The distribution of cement to the end user from the manufacturer is a major cost factor in the landed cost of cement at the user end. Approximately 30 – 35% of the cost of cement can be attributed to the cost of distribution, which begins at the gates of the cement facility. It is obvious that the movement of cement in bulk is less expensive than movement in small and jumbo bags, since the cost of bagging and debagging is eliminated. However, it is not always possible to move in bulk due to a variety of factors, ranging from geography to the culture of the country of manufacture and the country of use.
Factors affecting cement distribution
In most cases, due to the lack of any concerted and detailed analysis of the cement logistics situation, manufacturers tend to use a combination of distribution methods, which include bulk and bags via road, rail, inland transport and by sea. The most inexpensive method of moving cement is in bulk by water. The optimum solution is always a combination of methods. In today’s technologically advanced world, it is possible to use the power of information technology to arrive at such optimum solutions using mathematical modelling and algorithms.
Intense competition in crowded markets such as India keeps pushing management to find effective ways to lower costs. Logistics is a key cost differentiator and the cement company that can master the art of delivering the lowest cost cement to the user will be the clear winner in the marketplace.
So how does one reduce the cost of cement logistics? Cement (and hundreds of other dry bulk materials) is manufactured and used in bulk form. To bag and debag it between manufacturer and user is an economic burden that can be avoided if the cement is moved in bulk rather than in bags. In some cases, bags cannot be eliminated due to inadequate or nonexistent bulk storage and receipt facilities.
Other factors influencing cement distribution would be market demand, seasonal surges, government policies, political lobbies, connectivity, infrastructure, technology, country geography, history and culture. A solution for Europe will not be suitable for Indonesia, a solution for the UK will not be an ideal solution for Bangladesh and a solution for the USA will not be feasible for India. The solution is bespoke.
Approaches towards a solution
Designing a custom solution requires a methodology that is specific to the operation. This article will look at India as the model. The flow diagram shown in Figure 1 illustrates the total scenario of cement distribution as it can occur in India, and probably elsewhere where similar relative chaos is part of the culture.
Figure 1. Total scenario of cement distribution as it can occur in India
Cement at the factory gates can be in any one of four different forms: in 50 kg polywoven bags, in 25 kg paper valve sacks, in 1 t jumbo bags or in bulk. This combination cannot be refined to become one method, which creates the complication of low cost cement distribution. The four forms multiply the complexity and the cost.
Referring to the flow chart, the number of permutations and combinations that can finally give the manufacturer the lowest cost option can be computed into an algorithm that needs to be defined. One needs to input the prevailing volumes and forms. Supplying cement to an individual building a home and to a company building a dam are two different ball games – but both must deliver lowest cost to the user. Obviously two solutions cannot be the same, but they must be within the same logistics framework of the manufacturer to make economic sense.
Barge/ship movement of bulk cement is the lowest cost option in any scenario with a silo-to-silo flow process. The barging option is straightforward to the logistics engineer. However, when one factors in the myriad laws and regulations of governments that control coastal and inland waterway shipping, there could be hidden costs. The only way to eliminate or reduce these hidden costs is for the cement lobby to force their viewpoints on the governments. This unfortunately does not happen, primarily because of vested interests.
Of course, the silo-to-silo concept doesn’t suit all users. Some users want 50 kg bags, some 25 kg bags and some 1 t jumbo bags. Irrespective of whether it is one bag or more, the system must cater to every type of customer. An integrated IT solution is the only answer.
Such a solution, with the algorithms coded into the system, would have the following input parameters:
- Total production per given manufacturing window of W days =
- X tonnes stored in manufacturer silos 1, 2, 3, 4, etc.
- Market demand:
- A number of 50 kg bags.
- B number of 25 kg bags.
- C number of jumbo bags.
- D tonnes of bulk cement.
- Total number of movement options:
- E number of road bulkers of F capacity each.
- G number of barges/ships of H capacity each.
- I number of container frames.
- J number of road trucks of K1 number of 25 kg bags, K2 number of 50 kg bags.
- L number of linered containers.
- The above are to be moved over a total distance of M kilometers in one trip or in N km over O trips.
The process flow as above now becomes mathematically defined and the logistics manager just needs to input parameters so that the system will tell him what the optimum combination of movement methods is for the lowest cost – all at the click of a button and with feedback being provided in real-time to the system via RFD labels on bags, the bulkers and the container frames. With GPS enabled on the transport systems, the overall management of the total distribution to every customer is available on the laptops of all the authorised logistics engineers who can at any given time intervene to correct inaccuracies. The flow chart in Figure 1 effectively defines the various permutations and combinations that need to be built into the control system.
For effective and optimum costs in cement distribution, the logistics managers of cement companies have to integrate IT solutions with actual demand and supply and, most importantly, include all options of cement movement and storage into the management cycle. They will need to work with almost everyone involved in the supply chain, from the drivers of road bulkers and trucks, the captains of the barges and ships and to the customer engineers who will finally receive the cement for use in their plants.
The homebuilder could also be given the opportunity to download an app to his mobile phone that tells him how to order cement depending on his location and the quantity. The app could be used to provide information on how much cement – either in bags or in RMC – to use for building the house, with the option to message the cement company with instructions on when to deliver the product, how much to deliver and in what form.
To begin the process, the user may download a CAD drawing of his home (which the architect would provide) into the app. This is sent to the central server of the cement company, where a formula calculates the total cement needed both for mortar joints in the brick or hollow/solid block walls, as well as the RMC volumes needed for the roof and other reinforced/non-reinforced slabs.
The user then receives a text alert, which provides him with the number of bags of cement needed for the mortar joints and the number of cubic metres of RMC. This information is linked to the nearest dealer, as well as to the nearest RMC plant of the cement company via PIN code matches. The dealer and the RMC plant immediately send a price quote in reference to the total quantity information computed by the app.
This method of ordering cement could result in increased customer loyalty, as well as creating an invaluable database of home construction that could potentially help cement companies to plan marketing strategies and plants to schedule production. The key for effective cement distribution lies in the use of modern technology, which can result in cement being ordered and delivered to the end user in double quick time.
Written by Balan Velan, Scorpio Engineering Pvt. Ltd, India
Read the article online at: https://www.worldcement.com/asia-pacific-rim/03062014/efficient_cement_distribution_in_india_16/