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Innovative Strategies for Cost Optimisation

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S Sathish, Partner and National Sector Leader – Industrial Manufacturing, KPMG India, explores key levers across energy, logistics, and manpower to drive efficiency and resilience.

Over the last two quarters, margins of cement players are under pressure and some of the players have shown a 25 to 30 per cent reduction in their EBITDA. While the key reasons can be attributed to the external situation of rising material prices and constraints to increase cement price, all the players are quite actively looking at strategies to enhance the bottom line to stay prosperous. The need of the hour for cement players is to think of innovative cost optimisation practices. We will deep dive into optimisation strategies for three major cost heads in this article.

Optimisation opportunities
A: Energy and fuel cost is one of the key costs for cement sector. While a lot of focus has been done on energy consumption optimisation, waste heat recovery areas, buying optimisation of coal and petcoke is a new area, which cement companies are focusing on.

Identifying the right import supplier and source country combination can help in optimising the buying cost. We have seen that if this aspect is intelligently done can lead to an optimisation of 8 to 10 per cent in fuel costs. This would entail mapping the importers in India, quantities they import, companies they supply and deciding the right contracting strategy with the right ones.
Analysing the quality of different sources of coal such as Indonesian, South African, Middle Eastern, American, etc. and deciding the right fit for your organisation based on equipment capability can help in optimisation.
Having an AI-based model to optimise the buying cost of fuel, based on petcoke price trends, price trends of coal from different sources, both import and domestic, quality variation analysis of different sources, etc. is a best practice adopted by some leading players to optimise fuel buying.
Exploration with green fuels and alternative fuel resources is another big area cement players are working on.
B: Logistics cost is the next biggest cost driver in cement sector. While prima facie this cost appears to be driven more by demand requirement and market conditions, a sharper focus on drivers of spend will help in optimising this cost.
Many companies operate with a long tail of transporters for each lane to de-risk themselves from the cost of unavailability of trucks. However, the share of business gets split across multiple transporters leading to lesser bargaining power. Some companies operate based on three quote negotiations even today where the breakup of price is opaque to the buyers. Leading companies adopt zero-based costing methodologies / should be cost modelling to build up the should be costs and use that for negotiation coupled with share of business optimisation. AI is used by some of the companies here as well in deciding the right share of business based on supplier price and transporter performance scores.
Synergy leverage between outbound, inbound, primary and secondary logistics is another innovative way of optimisation. Traditionally inbound and secondary logistics is managed by procurement function and outbound and primary transport is managed by sales function. This structurally does not allow for optimisation of spend and we have seen that the same transporter manages between two different functions and in some cases even with different rates for the same distance. Structured negotiation with the total spend share for the transporter can give substantial optimisation. Many companies have changed the logistics organisation structure between inbound and outbound logistics under a common reporting structure.
Load consolidations and right carrier/mode mix optimisation is a big lever. Based on analytics of load in a particular direction and the vehicle type used provides one with an option of increasing the vehicle capacity. An increased vehicle capacity can reduce the number of trips and at the same time reduces the logistics cost per ton. Loadability is often not measured which if optimised can help in reducing the costs. Evaluating the
right logistics mode in terms of road, rail and sea transport based on destination is another
lever used by different industries. Some of the leading cement players are exploring waterways to become more sustainable.
C: Manpower costs is one of the next biggest costs in cement sector. We can look at key strategies for contract manpower costs and white collar costs.
Typically contract manpower costs are a big contributor to manpower costs. Companies adopt the piece rate model or man-day rate model in areas such as packing where a daily output is involved. While a piece rate model may appear optimal, many companies don’t really get into details of how the piece rate is arrived at. Assumptions taken for piece rate calculation such as number of people planned to be deployed, skill levels of people considered, and wage rate assumed for each level leave a lot of room for optimisation. Once the value is unearthed, companies rationalise the number of contractors and increase share of business with a few contractors to realise the value unearthed.
Another innovative lever in white collar manpower is evaluating the people deployment/ cost incurred by core and non-core functions and exploring possibilities of managed services for non-core functions. Payroll/ IT service functions are mostly outsourced by many companies but companies today have started looking at other subfunctions/functions such as recruitment / tax / accounting where service providers are asked to reduce cost of service year on year through automation and digital interventions and. Another trend we see is even the non-core activities of core functions like procurement are being actively outsourced. The strategy here is to make variable the fixed costs, which helps companies in downturn to still stay profitable.

While we have deliberated on strategies for three top cost heads with a few levers, there are other cost heads such as indirect spend and packaging costs, which also provide more optimisation potential. The need of the hour for cement players is to think of an innovative approach to cost optimisation with new levers, to achieve higher order bottomline benefits.

About the author:
S Sathish, Partner and National Sector Leader- Industrial Manufacturing, KPMG, is responsible for increasing revenues for the industrial manufacturing sector, and increasing penetration in sector key accounts/corridors. He has rich experience in auto, industrial manufacturing and consumer market sectors. He has delivered more than 100+ engagements in India and abroad in his 27 years of experience.

