Arun Salvi, UltraTech, discusses the importance of supply chain optimisation within the cement industry.
To read the full article
"Strengthening Your Supply Chain"
Please sign in or become a member for FREE
For an industry segment like cement, where high product volume is intrinsic to the business, logistics and supply chain play a critical role in ensuring service differentiation in the face of increasing competition. Transporting material is an essential requirement for industrialisation and urbanisation alike. Further, with rural consumption being one of the main drivers for growth in India, it is important to build an effective and scalable supply chain network to reach the last mile.
Supply chain in India faces a number of challenges, including the lack of well-developed logistics infrastructure, the unavailability of skilled manpower, the inability to cater to increasing rural consumption, stringent statutory regulations, policies, and low level of maturity in industry as compared to other developed countries.
Logistics in the cement industry
The Indian economy is expected to grow 7 – 8%/year over the next decade. Cement demand is projected to grow to 2.5 – 2.7 times the current volume. This is expected to reach 550 – 600 million tpy by 2025, resulting in the transportation of more than 900 million tpy of raw materials and finished products. Meeting the growing demand in the future will require considerable capacity addition, which in turn will create pressure on existing resources. The industry is expected to need an additional 180 000 wagons and 400 000 trucks by 2025 to serve these volumes. Optimising logistics and distribution costs, while ensuring consistent availability and service to markets from manufacturing units, is a major challenge for the industry going forward. The business imperatives in this context include the following:
- Technology enabled processes: end to end supply chain visibility.
- Network optimisation: to improve reach and service to markets at optimal costs.
- Customer service orientation: to make service as the basis for all supply chain management decisions.
A key differentiator
Most cement plants are located in remote clusters depending on the availability of limestone, which is the raw material for manufacturing cement. Supply chain in cement industry is critical to ensure the delivery of cement from these manufacturing locations to the markets. Further, cement is a distribution-intensive product with the focus in cement transportation being on high volumes and low distribution costs. Due to the low value of single consignments, the logistics cost/tonne is much higher compared to other products like fruits, vegetables, consumer appliances, and FMCG, etc. Hence, optimising logistics costs has an immediate and visible business impact for cement companies. Finally, the nature of cement consumption in urban locations is quite different from the nature of cement consumption in rural locations. This implies differentiated supply chain strategies to serve urban and rural customers.
An agile and responsive supply chain is critical to sustaining industry leadership. This has been the driving factor for supply chain excellence at UltraTech and the focus has been on creating continuous value and service differentiation at each stage, from planning to delivery.
Customer centricity is at the core
Over the years, UltraTech has achieved market leadership by providing benchmark services to customers by adopting a customer-oriented process at every stage from planning to delivery. UltraTech has adopted a robust planning process that starts with forecasting the cement demand based on an assessment of customer requirements. At the execution stage, UltraTech uses a web-based order management tool that captures the delivery requirement of each customer in detail, including the unique concept of ‘delivery window’. This helps understand at what time during the day the customer requires the delivery of the cement. To improve on-time deliveries, UltraTech uses GPS technology to track more than 9500 trucks across the country, which are carrying loads for customer deliveries. Each order execution is intimated through SMS to help customers plan for onward sales. More than 2500 customers are using either online or mobile technology for order booking and execution status monitoring.
UltraTech is the largest producer of cement in India, with 19 integrated plants, 21 grinding plants, and seven bulk terminals across the country. Through a robust logistics network of more than 550 warehouses and 190 railheads, UltraTech serves more than 16 000 orders per day, using a mix of various logistics modes, including rail, road, and sea. These orders originate from over 50 000 dealers, retailers, and institutional customers with lot sizes varying from of 2 t – 40 t. Through bulk terminals located at Mumbai, Bengaluru, Hyderabad, Pune, Mangalore, and Cochin, and with grinding units located near major urban consumption centres, UltraTech is able to provide the desired services at optimal cost. Further, 50% of the warehouses are catering to rural demand where the order lot sizes are small. For primary movement on road from factory to warehouses or nearby customer locations, the fleet size is of medium-capacity and high-capacity vehicles, whereas from the secondary locations, UltraTech use tractors, and low-capacity and medium-capacity vehicles on road to serve customer orders.
