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AMBUJA CEMENTS LTD
INTRODUCTION
Ambuja is the most profitable cement company in India, and
one of the lowest cost producer of cement in the world.
3rd largest cement company in India, with an annual plant
capacity of 16 million tonnes including Ambuja Cement
Eastern Ltd. and revenue in excess of Rs.3298 crore.
Ambuja Cements was set up in 1986.
The company is engaged in manufacture and market
cement and clinker for both domestic and export markets.
PRODUCTS
CEMENT
Portland Pozzolano cement (PPC)
Ordinary Portland cement (OPC)
CLINKER
POWER
MATERIAL REQUIRED FOR THE PRODUCTION OF
CEMENT PER TONNE OF CEMENT
1.2 – 1.5 tons of limestone
0.25tons of coal
120 kwh of power
0.05 tons of gypsum
Power
Clinker content
Fuel (coal)
Transport
Captive Power Plants, AFR
AFR/process efficiency / international sourcing
Composite cement
Grinding facility close to end user, production close to raw materials
Terminal logistics
Cost drivers
Techniques used by ACL to reduce its cost of production
V belt drives which consumed more energy were replaced by flat belt drives.
improved version of mechanical conveyor was used to eliminate breakdown
and spillages.
Adjusted retention time, maximised temperature and the rate of cooling to
reduce power cost from 120 units per ton to 90 units per ton.
Reduced mining expenses by implementing ‘ripping technology’.
Introduced an Australian device called Surface miner to
recover more material from the given area and save energy.
Computerized process control system for easy access and
regulating the production process.
Zero Error Electronic Rotary Machines to increase capacity
utilization.
Improvement in efficiency and lower shutdown rates to
increase capacity utilization.
9
THE SUPPLY CHAIN:
Suppliers Manufacturers Warehouses &Distribution Centers
Customers
Material Costs
TransportationCosts
TransportationCosts Transportatio
nCosts
Inventory CostsManufacturing Costs
E-PROCUREMENT
E-Procurement (Electronic procurement) is one such area, where the Internet was instrumental in automating the purchase process, thereby significantly reducing cost and time.
Using the Internet makes it easier, faster and cost effective for businesses to source their requirements on a timely basis.
CNTD…
Key strategic initiatives, lesser time-to-market and
increased global competition, e Procurement aids
organizations in streamlining their entire
purchasing process.
There are several approaches to e-Procurement
taken by different vendors to manage supplier
relationships.
ACL has a large distribution network of 11500 outlets.
it is one the first cement companies in the country to
recognize the importance of brand building.
ACL had merged as one of the most energy efficient
and technologically advanced cement manufacturer in
India.
ACL was the overall market leader in the Indian
cement industry and earned a huge profit
ACL worked hard to reduce mining
expenses.
ACL implemented new technologies
that could access lime stone in
smaller areas where blasting is not
possible.
Sourcing- Summary
Raw Material Qty/TonCement
Main Source Major Cost Drivers ProcurementStrategy
Lime Stone
Coal
India has sufficient reserve of good qualitylimestone scattered all across the India
Domestic low quality , high ash coal is usedfor making cement which accounts formajority of consumption, companies alsouse imported coal duringpeak demandseason to hedge supplyrisk
Miningroyalty, Dieselprice,
Linkage coal prices
Captive mines andplantsnear quarry
Maximize linkage coalquantity
Fly ash Power plants are the main source of flyash.They are situated uniformlyacross India.
Diesel prices Nearest pointsourcing
Gypsum India’s limited gypsum deposits areconcentrated around Rajasthan . Companies
Import duty,freightcharges
Nearest pointsourcing
import most of the requirement fromThailandand Middle east
* All RM consumption fig. are approximate and only main rawmaterial has been mentioned
Sourcing- Limestone
Volume wise limestone accounts foralmost 60 % of raw material. Sincesetting up plants near quarry saves oninbound transport cost proximity toreserve is the single most importantcriteria.
