POINT OF VIEW
An approach to bolster up the logistic link of supply chain
in cement industries through value engineering techniques
B. Ramesh, Utpal Baul and V. Srinivasan
This paper reviews supply chain management activities
in Cement Industries with focus on bulk transportation to
improve efficiency and effectiveness of both inbound and
outbound logistics through Value Engineering techniques.
Case study approach is used. The aim of this research is
to reduce costs of logistic operations without sacrificing
transportation requirements with customized vehicles. All
research efforts with inherent limitations will result based
on researcher’s requirement and choices with different
outcomes. The findings support a view of the complex nature
of change in the transportation and process requirements for
the cement industry.
1.0 Introduction: Need for the study
With the globalization of Indian economy there is a greater
awareness on the part of the manufacturers about the need
to improve quality of service and reduce cost not only to
maintain market share but also to improve it. Competition
has increased by leaps and bound and customer awareness
of quality has reached new heights. To meet the customer
expectations of quality and value for money, the premier tool
that can be used is “Value Engineering”. Value Engineering
is recognized as an effective technique for reducing costs,
increasing productivity, and improving quality-related
features such as durability, reliability, and maintainability.
With the factors like changing demographics, technology
development, swinging market perceptions, ongoing
environmental degradation because of influx of technology
and the rapid flow of global financial capital, the business
environment is in a state of continual flux. In this context,
Cement industry will inevitably like any other industry
needs to reinvent itself to face challenges.
Transportation is one of the most visible elements of Supply
Chain Management. However many do not realize that
Transportation is a key decision area within the logistics
mix. Except for the cost of purchased goods, transportation
absorbs, on the average, a higher percentage of logistics costs
than any other logistics activity. Transportation functionally
provides two major function: material movement and
material storage.
Transportation of raw materials and finished goods in the
cement industry is a real challenge and demands innovative
methods to reduce costs on a continual basis. Traditional
transportation has to be reviewed de-novo, considering the
need and environmental conditions and to avoid possible
losses during transportation. Specialized material handling
equipment to transport clinkers, fly ash and cement which
can functionally meet the material movement and material
storage at an optimal cost is the need of the hour. In this
context, the researcher has taken up a study of Management
of Logistical systems of Bulk Materials handling in Indian
Cement Industries.
2.0 Literature Review
Global Cement Production has continued to be expanding
at an average rate of 6.4% in the last five years from 2568
million tons in 2006 to 3294 million tons in 2010. Around
56% of production is from China. China (with an average
annual growth of 11.4%) and India (with an average annual
growth of 9.8%) have been the drivers of growth in global
cement output. – Cement Industries Report (2011) [1].
India is the second largest cement producer in world after
China. Except India and China, other major producers are in
The Indian Concrete Journal July 2016 79
 POINT OF VIEW
the range of 45 - 65 million tons production (as against 52 - 86
million tons in 2008). – Cement Industries Report (2011) [1].
Today cement industry comprises of 183 large cement plants
and more than 360 mini cement plants. Large producers
contribute about 97% to the installed capacity while mini
plants account for the rest. Among these, 98% of the capacity
is met by private sector and the rest by the public sector.
– Cement Industries Report (2011) [1].
The turnover of cement industry has been estimated at US
$ 25 billion in 2010-11. The installed capacity has increased
at a compound annual growth rate (CAGR) of 8.8 percent
during 2001-2011 and matched the growth in production,
which averaged 8.7 per cent. However, during the last five
years (2006 – 2011), while installed capacity increased at an
average annual rate of 13.6 per cent, production witnessed
an increase of 9.1 per cent only during this period. – Cement
Industries Report (2011) [1].
Cement plays a vital role for the development of infrastructure,
and is indeed a fulcrum for Industrial progress. As per the
background note submitted by the Ministry of Commerce
and Industries, Government of India (GOI) the Indian
Cement Industry is now the second largest cement producer
in the world, next only to China. India’s share in the world’s
cement production is around 6%. - Parliamentary standing
committee report (2011) [2].
