In order to improve synchronisation between supply and demand, coordination and communication between marketing field workers and production people should be well co-ordinate by logistic personnel. An alternate exigency plan should be prepared to cover the vacuum created by extra demand for warehouses, production hubs and bulk supplies by rail, says Yogesh Mehta, Jt. VP (Commercial) Shree Cement. Excerpts from the interview.
What are the challenges in the supply chain management?
In the cement industry, the significance of SCM is to minimise lead time by managing floating cements stock at nearest destination point with optimum cost, as well as arranging raw material at production site with same object. Some of the challenges are: Setting up grinding units at strategic locations: Since cement plants are located near limestone stock, grinding units can be located near cement markets or fly ash sources to the extent possible.
This change of environment is with the object of delivering at lowest costs; obviously, this requires the cost of cement produced to be low.
Now, which area of market is to be served out of the many plants is a big challenge for SCM. In order to overcome this, cement companies can use cost optimisers i.e. liner programming modules (LP) to determine the ideal plant location for each destination. Customer wants small
deliveries on time: In today´s competitive scenario, end users of cement and stockists do not want to store the cement but want scheduled regular and timely supplies as per their consumption pattern. This leads to the requirement of small vehicles (5 MT to 20 MT/trip) which can only be arranged if delivery is within a 150-200 kms circle. This generates the concept of split grinding units because it is more logical and cost- effective. Bulk storage and redistribution facilities too, ough to be set up.
How is your supply chain cost divided on different fronts?
Cement demand forecasts indicate the area of cement demand which decides the location of cement to be produced, cost effectiveness, source of raw material. Obviously with better planning, in inbound and outbound logistic coordination, along with the use of cost optimizers as well as return logistics, tie up all loose ends. An efficient cement company can have better return logistic planning by way of putting a split grinding unit at the fly ash source and bringing back fly ash to clinker and cement producing plants.
Similarly, bulk terminals for bagging or a blending unit can be set up at fly ash source by producing PPC by blending method, so in return fly ash can be brought by those bulker capsules. This will save enormous cement logistic costs (PPC consuming 66 per cent clinker) which is around 22-24 per cent of the cement selling price.
Warehousing: When more numbers of split grinding units are set up to cater to high cement demand, the requirement of warehouses becomes less. But to cater to remote areas, bulk supply can be accommodated in warehouses as per geographical requirement. These hubs can work as cushion between demand and supply and managed well by C&F agents.
Inventory: By forecasting of cement demand, it is advisable to keep minimum inventory and as and when the high demand trend comes in, we can supply cement from warehouses; when demand is low, inventory can be built up in warehouses.
Transit Losses: Typically, containerised trucks are not weather-proof, therefore cement industries have developed flat trailers on which cement bags are tightly covered by tarpaulin and ropes. to ensure almost zero shortage / pilferage. Unfprtunately though, there is a lot of theft in railway unloading yards, which are open and vulnerable.
Are you considering automating the cement loading and unloading process?
Packed cement: In the Indian cement industry, almost all cement manufacturers do not have automated but mechanised chutes for cement loading, in the case of both road and rail dispatches. The benefits of automating cement loading process are as under:
- Packing when vehicles are not there.
- Saving in labour costs.
- Quality of bags ensured.
- Reduce manpower.
The automated loading is only partially successful since there are large varieties of vehicles and the process is not standardised.
However, in the current scenario, automated mechanisms for cement unloading is not developed; hence, it is the need of the hour to develop such systems so that manual intervention can be avoided, factoring in the damage to bags and shortage of manpower. Clinker: In clinker logistics, we have developed fully automated telescopic chutes and loads without any manual intervention. On the other side, there is the automatic hydraulic unloading tippler used to reduce unloading time. This automisation hardly consume 1-1.5 hours of the loading and unloading process, including queuing.
Loose cement: Loose cement filled in bulkers by air compressors and the same way, loose cement unloaded by air compressors will ensures minimum time spent on in loading and unloading.
It is a one-time capital investment for setting up compressors but it reduces labour and packing costs, which is mutually beneficial for both cement manufacturer and users. This is also environment friendly because it avoids pollution and the use of PP bags.
How do you deal with warehouse shortages?
Our warehouse shortages are negligible. Once cement unloaded, it is the responsibility of C&F agents to take care of the material.