To the benefit of cement industry highgrade limestone reserves are scattereduniformly all across India.
Mining royalty imposed by stategovernment are paid per ton basis.Dumpers and shovels used in miningconsume high quantity of dieselmaking it the second most importantcost driver
Sourcing- Coal
Government companies mined coal alsoknow as “linkage coal” is 15-20 % cheaperthan open market coal. Companies try tomaximize linkage off take by better liaisonwith railways and coal mining companies
Coal reserves are found mostly in easternstates. 95 % of coal mining is still in controlof center or state government. Steel ,power and cement companies are allowedto do captive or contract mining
Since coal reserves are skewed towards theeastern zone, freight cost is the biggest costdriver. Market coal prices are determinedby global supply and demand equation
Power Plants – Source of Fly Ash
Flyash prices are determined by localdemand and supply equation. Since freightcost is the major component companieslook for nearest source of flyash.
Burning of coal results into flyash. Thermalpower plants across India produce plenty ofgood quality flyash which can be used bycement industry. Flyash is used in producingblended cement grades like PPC
Freight is the biggest component thatdetermines the landed price of flyash
Cement Manufacturing Process
Limestone blendingBurned Limestone ( calledclinker) is blended with flyash,
slag or gypsum in grinding mills
Limestone is burned withcoal inside rotary kilns
Limestone Quarry
FORECASTING
Demand forecasting is based on :
The past sales.
The government policy and the budget for the
construction activities like ROADS &
BUILDINGS.
THRIVE DEMAND FORECASTING is a method,
based on seasonal patterns:
High season time and
Low season time
ERP
Launched Connect India Plus for the overall integration of data across its plants and carried out in batches.
Within two years, Ambuja rolled out Connect India Plus that was conceived as an ERP implementation program for installing SAP with all its modules at 200 locations across India and 2,500 users with a single instance on a server in Mumbai.
The project kicked off on June 1, 2007 and went live on August 1, 2008a period of just fourteen months.
CHALLENGES FACED
Need to create a single business blueprint across
the organization.
Need to integrate individuals with diverse
background to be able to work as a focused team.
Infrastructure refreshes was another critical
challenge.
Data migration was another major challenge since
data had to be imported from eight different legacy
systems.
IMPROVEMENTS…..
Exploring some cutting edge technologies to
improve supply chain.
Implemented a sophisticated smart-card
based vehicle tracking system to improve
operational efficiency in terms of cycle-time
monitoring and fleet management.
Information is dispatched to customers via
SMS
TQM
A computerized process control system with field
instruments supplied by Larsen and Turbo were
also being installed to give consistently high
quality cement with maximum productivity.
The control procedures cover all aspects of
cement manufacture from quarry operation,
handling, mixing and grinding to packing.
CONTD……….. Computerized mine planning and deposit
evaluation to enable optimum use of raw material Online X-ray fluorescence spectrometer for raw
material control and raw mix design Better aided instrumentation and process
measurements using X-ray analysis, gas analyzers, temperature and pressure measuring devices, etc. Centralized kiln control system in conjunction with expert control systems for process and operation control.
Continuous monitoring of quality in production by plants as well as by the certifying agency, namely, Bureau of Indian Standards (BIS) under compulsory Certification Scheme.
RESULT……….
First company to receive the ISO 9002 quality certification.
Received ISO 14000 certification for environmental systems.
The only cement company to be awarded the National Quality
Award in recognition of total quality management. The
parameters adopted by the Government for this award are on
the lines of the most prestigious international awards such as
the Malcom Baldrige National Quality Award of the USA, the
Demming prize of Japan and the European Quality Award.
Its environment protection measures are at par with the best
in the world. The pollution levels at all its cement plants are
lower than the rigorous swiss standards of 100mg/NM3.