Three types of cement are produced in India. The Portland
Pozzolana Cement (PPC) enjoys the major share ( 67%)
of the total production, followed by Ordinary Portland
Cement (OPC) (25%) and Portland Slag Cement (PSC) 8%. A
positive trend towards the increased use of blended cement
is discernible with the share of blended cement increasing
to 75%. During 2008-09, the industry consumed 35 million
tons of fly ash and 7.5 million tons of slag. According to
the Ministry of Commerce, GOI, continuous increase in the
production of blended cement is expected to reduce the
problem of waste disposal, improve energy efficiency and
reduce carbon foot print. The principal raw materials for
cement are lime stone, gypsum and sand. In order to reduce
the consumption of limestone, various substitutes are used.
Substitution of clinker by using fly ash and blast furnace
slag can reduce emission of pollutants per ton of cement
production.- Parliamentary standing committee report
(2011) [2].
2.1 Fly ash/Cement/Clinkers
Fly ash is generated in thermal plant and is considered
a waste to be disposed of, till recently. Thanks to the
development of Portland Pozzolana cement, fly ash can be
80 The Indian Concrete Journal July 2016
used as one of the ingredients advantageously. Fly ash, of
late is being transported in ”Bulkers” from Thermal power
plants to cement plants to be used as a raw material for
manufacture of cement. Cement is transported in bulk
quantities in the same Bulk transport vehicles to the place
of delivery to optimize cost of operations. Clinkers are also
one of the main ingredients of cement. They are moved in
large quantities and traded internationally. Manufacturers
also ship clinker to grinding plants in areas where cement-
making raw materials are not available. However, they
are normally moved by tipping vehicles and not by Bulk
Transport vehicles.
Due to infrastructure growth, concrete -a vital material for
such a growth- is now being produced by Batch plants which
require cement in bulk quantities to be loaded to the silo. In
this context, the operation of bulk tanks becomes ideal as they
can unload the product by supply of large quantity of air to
the tank and hence can be conveyed pneumatically without
handling the product physically en route. Consequently bulk
tank operation is most suitable logistically and thus can also
create more “value” in transportation. This can be seen more
clearly by analyzing the inbound and outbound logistics of
the material transportation in the cement industry.
As with any other industry, the cement industry needs to
focus on its supply chain for sustainability. Rating agencies
today look for companies’ stewardship efforts across their
supply chain, and frequently direct them to report on this
aspect in their sustainability reports. Companies concerned
with the cement supply chains can have a significant impact
on the overall sustainability of the sector. Some cement
companies have started assessing supply chain performance,
but there is no universal agreement on which factors to
consider or their relative importance. - Cement Sustainability
report (2012) [3].
Further, Working Group for Cement Industry suggests in the
12th Five year Plan (2011) that, “Future modernization needed
in cement industry is Bulk loading and transportation and
pneumatic cement transport”. - Cement Industries Report
(2011) [1].
After the total decontrol of cement, the Indian Cement
Industry has gradually developed good export market for
cement/Clinker due to its competitiveness and tendency to
grow for achieving a technological excellence. To make the
Indian Cement/Clinker more competitive in the International
Market and with a view to give a fresh boost to the Export of
Cement and Clinker it is recommended in Cement Industries
Report (2011) to consider 50% freight subsidy for cement/
POINT OF VIEW
clinker logistic cost to the port/jetty from the manufacturing
unit, as most plants are located in hinterland [1].
Cement, being a low value and high volume commodity,
transportation costs form a significant proportion of its total
cost. To improve market servicing ability and reduce the
transportation of fly ash, a lot of split-grinding units have
come up close to key markets and fly ash sources. Thus
clinker which is again a bulk natured intermediate product,
needs to be transported for long distances in bulk from
the production centers to various grinding units- Cement
Industries Report (2011) [1].
