Cement Logistic Challenges
With the Cement industry showing a downward trend in profit margins, better logistics management proves beneficial to many of the cement manufacturers. Let us explores the various modes of logistics that can provide a cost-effective means of cement transportation.
Cement, being a bulk commodity, transporting is a costly affair. The selling and distribution costs account for around 21% of production cost. In 2009-10, top 30 cement companies spent more than Rs 10,000 crore to carry cement to the consumer. The domestic cement industry has been making continuous efforts to cut its logistic costs.
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At the time when the industry was entering into the downside of the cycle, with profit margins coming down to 20-25 per cent from 35-40 per cent, better logistics management proved beneficial to many of the cement manufacturers. Using more railway routes than roads, shrinking lead distance (distance between the manufacturing facility and market) and opting for sea-routes wherever possible were some of the ways the industry explored. Currently, for every 50-kg bag of cement, the logistic cost comes to around Rs 18-25 by road and Rs 12-15 by the railway, depending on the distance. The country’s third-largest cement maker, Ambuja Cements, opted for sea-routes to transport its cement from Gujarat to southern market.
Today, 70% of the cement movement worldwide is by sea compared to just 1-2% in India. However, the scenario is changing with most of the big players like L&T, ACC and Grasim having set up their bulk terminals.
About 3% of the gross revenue is spent on inward logistics while outward logistics accounts for another bulk of 15%. Inward logistics include, coal and limestone transportation, while outward logistics is mostly the final product cement. Some companies also incur outbound logistics cost on transporting clinker to their grinding plants. Plants that are closer to the collieries, the inbound transportation
Cement, being a bulk commodity, transporting is a costly affair. The selling and distribution costs account for around 21% of production cost. In 2009-10, top 30 cement companies spent more than Rs 10,000 crore to carry cement to the consumer. The domestic cement industry has been making continuous efforts to cut its logistic costs.
[pic]
At the time when the industry was entering into the downside of the cycle, with profit margins coming down to 20-25 per cent from 35-40 per cent, better logistics management proved beneficial to many of the cement manufacturers. Using more railway routes than roads, shrinking lead distance (distance between the manufacturing facility and market) and opting for sea-routes wherever possible were some of the ways the industry explored. Currently, for every 50-kg bag of cement, the logistic cost comes to around Rs 18-25 by road and Rs 12-15 by the railway, depending on the distance. The country’s third-largest cement maker, Ambuja Cements, opted for sea-routes to transport its cement from Gujarat to southern market.
Today, 70% of the cement movement worldwide is by sea compared to just 1-2% in India. However, the scenario is changing with most of the big players like L&T, ACC and Grasim having set up their bulk terminals.
About 3% of the gross revenue is spent on inward logistics while outward logistics accounts for another bulk of 15%. Inward logistics include, coal and limestone transportation, while outward logistics is mostly the final product cement. Some companies also incur outbound logistics cost on transporting clinker to their grinding plants. Plants that are closer to the collieries, the inbound transportation