Concrete

India Sets Up First Carbon Capture Testbeds for Cement Industry

Five CCU testbeds launched to decarbonise cement production

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The Department of Science and Technology (DST) recently unveiled a pioneering national initiative: five Carbon Capture and Utilisation (CCU) testbeds in the cement sector, forming a first-of-its-kind research and innovation cluster to combat industrial carbon emissions.
This is a significant step towards India’s Climate Action for fostering National Determined Contributions (NDCs) targets and to achieve net zero decarbonisation pathways for Industry Transition., towards the Government’s goal to achieve a carbon-neutral economy by 2070.
Carbon Capture Utilisation (CCU) holds significant importance in hard-to-abate sectors like Cement, Steel, Power, Oil &Natural Gas, Chemicals & Fertilizers in reducing emissions by capturing carbon dioxide from industrial processes and converting it to value add products such as synthetic fuels, Urea, Soda, Ash, chemicals, food grade CO2 or concrete aggregates. CCU provides a feasible pathway for these tough to decarbonise industries to lower their carbon footprint and move towards achieving Net Zero Goals while continuing their operations efficiently. DST has taken major strides in fostering R&D in the CCUS domain.
Concrete is vital for India’s economy and the Cement industry being one of the main hard-to-abate sectors, is committed to align with the national decarbonisation commitments. New technologies to decarbonise emission intensity of the cement sector would play a key role in achieving of national net zero targets.
Recognizing the critical need for decarbonising the Cement sector, the Energy and Sustainable Technology (CEST) Division of Department launched a unique call for mobilising Academia-Industry Consortia proposals for deployment of Carbon Capture Utilisation (CCU) in Cement Sector. This Special call envisaged to develop and deploy innovative CCU Test bed in Cement Sector with thrust on Developing CO2 capture + CO2 Utilisation integrated unit in an Industrial set up through an innovative Public Private Partnership (PPP) funding model.
As a unique initiative and one of its first kind in India, DST has approved setting up of five CCU testbeds for translational R&D, to be set up in Academia-Industry collaboration under this significant initiative of DST in PPP mode, engaging with premier research laboratories as knowledge partners and top Cement companies as the industry partner.
On the occasion of National Technology Day celebrations, on May 11, 2025 the 5 CCU Cement Test beds were announced and grants had been handed over to the Test bed teams by the Chief Guest, Union Minister of State (Independent Charge) for Science and Technology; Earth Sciences and Minister of State for PMO, Department of Atomic Energy, Department of Space, Personnel, Public Grievances and Pensions, Dr Jitendra Singh in the presence of Secretary DST Prof. Abhay Karandikar.
The five testbeds are not just academic experiments — they are collaborative industrial pilot projects bringing together India’s top research institutions and leading cement manufacturers under a unique Public-Private Partnership (PPP) model. Each testbed addresses a different facet of CCU, from cutting-edge catalysis to vacuum-based gas separation.
The outcomes of this innovative initiative will not only showcase the pathways of decarbonisation towards Net zero goals through CCU route in cement sector, but should also be a critical confidence building measure for potential stakeholders to uptake the deployed CCU technology for further scale up and commercialisation.
It is envisioned that through continuous research and innovation under these test beds in developing innovative catalysts, materials, electrolyser technology, reactors, and electronics, the cost of Green Cement via the deployed CCU technology in Cement Sector may considerably be made more sustainable.
Secretary DBT Dr Rajesh Gokhale, Dr Ajai Choudhary, Co-Founder HCL, Dr. Rajesh Pathak, Secretary, TDB, Dr Anita Gupta Head CEST, DST and Dr Neelima Alam, Associate Head, DST were also present at the programme organized at Dr Ambedkar International Centre, New Delhi.

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Concrete

JK Lakshmi Adopts EVs to Cut Emissions in Logistics

Electric vehicles deployed between JK Puram and Kalol units

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JK Lakshmi Cement, a key player in the Indian cement industry, has announced the deployment of electric vehicles (EVs) in its logistics operations. This move, made in partnership with SwitchLabs Automobiles, will see EVs transporting goods between the JK Puram Plant in Sirohi, Rajasthan, and the Kalol Grinding Unit in Gujarat.
The announcement follows a successful pilot project that showcased measurable reductions in carbon emissions while maintaining efficiency. Building on this, the company is scaling up EV integration to enhance sustainability across its supply chain.
“Sustainability is integral to our vision at JK Lakshmi Cement. Our collaboration with SwitchLabs Automobiles reflects our continued focus on driving innovation in our logistics operations while taking responsibility for our environmental footprint. This initiative positions us as a leader in transforming the cement sector’s logistics landscape,” said Arun Shukla, President & Director, JK Lakshmi Cement.
This deployment marks a significant step in aligning with India’s push for greener transport infrastructure. By embracing clean mobility, JK Lakshmi Cement is setting an example for the industry, demonstrating that environmental responsibility can go hand in hand with operational efficiency.
The company continues to embed sustainability into its operations as part of a broader goal to reduce its carbon footprint. This initiative adds to its vision of building a more sustainable and eco-friendly future.
JK Lakshmi Cement, part of the 135-year-old JK Organisation, began operations in 1982 and has grown to become a recognised name in Indian cement. With a presence across Northern, Western, and Eastern India, the company has a cement capacity of 16.5 MTPA, with a target to reach 30 MT by 2030. Its product range includes ready-mix concrete, gypsum plaster, wall putty, and autoclaved aerated fly ash blocks.

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Concrete

Holcim UK drives sustainable construction

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Holcim UK has released a report titled ‘Making Sustainable Construction a Reality,’ outlining its five-fold commitment to a greener future. The company aims to focus on decarbonisation, circular economy principles, smarter building methods, community engagement, and integrating nature. Based on a survey of 2,000 people, only 41 per cent felt urban spaces in the UK are sustainably built. A significant majority (82 per cent) advocated for more green spaces, 69 per cent called for government leadership in sustainability, and 54 per cent saw businesses as key players. Additionally, 80 per cent of respondents stressed the need for greater transparency from companies regarding their environmental practices.

Image source:holcim

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