The industry has innovatively adopted hazardous wastes
viz. Fly ash thermal power plants and slag from steel plants,
as important raw materials. As these materials need to be
transported from distant sources and in large quantity, they
contribute significantly to overall cement production costs.
Thus using a cost efficient and environment friendly mode
of transport for raw material, fuels and finished product are
very important - Cement Industries Report (2011) [1].
There is a huge untapped opportunity available for
transportation of cement in bulk through Special Purpose
Wagons. The present Rail movement of bulk cement is
about 2% of the total installed capacity in the country. Due
to increasing use of Ready Mix Concrete and consumption
of Bulk Cement, it is likely to go up in the next few years.
- Cement Industries Report (2011) [1].
In the present scenario road carries about 65% of cement
freight. Even in case of rail freight, last mile connectivity is
ensured by using road transport only. Thus it is paramount
to ensure that issues hampering road transport are looked
into and addressed as road shall continue to be the back
bone of cement distribution. - Cement Industries Report
(2011) [1].
One of the major contributions of cement industry to society
is in the form of absorption of industrial waste generated by
other sectors, particularly the power sector and plastics. The
Power generation in India is coal intensive which generates
huge amount of ash and enormous area of land is used to
store it. Utilization of fly ash is not a cost-free process. It
requires establishment of a proper processing infrastructure
at the power plant site in the form of dry fly ash collection
system and dedicated system of transport to the grinding
unit.-Cement Industries Report (2011) [1].
During 2010-11, as per details provided by Central Electricity
Authority (CEA), thermal power plants (based on 79202
MW of coal based capacity) generated a total of 130.7 million
tons of fly ash. The total utilization of fly ash was only 72.8
million tons (i.e. 56%) of which 35.2 million tons (i.e. 27% of
total fly ash) were consumed by the cement industry. The
other users included Brick Manufacturers 4.59 million tons
(3.5%), Roads, Embankments and Ash Dykes 8.52 million
tons (6.5%), Reclamation and Mine filling 15.19 million tons
(11.5%), and other miscellaneous applications 9.34 million
tons (7%). Balance 57.90 million tons which is about 44% of
the total fly ash remained unutilized. - Cement Industries
Report (2011) [1].
In the recent notification, cement plants are compelled to
purchase ‘cement graded fly ash’ from the Power houses
located far away from their plants, which unnecessarily
increases avoidable production cost of cement due to
involvement of the cost of fly ash they purchase and its
transportation. This also leads to a National Wastage of
Diesel in transportation, a product for which Government
is struggling to find ways for its conservation. - Cement
Industries Report (2011) [1].
th
In the 12 Five year plan, a Sub Group IV is contemplated for
logistics, to study including the role of Railways and issues
related to raw materials, fuel, fly ash, minerals right and
land acquisition and in which the specific term of reference is
given to examine the status of bulk transportation of cement
and recommend measures for bulk transportation. - Cement
Industries Report (2011) [1].
Cement production and distribution is transport intensive.
Transportation component involves about 20% cost of
production. Transportation cost of cement, is about INR
1.03 or Rs. 1.04 per ton kilometer. For competitive reasons,
cement companies are seeking more wagons. It was pointed
out to the Committee that the transportation cost will
increase when the material is unloaded and carried on road
for further distance. If the material is brought from or taken
to hinterlands, transportation cost by road increases. The
industry depends heavily on road transport for movement of
Clinker to cement manufacturing site. The prominent cement
company informed the Committee that transportation cost
by truck transport over the last 10 years has increased by
about 60%.- Parliamentary standing committee report (2011)
[2].
Paul Shrivastava (1995) introduced the term environmental
technology to refer to production equipment, methods
and procedures, product designs and product delivery
mechanism that conserve energy and natural resources,
minimize environmental load of human activities and
protect the natural environment [4].