How do you ensure that your fleet is performing at its best?
We adopt the following practices to ensure best fleet performance:
- Maintain lowest loading unloading time so that triparound time is reduced.
- Driver are enthusiastic since their payments are on trip basis.
- Incentives are rewarded to the drivers on a trip performance basis.
- Better management for cement supply order and faster loading of the vehicle and waiting for pending orders.
- A cement freight reverse bidding system which allows truckers to choose any transport with its own freight rate for any destination of choice, with any transporter.
What are the advantages/ disadvantages of using C&F agents?
C&F is a key part of bulk supply industries i.e, steel, cement, white goods, consumer goods, etc but there is a specific and different type of C&F to handle cement. They are custodians of cement and supply to the stockists / customers, as per demand. Unskilled labour is required for handling cement bags which can be carried only by C&F and they arrange transportation, too. In the cae of rail supply, C&F agents are required to handle two set of transportation via godowns.
Are you planning to build a terminal in the near future?
We have a rail terminal at our main plant and are in the process of building a terminal at another major production plant. However, government land procurement policies are the main hindrance in setting up private rail terminals.
Are you open to collaboration with other cement companies for setting up a terminal?
Yes. Collaboration is the need of the hour and if other cement companies show an interest, then it can happen, since the project involves a huge investment and benefits can be shared by all related cement companies. These terminals should be set up jointly or at major destination points like Ghaziabad, Indore, etc.
In a growing economy like that of India´s, constant fluctuation in demand and raw material is a big challenge. How can the logistic system be modelled to accommodate these variations?
Designing a logistic plan should keep in view the fluctuations in demand of cement in lean and peak seasons. Lean demands times, i.e, festivals, rainy season or adverse weather conditions, can be used for plant maintenance. Peak demand on account of festivals, taxation or high demand in a changed scenario can be managed with proper SCM as well as C&F / warehouses channels. Constructing big cement silos, as well as domes for coal and fly ash and storage places for other raw material, may ease the procurement problem in periods of fluctuation.
Clinker storage capacity should be a minimum for five days at split grinding units (GU) and GUs should have an additional cement grinding capacity to accommodate the increased cement demand. Regarding raw materials like fly ash for producing PPC, when power plants are shut due to lean demand for power, cement plants need to preserve themselves for more consumption of pond fly ash.
What are the factors to be considered while designing a logistic plan?
We need to look at these points while shaping logistic plan:
- Cement marketing targets
- (demand quantum).
- Setting of production target production unit-wise.
- Procurement plans, looking to availability of raw material and alternatives.
- Ideal distribution (cost optimiser) in view of cement/raw material availability at production units.
- Practical dispatch plan looking to cement production constraints.
- Mode of dispatch (rail/road).
- A back-up plan is to be prepares simultaneously to avoid unseen situations i.e, power shortages, road blockage, power plant shutdowns, (fly ash shortages, etc.
- What leads to errors in demand forecasting and how can they be avoided?
- If the marketing plan is not backed by an analysis of historical data and new corresponding corrections to developments, this may lead to errors in demand forecasting. The demand forecasting need to be linked with economy growth, the festive season, infrastructure development, etc.
What are future plans for the company?
We are in the process of developing new rail terminals at our major production plants.
- GPS base tracking system for vehicles to minimise triparound time. Strengthening ERP and increasing its uses.
- Priority given to higher carrying capacity commercial vehicles to supply bulk requirements at long lead split grinding units and warehouses, in a minimum number of vehicles on road and at plant.
- Infrastructure development for loose cement supply to reduce cycle times and aid faster delivery.
- Keeping a good fleet, which is well managed and technology up to date. Maximising direct delivery to the end users for fast delivery and cement costs reduction.
- Optimising utilisation of rail to cater to high demand.
- A returning logistic plan with the company´s own transportation i.e,clinker v/s fly ash v/s cement and vice verca. Tie-ups with other commodity / cement return logistics.
- Reduction in loading and unloading time of cement, clinker and fly ash.
- Facilitation to fleet owner of cost- effective spares i.e, diesel and tyres.
- Optimum size of truck / fleet as well as storage capacity to be need-based.
Using cement bulkers is also environment friendly because it avoids pollution and the use of PP bags.