JIT Linked its inventory management process to most of the
functions such as production planning, raw material
planning, ordering etc. Online ordering, not only reduced
time, but also transaction costs.
Electronic Data Exchange (EDE) and Material Resources
Planning (MRP) systems facilitated timely and accurate
processing of orders.
Uses the ABC analysis and XYZ analysis for the inventory
control
Company maintained a buffer stock of about 10 to 20
days depending upon the location of the production unit.
ERM A ‘stretch assignment’ requires an employee to go
beyond the job description. It challenges people to
‘stretch’, learn new skills, surprising everyone, specially
themselves.
Under this programme middle to senior level employees
are given two weeks of intensive training focusing on
their ‘stretch objectives’. Each batch consists of 30
people. The programme has been designed in
consultation with IIM Ahmedabad and is followed by a
360-degree evaluation of each participant.
Balance Score card- This is a modern management tool
to monitor the performance of employees at all levels
within the organisation.
CRM
High Quality product
Low cost
Timely delivery
Loyalty discount - frequent and regular
supplies, and also passed on some discount
to customers (bulk consumers)
Ready Mix Concrete
RMC: Ready to be consumedcustomized mixof cement,
sand and crushed stone
•Consistent concrete mix for large construction projects•Compared to traditional methods no space is required for storing and preparation of ingredients such as
sand•Saving on labor and supervision cost•Less wastage of concrete•Faster and smoother construction
Benefits for customer
•Orders are received only few hours in advance , putting extra pressure on planning and coordination•Vehicle route planning is a serious challenge•Accurate sourcing of sand and crushed stone requires additional planning
Challenges for companies – JIT model
DISTRIBUTION
COMPANY
C & F AGENTS
OWN ORGANISATION GOVERNMENT
Cement reaches nearest port and is then transferred to importing country.
Via roadways or railways
FOR EXPORTS:
FOR DOMESTIC MARKETS:
C & F agents /Warehouse
Dealers or distributers
Sub-dealers
End Users
Distribution Chain
CMU/GU
•Bags are loadedon wagon ortrucks
•Companies userail mode forprimarytransportation
C&FA
•CFA unloads thebags, store sanddelivers it whenorder is placedby distributor
•Trucks are usedfor secondarytransportation
Distributors
•Distributorsalsostore small quaintlyof cement to meeturgent demand
•Apart from sellingdistributors helpcompany inmarketing and salespromotionactivities
Retailer
•Retailers takeorder anddeliver to endconsumers
CNTD..
Large network of over 7500 dealers and 20000 retailers across 18 states in India.
Penetration into core rural and semi urban markets.
It has network of port, bulk terminals, bulk cement ships has supported a sustainable strong market position.
SALES & DISTRIBUTION
Cement in India is primarily sold through a distributor - dealer network
Total margins for the distribution channels - 17 to 18 %
Direct sales less than 2 % of total sales
Managing the distribution network & strong working relationships with distributors, contractors etc., critical.
Smaller GU are located near tomarket and flyash/slag source. TheseGU source clinker from Integrated
Distribution Strategy- Hub & Spoke Model
HubLarge Integrated units are fewin number & are situated near tolimestone quarry.
SpokeIntegrated units
Grinding units (GU)
unitsSea Transportation
Distribution: Numerous Challenges
•
•
•
•
•
Cement has a useful shelf life of approximately 6 months. Customers also have abias towards fresh cement ( “ Garam Cement “) forcing manufacturers to predictaccurate amount of inventoryIn India construction activities slows down during rainy season that is why cementdemand is cyclic in nature. A fine balance needs to be achieved between inventorycost and capacity utilization.Since railway route is the cheapest mode of transport, availability of railway wagonis a big constraint in present scenario.Since companies put multiple plants to save on transportation cost, which marketshould be served from which plant is big challengeValue added services such as Ready Mix Concrete ( RMX) has now become aindustry trend. It is putting pressure on lead-time and vehicle TAT.