The Indian Concrete Journal July 2016 81
 POINT OF VIEW
Dr. Diego Medina and Dr. Juan Manuel Gracia (1998)
tried to emphasize on sustainable development as an
essential requirement for achieving economic goals without
degrading the environment [5]. Kopicki et al.(1993); Van
Hoek (1999) suggested three approaches in Green Supply
chain management, namely reactive, proactive and value
seeking. - Gazala Yasmin Ashraf et al (2009) [6, 7, 8].
The Indian cement industry is being recognized for efforts in
lowering its carbon footprint. Its effort in this direction include
measures such as promoting green cement, modernization
and adoption of new technology, process improvements,
steps to achieve greater thermal and electrical energy
efficiency, the pursuit of renewable energy, alternative fuels
and raw materials, optimizing transportation costs and
leads and striving for cost competitiveness. - Gazala Yasmin
Ashraf (2012) [9].
Harvard’s Michael Porter noted that to succeed, companies
have to develop distinctive advantage. Distinctive advantage
implies that a company differentiates itself in the mind of
customers. Beating the competition by capturing the heart
82 The Indian Concrete Journal July 2016
of customers is the battle cry of companies like Apple and
Nordstrom. If companies were to bring their managers
together to brainstorm opportunities to create value, many
ideas could be crystallized. These ideas could then be
classified as one of the five basic areas of customer value:
Quality, cost, flexibility, delivery, and innovation. - Stanley
E Fawcett et al (2008) [10].
Cement as a final product is sold in bulk or bags. Cement
bulk is the normal way to distribute cement in developed
economies. Bulk sales represent almost 90% of the US cement
market. Concrete producers are the biggest customers.
According to a cement company, bagged cement represents
80% of sales in emerging markets. Bags sales are strong
related to Do-It Yourself (DIY) home construction. - Isabel
Agudelo (2009) [11].
Cement manufacturing process is capital and energy
intensive and is designed to generate economies of scale. It is
a highly automated continuous process. Because of the cost
that is generated by stopping a plant, traditionally all the
logistics processes were subordinated to avoid this situation.
POINT OF VIEW
Now, cement companies are committed to optimize the
logistics costs along with avoiding stops in production.
- Isabel Agudelo (2009)[11]. Hence it may be noted that
logistic cost is very important in a process industry like
cement manufacture.
2.2 Supply chain design frame work in
cement industry
As per Reev and Srinivasan (2005), there are a four major
supply chain designs: Built to-Stock (BTS), Configure-to-
Order (CTO), Built-to-Order (BTO) and Engineer-to- Order
(ETO) [12]. However BTO and ETO may not be applicable
for cement industries- Isabel Agudelo, (2009) [11].
The various frame works for the supply chain are as below:
At present, the cement industry supply chain has a BTS
design where purchase orders are delivered from storage,
the lead time to consumer is just the transportation time
and the degrees of customer choice are limited. Cement BTS
design is shown in Figure 1.
According Reeve and Srinivasan (2005), CTO is the most
appealing of the supply chain designs because CTO maximizes
the benefits of the Raw-As-Possible (RAP) principle [12].
CTO usually increases the customer lead time but offers
flexibility in product configuration. Additional analysis has
to be made to ascertain cement customers’ willingness to wait
for the product and how cement / concrete configuration
requirements justify the implementation of the CTO model.
Simchi-Levi et al. (2008) push-pull supply chain concept is
similar to Reeve et al. (2005) CTO design [13]. To evaluate
how feasible it is to move from BTS to CTO in the cement
industry, an analysis of the cement Bill of Material (BOM)
was made according to the RAP principle. Cement BOM is
composed of clinker, gypsum, other mineral raw materials
and paper bags (only for bagged products). Based on the
cement BOM, proposed two CTO alternatives: Grind-to-
Order and Pack-to-Order are evolved.
