|In early 2010, strategic imperatives and the challenge of responding to the global financial crisis drove James Fazzino, newly appointed Incitec Pivot Limited MD and CEO, to build a continuous improvement culture that would transform IPL into a productivity powerhouse. Confident in the company’s strategic direction based on its balanced exposure to the world’s two biggest economies, the USA and China, he recognised that IPL lacked a high-performance culture and a consistent approach to strategy execution. A paradigm shift was required.|
As a result of the global financial crisis in 2009, productivity and plant reliability was suboptimal, while energy, labour and operating costs were high. Also, IPL had just acquired Dyno Nobel, a manufacturer of explosives and initiating systems (IS) for use primarily in the mining and quarrying sector.
The Dyno Nobel business acquisition came with the Ensign-Bickford Company (EBCo) business which had merged with Dyno Nobel in 2002. The former had a relatively mature Lean manufacturing culture within their North American IS manufacturing function. The IPL Executive Team wanted to leverage this IS continuous improvement culture globally into the entire IPL group.
I am convinced that the principles of BEx can be applied successfully to any organisation. The results at IPL speak for themselves – you can’t argue about AU$0.5 billion in productivity savings.
former MD and CEO,
Incitec Pivot Limited
Within 12 months of commencing his role as CEO, James Fazzino made it clear that he was actively looking for “a way of running the business to strategically create distinctive competitive advantage that couldn’t be copied”.
The goal was to find a methodology that would:
- involve all employees, covering the whole business
- enable empowerment through capability
- provide the framework to guide and sustain improvement initiatives as an ongoing process
- align all activity under one improvement umbrella
After an extensive search, IPL concluded that CCi’s TRACC Integrative Improvement methodology best aligned with its objectives. In 2010, the IPL Executive Team visited a number of TRACC reference sites which had well embedded Lean manufacturing principles. These sites included the DuPont Wilmington headquarters and Chambers Works site in the US, and the Lion Tooheys Brewery site in Australia. The DuPont site visits were particularly impactful as DuPont is a leader in the global chemicals industry.
The outcome was the introduction of the IPL Business System, internally called Business Excellence or BEx. Underpinned by the TRACC system, BEx is grounded in Lean philosophy, concepts and practices and has complementary elements of several other proven business improvement methodologies. BEx officially commenced in 2011 and favourable results were achieved almost immediately.
Key improvements in productivity have been realised via a combined effort of improving Overall Equipment Effectiveness (OEE) and increasing production volumes. Within IPL, OEE comprises three components: quality (first pass yield), availability (equipment, people and materials) and throughput rate.
|Key themes associated with IPL’s success|
|The improvement initiative clearly aligned with the IPL values, as was established quite early into the BEx journey. The organisation then sought to bring the values to life with some high-level principles, many of which later emerged as key themes from Appreciative Inquiry (AI) interviews. These interviews were conducted globally with 75 employees across all tiers and functions within the business.|
|In total, nine themes associated with IPL’s reported successes and the well-entrenched BEx practices emerged from the interviews.|
IPL believes that safety improvements, BEx maturity progress and improvements in organisational performance are all highly correlated.
The following results clearly illustrate this:
- Over AU$570 million in EBIT gross benefits, including AU$84 million in 2017
- About AU$300 million reduction in working capital
- 35% reduction in recordable safety-related injuries combined with an 85% reduction in injury severity
- Record output at IPL’s largest chemical plants globally; namely, Cheyenne Wyoming, Waggaman Louisiana, Moranbah Queensland, Phosphate Hill Queensland, Mt Isa Queensland
- 20% improvement in Overall Equipment Effectiveness (OEE) at Initiating Systems plants
After allowing for escalation of the cost base (e.g. wage increases), the net BEx productivity benefits to IPL since 2012 exceed AU$350 million directly onto the bottom line, as indicated in the graph. BEx productivity benefits increase over time as business system maturity increases. This is very different from traditional top-down, centrally driven and project-based improvement which is focused on short-term cost cutting.
Comparisons between the ramp-up performance of the Moranbah and the Louisiana manufacturing facilities visibly demonstrate the benefits of applying a BEx mindset in the commissioning phase of greenfield sites. Moranbah was commissioned in July 2012 – less than a year after the BEx initiative was approved to commence within IPL. In contrast, Louisiana was commissioned about five years later, thus benefitting from a solid BEx mindset that was applied to the commissioning process.
Uptime data clearly illustrates the improvement in ramp-up between Moranbah and Louisiana; average uptime for the first year of operation in Moranbah was 34% as opposed to Louisiana’s 74%, which is well inside the top quartile of plants commissioned in the global chemicals industry. Moranbah took over three years to achieve nameplate production rates which Louisiana achieved in less than four months after commissioning. Louisiana exited year one with month 12 production 110% of nameplate, raising maximum sustainable production rate (MSPR) by 10%.
Summing up the overall success achieved with the BEx initiative, James Fazzino said: “An AU$8 billion company requires an underlying business system to ensure long-term sustainability, underpin productivity improvement and drive success over multiple business cycles. That’s where the BEx journey has led us to.”
The real value of TRACC and what differentiates it from other common business improvement offerings is the assessing and planning capability. Its structure is also particularly helpful.
– David Walker,
BEx Manager, North America Manufacturing and Strategic Engineering
Improvements in productivity, volumes and OEE
|IPL’s manufacturing facilities produce a wide range of explosives, fertilisers and industrial chemicals. As well as owning and operating 20 plants in the US, Canada, Australia, Mexico, Indonesia and Turkey, it has joint venture operations in South Africa, Malaysia, China and Australia. IPL is Australia’s largest manufacturer and distributor of fertilisers, and the subsidiary company Dyno Nobel is number two in industrial explosives globally.|
All rights reserved. This is a condensed version of an in-depth case study developed by CCi and Incitec Pivot Ltd. It is largely based on appreciative inquiry interviews conducted globally and involved 75 employees across all tiers and functions within IPL. No part of it may be reproduced or used in any manner without the express written consent of the publisher or client partner. For access to the full document, click here.
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