Distribution: Key Cost Drivers
•Freight charges from plantsto warehouses
•Outbound freight tocustomers from warehouse
• Packing Bags (PPE) Cost• Bag Branding/ printing
costs
• Personnel Costs• Clearing & Forwarding
costs at Dumps• Local Taxes, etc
Transportation(65%)
Packing Costs(15%)
Others (20%)
Fuel PriceLead DistanceContractingwith TransporterWagon/Truck Loading
RegulationsRoad ConditionsTruck TypeRail to road ratio
Demand/Supply for PP granulesBag makers conversion costBag specificationsPrice Risk ManagementMarket StructureTax leviesAlternative Packing Solutions
Local taxes (of Municipalities)Dump Handling costsLocation of Dump & manpower
costsPacking Plant ManpowerAdministrative Overheads
LOGISTICS
ACL was one of the 1st cement producer company
to introduce Integrated logistics system(ILS)
Order Processing System
Involved the flow of information about the orders
from generation to fulfillment.
Involved transmission of customer order, paper
processing, retrieval from the ware-house,
dispatch to the transporters ,transmission of
information to production planning dept.
Inventory Management
Involved knowing both, when to order and how
much to order
Management had to control the cost of carrying
larger inventory
Had well developed system for in bound raw
materials
Packaging cement was packed in 25-50kgs packet bags using
jute bags.
Was 1st to use paper bags for packaging having
advantage of low pilferage, better
preservation ,appearance with low cost.
Each bag contained the brand name, ISI logo ,with
identification number ,price of the bag and net
weight of the bag
TRANSPORTATION
Cement is highly freight intensive in nature.
Manufacturing of each tonne involved a
transportation of 1.6tonne of limestone, 0.25 tonnes
of coal, 0.05 tonnes of gypsum.
Road transportation beyond 200kms was not
economical, 55% transported through railways.
Unavailability of wagons for transportation on
western and south eastern railways
In 2003, 70% of the movement worldwide was by
sea compared to only 1% in India
ACL was the first company To use water
transportation for domestic as well as export
consignments.
As a result the cost came down drastically
The cost of transporting were as follow:
RAIL–580/ton
ROAD–670/ton
SEA–190/ton
Bought ports and freight handling terminals at
Muldwarka, surat and vashi.
In 2003 muldwarka was equipped to export clinker,
cement, import coal and furnace oil
Built a bulk terminal at cochin Kerala
Setting up Break water and jetty facilities in Gujarat,
Maharashtra and Kerala.
Acquired five ships for transporting cement in bulk
350 self financed trucks and a railway siding its in its
factory premises provided flexibility in the mode of
transportation
REVERSE LOGISTICS
Concrete is used for production of reclaimed concrete aggregate, which is a popular substitute for natural stone aggregates.
Concrete is hauled to a central facility for stockpiling and processing which is crushed, screened.
They remove the reinforcing steel by using magnetic separators.
FUTURE OUTLOOK OF ACL
ACL has been pursuing a combination of strategies like
Strategic alliances
Capacity expansion
New plants
Aggressive takeovers.
The company had set up a two million ton Greenfield cement
unit in Maharashtra at an investment of Rs.500crores.
It had expanded capacity at the existing Gujarat Site from
three million to four million at an incremental cost just of
Rs.100crores
It had also set up a one million ton grinding units, one at
Bhatinda and another one at West Bengal.
Also to enhance its presence in the south ,the company had
planned to set up a Rs600crores, two million ton Greenfield
project in A.P
ACL has also started offering ready mix cement.
As 2004 got under way, ACL looked well placed in the Indian
Cement Industry.
Best quality cement
Good packaging
Higher customer satisfaction
Strong distribution network
Ecofriendly operations such as
Use of agro waste and biogas as alternative fuel
Use of surface miners- blast free mining.
Restoration of mines–green spots and water
reservoir
Global standards of environmental measures.