Grind-To-Order (GTO): Clinker is an intermediate product
of the cement manufacturing process. GTO might be possible
The Indian Concrete Journal July 2016 83
 POINT OF VIEW
using clinker as a base, grinding it according to customer
orders as shown in Figure 2. A trade-off analysis between
the costs of storage and ordering from clinker versus the
reductions of final product inventory and the benefit in
cement / concrete configuration flexibility is necessary.
Also, technical aspects related to the grinding machines have
to be evaluated.
Pack-to-Order (PTO): PTO is an opportunity in emerging
markets where cement is sold in bags and where “Do- it-
yourselves” (DIY) builders and small contractors have the
highest market share. Today, there are just a few variations in
bag sizes in the cement industry in emerging markets. In the
future, the number of bag size variations might increase.
There is, therefore an opportunity for postponement in the
packaging process. Cement packaging is a simple and highly
automated process. The average speed of a cement bagging
machine is 100 tons per hour. The packaging process is not
a bottleneck. In this case, postponement can be used by
keeping cement in bulk stored in silos until purchase orders
84 The Indian Concrete Journal July 2016
arrive specifying the bag size that the customer needs as
shown in Figure 3. A trade-off analysis between the carrying
costs of cement in bulk versus the carrying cost of cement in
bags is required.
GTO and PTO aggregate demand in the manufacturing
process reduces variability and improves forecast accuracy.
Their implementation requires a continuous information
flow and close coordination between order processing and
manufacturing.
Traditionally Cement industries only try to innovate on
the manufacturing side, but on the transportation which is
part of the logistics cost, is left to the transporter to decide
the type of vehicle to be used for the transportation. There
is also a need to understand the type of vehicles that are
used for transportation and the purpose of the same in
the transportation chain of the raw material and finished
goods transportation in cement industry which can have a
lot of potential savings. It is in this area, Value Engineering
concepts play a vital role.
POINT OF VIEW
2.3 Value engineering The society of American Value Engineering Defines value
engineering as “The systematic application of recognized
As per Somerby Dowst (1972), nearly three quarters of all
techniques, which identify the function of product or service,
American industrial firms have some type of value analysis
establishes a monetary value for that function reliability at
program (VA) in operation [14]. Quoting the Readers Digest
the lowest overall cost.” - Jairi F. and Zegordi S.H. (2008)
article entitled, “The Biggest Thing Since Mass Production”
[17].
published thirty years ago, Somerby Dowst (1972) emphasized
how dramatic dollar savings were produced for consumers
The objective of Value Engineering is to deliver to the user/
& tax payers by a new industrial technique called “Value
customer, the required functions at lowest cost. The core of
Analysis” (VA) [14]. Somerby Dowst (1972) continues his
value engineering is the technique of identifying necessary
observations and points out that the so called “new concept”
costs and then creatively finding out suitable alternatives
has its genesis during the war years of the early 1940s [14].
using cross-functional teams. Though the technique was
During the intervening years acceptance of the concept
developed to essentially eliminate unnecessary cost in
grew. By the mid-1960s, value analysis was established as
existing products and processes, it is well recognized these
the cornerstone of most cost reduction programs in major
days that it is more effective if used at the design stage itself.
manufacturing firms.
This technique can be applied to evaluate the transportation
aspects of the Cement Supply chain in order to bring
Dobler & Burt (1996) narrate that during World War 2, many
effectiveness and efficiency in the Supply chain.
critical materials and components were difficult to obtain;
most manufacturers were required to specify numerous
The firm on the first stage of the supply chain (Material
substitutions in their design and production activities.
