world.

However, along with these benefits, new challenges have also emerged. Higher energy and labor costs, along with continued consolidation in the industry, has led to higher prices and fewer suppliers. Additionally, personalized service isn't necessarily guaranteed, especially when the supplier is thousands of miles away. Now, more than ever, a successful manufacturer-supplier relationship requires both parties to understand the challenges each is facing and be willing to work together to find and implement creative solutions.

A reclaimed mine. Photo courtesy of Kentucky-Tennessee Clay Co., Imerys, Nashville, Tenn.

Understanding the Challenges

In the ceramic industry, it goes without saying that the rising cost of energy is one of the biggest challenges facing most of today's plants. Raw material suppliers, which must use energy-intensive mining and processing equipment to obtain and refine their products, are also feeling the pinch. While this has led to some price increases over the past few years, suppliers say such increases don't even come close to offsetting their costs.

"In our Gleason, Tenn., plant alone, we saw a 70% increase in energy prices last year over the year before, and our Kentucky operation saw around a 38% increase," says Robert Christensen, sales manager for Old Hickory Clay Co., headquartered in Hickory, Ky. "There's no way that we can raise our prices to compensate for that."

While suppliers have tried to streamline their processes and upgrade their equipment to ensure that their operations are running as efficiently as possible, even that is effective only to a point.

"As clay suppliers, we are at the beginning of the process-we can't just go to our ‘producers' and squeeze them over pricing. We take the material out of the ground, so all of the costs are ours. We have no one to squeeze or pressure, and there are only so many costs we can control," says Mike Brezina, chief ceramic engineer and marketing director at Franklin Industrial Minerals/Spinks Clay Co., Paris, Tenn.

Miguel Galindo, global business manager - ceramics at Borax Europe Ltd., agrees. "Our energy bill is increasing much more rapidly than was forecasted or expected," he says. "It is very difficult to pass these costs along in higher prices. So far, suppliers have been absorbing most of these increases into their margins."

Transportation is another challenge facing the industry. According to Randy Johnson, vice president of minerals sales for R.T Vanderbilt Co., Inc., Norwalk, Conn., ground transportation within the U.S. has become increasingly expensive due to higher fuel prices and an aging rail infrastructure, and availability of rail cars is not always guaranteed. The emergence of China on the global market has had a similar effect on shipping overseas. "The sea freight market in the first six months of 2004 has changed a lot in terms of prices and availability," notes Borax's Galindo. "Imports into China are increasing substantially, and that is creating a very tight situation in the freight market. It has become increasingly difficult to ship products to other parts of the world."

Additionally, labor costs have continued to increase, and suppliers have also had to contend with a shrinking U.S. market, as more and more manufacturers have opted to move their operations to lower-cost regions. "The maturation of the ceramic market and continued consolidation of traditional ceramic manufacturers poses a significant challenge going forward," notes Michael J. Yarborough, vice president and general manager of Kentucky-Tennessee Clay Co., Imerys, headquartered in Nashville, Tenn.

Finding Creative Solutions

Suppliers agree that none of these challenges is likely to disappear any time soon, and that additional price increases are probably inevitable as their own costs continue to rise. However, Borax's Galindo cautions that price is only one part of the raw materials equation. "By focusing too much on a per ton price, companies often miss the value-added aspect that suppliers can bring to the table," he says.

For example, Borax is helping tile manufacturers use borates as fluxes to achieve lower-porosity tile at lower firing temperatures, or, in some cases, faster firing cycles and less energy consumption. The company is also helping manufacturers produce large-format wall tile that are 25% thinner than conventional tile-a development that will allow faster firing, less use of glaze and/or body materials, and a savings in transportation/freight because more product can be shipped in the same size container.

Borax is also using its experience in "sustainable development"-generally defined as development that meets the needs of the present generation without compromising the ability of future generations to meet their needs-to help ceramic manufacturers improve their production processes and also capitalize on a valuable marketing strategy.

"We embarked on a sustainable development program four years ago, and we see that there are opportunities for our products to be used in a more sustainable way, not only from the operations side-such as the more efficient use of resources and energy in our mines and processing plants-but also by helping our customers improve their processes," Galindo explains. "For example, ceramic tile is already seen as an environmentally friendly building material because of its durability, but there is an opportunity to enhance that image even further through sound production practices. By working closely with tile manufacturers, we can help them apply sustainable principles in their operations and enhance the marketability of their products."

H.C. Spinks has developed new processing chemicals that are helping ceramic manufacturers improve productivity and yields, and the company is continually introducing new clay products that offer improved manufacturing characteristics. Still other companies are adding value to the service end of their business-for instance, R.T. Vanderbilt continues to update and revise its website to enhance its popular online ordering system, and K-T Clay is also working to improve its electronic transaction capabilities.

But while raw material suppliers continue to invest heavily in new services and in research and development on new materials and blends, their focus is increasingly on creating partnerships instead of products. "Many of our most innovative developments have been proprietary, customized formulations," says Old Hickory Clay's Christensen. "Some ceramic manufacturers might think that all ball clay is more or less the same, but that simply isn't true. We can tailor specific blends to an application to solve a problem or improve a process, and in turn help our customers compete more effectively in their various markets."

In some cases, the added value a supplier brings to the table goes beyond a specific material and delves into creative solutions that can improve an entire process. For instance, Galindo notes that Borax constantly evaluates new technologies, such as microwave drying, to determine whether they might have applications in broader ceramic applications. "Not only are we partnering with our customers to develop new body formulations, but also new solutions for overall manufacturing. Our mission is to be a solution provider," Galindo explains.

Ensuring a Successful Future

As everyone looks ahead to what the future will bring, only one thing is certain-companies with a long-term strategy and a partnership-focused mentality will end up with a more competitive advantage on the global playing field. "Focusing on price in the short term is easy, but it is difficult to sustain a business and have a competitive advantage in your market in a sustainable way with this type of focus," says Galindo. "We need to start thinking more creatively and find ways to create more value out of our relationships. We as material suppliers can bring more services and more value to a business, rather than just supplying tons of product."

Editor's Note

The suppliers included in this article are not intended to be representative of all ceramic industry suppliers. These companies answered our survey or agreed to be interviewed for the purposes of this article. Contact information on any of the companies mentioned in this article, as well as other ceramic industry suppliers, can be found in our 2004-2005 Data Book & Buyers' Guide.

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