How the 2021 raw materials shortage improved our forecasting

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How the 2021 raw materials shortage improved our forecasting

Meet Ignacio Pala, our Global Sourcing Director for Colors. Ignacio and his team make sure that we get the raw materials we need to meet the needs of our customers – even in a crisis causing global shortage.

“Along with the entire paints and coatings industry, we’ve faced a raw materials shortage in 2021 combined with a sudden global demand increase,” says Ignacio Pala, our Global Sourcing Director for Colors. “The combination of both elements created a perfect storm.”

A perfect storm brews

Believing wholeheartedly that “your future is in your hands”, Ignacio’s empowered mindset has opened many doors for him throughout his career. It’s also helped him and his team weather the challenges of 2020 and 2021 as the paints and coatings industry grappled with the full impacts of COVID-19.

“I’m responsible for the source-to-contract journey for raw materials in the ‘colors’ category, including titanium dioxide (TiO₂), pigments and colorants found almost in every formulation of our products,” says Ignacio. “By the end of 2020, we started to see unexpected plant maintenance shutdowns from our key TiO₂ suppliers, resulting in less product availability globally. At the same time, we saw that demand was peaking.”

What happens when the formula fails?

How we would normally secure the right amount of raw materials (at the best cost to satisfy our customers) would be to contract the annual volume in Q4 of the previous year. But given the impact of the pandemic on the demand mix, the approximation fell very short of 2021’s actual demand pattern.

“We had to manually collect the forecast of more than 120 sites,” says Ignacio. “In doing so, we noticed that some sites were over-ordering (to rebuild depleted stocks), increasing the gap for those sites that weren’t getting enough to satisfy their orders.”

Facing the raw materials shortage head on

The response from across the company was quick and efficient. “We set up an urgent taskforce with key stakeholders, including the direct involvement of our CEO, to optimize the allocation of our available TiO₂,” says Ignacio. “I was relieved when we ended up with a realistic and aligned forecast for 2021.”

“We still needed to find 40,000 tons of extra TiO₂ in a very tight market,” he says. “We eventually got it with the help of a dynamic cross-functional team, not to mention the support of our CEO, who kept the pressure on our suppliers to come through for us.”

The crisis made us stronger

“I feel really proud of my team,” says Ignacio. “We managed to keep working on all the other important work on top of dealing with our urgent needs. All throughout this crisis, we needed to think differently, act faster and do better.”

He adds: “It’s strange, but in a way these challenges have been helpful to our development as individuals and as a team – even though it’s not a situation we could deal with long term.”

“It’s all about balance for me. My family comes first, I take care of my health by being active and indulging in my passion for good wine, and I invest in my professional career. If you can succeed in these three areas, I think you can go far in life.”

How will we avoid a similar crisis in 2022?

Now that we’ve just about made it through 2021, we’re looking forward to the next step: developing a structured process that can translate integrated business planning numbers into a reliable raw materials forecast so we can contract the right volumes for 2022.

“We need to develop global raw materials forecasting and planning capabilities that will put us in the position to optimize on-time and in-full delivery (OTIF) to our customers all around the world – no matter what storms are brewing,” says Ignacio.

“And key for me when I reflect on our company purpose – Pioneering a world of possibilities to bring surfaces to life – is that very first word, ‘pioneering’,” he says. “I’m focused on getting the best raw materials from our suppliers that will allow us to bring the competitive advantage to our customers. That means the best in terms of innovative sustainable solutions or circular raw materials, in addition to the more obvious considerations of quality, service and cost.”

“As one of our core values, sustainability is part of everything we do as a company and plays a big role in how we source our raw materials,” adds Ignacio. “I’m really proud of the fact that AkzoNobel recently announced that we’ve aligned our own sustainability ambitions with the Paris agreement – it’s another example of our pioneering approach and I’m glad to be playing my part.”

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