Producer) which has the capacity to produce an incremental
Harry Erlicher, the then vice president of purchasing for the
innovation can drastically increase the end use value. In order
General Electric Company, noticed that many of the required
that innovation is to be adopted by the whole value chain, the
substitutions during this period resulted not only in reduced
value creation needs to be analyzed from each value chain
costs but also in product improvement [15]. Consequently,
member’s perspective. The practical challenge for the firm
Erlicher assigned to L.D.Miles - his assistant-the task of
is that the value chain is reluctant to accept innovation as
developing a systematic approach to the investigation of the
the value of the innovation is not clear for the middle stage
function | cost aspect of existing materials specifications.
of value chain as claimed by Claes & Samuli based on the
Larry Miles not only met this challenge successfully, but also
conceptual system dynamic model developed and presented
subsequently pioneered the scientific procurement concept
by them, during the 16th Igls international workshop seminar
which General Electric Company called as “Value Analysis”
on Production economics held in 2004 [18].
(VA).
3.0 Research gaps, issues, problems
Miles (1972) defines VA as a problem-solving system
implemented by the use of specific set of techniques, a From the literature survey and from the study conducted by
body of knowledge, and group of learned skills [16]. It is the researcher in the various cement plants, it is seen that
an organized creative approach that has for it’s purpose there are two types of logistics system that exists for the
the efficient identification of unnecessary cost: i.e. cost that Cement plants.
provides neither quality, nor use, nor life, nor appearance,
First one is inbound logistics. Here, the Supply chain for
nor customer features.
all the input materials like Fly ash, coal and lime stones
Dobler & Burt (1996) inform that in 1954 the US Navy’s for cement plant are considered. Fly ash is transported in
Bureau of Ships adopted a modified version of General specialized transportation vehicles called bulkers/ Self
Electric’s VA concept in an attempt to reduce the cost of ships unloading vehicle with hydraulic hoist called Tippers or
and related equipment [15]. In applying the concept, the open box body trailers to cement plants. Coal and lime stone
Navy directed its efforts primarily at cost avoidance during are conveyed by tippers or tipping trailers.
the initial engineering design stage and called the program
Another one is outbound logistics. Here the supply chain is
as “Value engineering “(VE), even though it embodied the
focused on the end products from cement plant to various
same concepts & techniques of GE’s value analysis program.
places of delivery like, customers, batch plants etc. Clinkers
In an operational sense, however, the two terms typically
are being transported to various places and to grinding
are used synonymously in industry today - only the timing
differs.

The Indian Concrete Journal July 2016 85

 POINT OF VIEW
plant. From the grinding plant, cement is either bagged and
transported or supplied in bulk using bulkers to customers.
Both systems are very important for cement plants and both
require a sizeable number of vehicles for transportation for the
volume of production indicated earlier. The transportation
requirement requires a mix of vehicles and logistics planning
to different parts of the country or for export depending
on the infrastructure available in the Cement plant or the
facility available at the delivery point in both the logistics
operation.
4.0 Need for Value Engineering
Since the transportation cost contributes nearly about 20%
of the total cost of the cement as per Parliamentary Standing
Committee report 2011, the need to address the efficiency
and effectiveness of the transportation equipment that
directly contribute to the cost of operation is called for. The
load distribution of the equipment on to the road surface is
also a concern that needs to be addressed, from the angle
of legal requirement. The value generation shall be through
operational and environmental savings for the end user.
Hence for Value Engineering job plan, the following issues
have to be analyzed which directly contribute to Logistics
costs:
1. Right kind of equipment used for transportation to
increase the end user value.
2. Effective utilization of the equipment used for
transportation.
3. Maximization of load that is being transported.
4. 4. Fuel Mileage requirement.
5. Repair and Maintenance cost of the equipment used
for transportation.
6. Environmental concern.
These aspects are to be studied in detail and to find out their
contribution in potential cost savings leading to increase the
supply chain effectiveness.
It may be assessed that for every billion Ton kilometer (Tkm)
of freight traffic diverted from road to rail, 30,000 ton of diesel
will be saved. This will amount to corresponding savings in
import as well. As compared to the international average,
the same capacity of road transport in India consumes
8 to 15% more fuel. - Iyer (2009) [19]. This aspect also causes
grave concern.