Technology as an enabler for logistics
UltraTech has adopted technology as the key enabler for supply chain excellence from planning to execution. It has implemented technology initiatives to benefit all stakeholders including channel partners (dealers and institutional customers), service partners (handling and transporting agents, railways), and all internal functional teams.
Over the last few years, UltraTech has put in place a robust sales and operations planning process with the help of optimisation tools. This process starts with demand forecasting, which is done via a bottom-up process and captures demand at the taluka level on a 10 day rolling period. Based on this demand, and taking logistics and production constraints into consideration, an optimal distribution is derived with the objective of maximising profitability. The plan aligns all functions for execution and enables performance monitoring with clarity.
From an execution perspective, examples of technology as an enabler include the following:
- Online order booking, sourcing, and scheduling system, which helps in capturing customer requirements, better scheduling of order execution, and real-time visibility of order status.
- Mobility application for sales force. UltraTech’s sales forces are empowered with information, such as dealer details, order status, targets, performance, visit planning, picture capturing, and other market information on a real time basis.
- Turnaround improvement at plants through RFID-based automation at plants and online order acceptance by vendors, in turn making the process paperless.
UltraTech uses supply chain optimisation tools for strategic and tactical planning. Strategic planning involves locational decisions for upcoming units – integrated units, grinding units, and packing terminals to cater to respective consumption centres. It also takes decisions on service infrastructure (warehouses and railway sidings), so as to meet the demand for small lot sizes, reduce delivery times, and improve the secondary reach.
An opportunity in the sea
Sea transport is the most economic mode of transport, especially when plants are situated near ports. UltraTech is focusing on sea as a mode of transport in the future as it is safe, environment friendly, and pollution free.
UltraTech has its operations on the Indian west coast with loading terminals situated at Pipavav and Jafarabad, Gujarat. The supplies go to Magdalla cement plant in Gujarat, Jawaharlal Nehru Port Trust near Mumbai, Ratnagiri, New Mangalore, and Cochin. UltraTech also exports to countries, including Sri Lanka, the Persian Gulf, Africa, and Far Eastern regions. UltraTech systems include the cargo conveying and handling system as a part of the cement plant. This captive jetty handles around 5 million t of captive cargoes of cement and clinker, with more than 80% berth occupancy rate.
UltraTech is continuously improving to achieve supply chain excellence on par with global best practices. Going ahead, it is focusing on the following critical success factors:
- Resource management: UltraTech is collaborating with rail authorities, other ministries, and external agencies to come up with innovative approaches to deal with resource constraints by developing captive infrastructure and exploring alternate modes of transport. In order to contain driver shortages, it is taking up initiatives, such as providing driver amenities at plants (rest rooms and canteens) and providing insurance cover to drivers through transporters.
- Capability building: UltraTech has internal and external skill development programmes in place for its employees as well as channel and service partners. Safety and sustainability: UltraTech endeavours to integrate safety, as a culture within its organisation and across channel partners through SOPs, infrastructure, and process improvements. Its major focus in supply chain management is increasing awareness on and building commitment of transporter and driver safety. Additionally, sustainability initiatives include the implementation of a paperless process and continuous thrust on integration of inbound and outbound movement to reduce ‘empty miles’.
- Digitalisation and analytics: to utilise the potential of the Internet of Things, Big Data, and customer connectivity, UltraTech has already digitalised several of its supply chain management processes. Further, data analytics will enable SCM professionals to identify and evaluate alternative routes, and quantify operation levers and sensitivity analysis to bring real time visibility on cost and service.
About the author
Arun Salvi is the Head of Logistics for UltraTech Cement Ltd.
Read the article online at: https://www.worldcement.com/special-reports/10072018/strengthening-your-supply-chain/