86 The Indian Concrete Journal July 2016
In India the road tankers are normally manufactured in
workshops having very minimum facilities. These local
manufacturers copy the design of recognized vehicle
manufacturers; also it is left to the manufacturer and the
buyer of the vehicle to decide the configuration of the vehicle
needed for the transportation for that chain of operation.
Traditionally India has a low cost oriented approach without
giving much thought for “safety” and “reliability”. Quality
is just governed more by the initial fitness of the vehicle for
transportation rather than its reliability and maintainability.
End customer is not also fully aware of the requirements of
the vehicle. If properly designed vehicles are used enormous
savings could be realized during transportation leading to
reduction of the overall logistics cost.
The following issues pose real challenges for the cement
industries during the bulk material transportation:
1. Uptime availability of the vehicles.
2. Loading time.
3. Unloading time.
4. Waiting time of the vehicle at both loading and
unloading sites.
5. Right type of equipment used for transportation and
it’s adherence to legal frame work.
6. Existing methods of transportation leading to
environmental concerns.
If the above issues are sorted out and course corrections are
made, there will be considerable cost savings.
The value creation by a firm is measured by the difference
between “value” and “cost”. A company creates value by
converting inputs that cost into a “product” on which
consumers place “value”. A company can create more
value either by lowering production costs, or by making
the products more functionally attractive through superior
design leading to better features, quality, and the like so
that consumer place a greater value on it and, consequently
are willing to pay a high price. Michael Porter (1980) has
mentioned that low cost and differentiation are the two basic
strategies for creating value and attaining a competitive
advantage in an industry [20]. According to Porter (1980),
superior profitability goes to those firms that can create
superior value and the way to create superior value is to drive
down the cost structure of the business and or differentiate
the product in some way so that consumers value it more
and are prepared to pay a premium price [20]. It, therefore
POINT OF VIEW
follows that a firm to be successful should ensure that the
gap between value and cost of production is greater than the
gap attained by competitors.
The external value chains are depicted in Figure 4. By
analyzing all the links, the existing total value proposition
and value chain can be disaggregated. The analysis would
identify the linkages among activities that are critical to
value and the sources of differentiation critical to creating
value for the customer. It will also help to identify how, by
whom, and under what conditions they can create new or
better value. Every impact, interconnection and influence
represents a possible opportunity for reconfiguration. The
modifications and reconfiguration could raise product (or
service) performance and quality, and reliability to effectively
meet customer needs. It could secure dramatic reduction in
time, risk and cost. It could help integrating effectiveness
with efficiency in the employment of men and resources to
garner unprecedented levels of performance, involvement
and commitment. It could guard against unnecessary frills
and gold plating. - Iyer (2010) [21].
Technological change would affect the suppliers’ value
chain. Working closely with the supplier, beneficial changes
can be mutually developed, giving advantages to both the
supplier and the firm. Skills and resources outside the
company can be availed for innovation. The objective is to
induce the suppliers to focus their creativity and innovation
to increase the functionality and performance of their
products, to create a supply chain culture of value. The
company cost reduction objective can be broken down to the
sub assembly and component levels; and then, transmitted
to the supplier. In turn, the supplier would find ways to
design and manufacture these items. - Iyer (2010) [21].
The Indian Concrete Journal July 2016 87
 POINT OF VIEW
From the above perspective, the researchers feel that the
“transportation link” in supply chain of cement industries
has to be viewed.
5.0 Methodology of research
The research approach chosen to conduct study is by induction
as conclusions are drawn from empirical observations using
a case study of two bulk Transporters in south India. Such a
study gives an opportunity to have personal interactions with
interviewees (that is respondents from the company). Using
an inductive approach gained through qualitative analysis
will help to study the relationship between Transporters
and their suppliers, and the activities they perform to
successfully follow the supply chain strategy. The authors
feel less concerned with the need to generalize the result of
their findings with other industries in the same category;
instead they gain deeper understanding of the subject of
discussion and the research method, in order to generate
answers to research questions and fulfill the specific research
objective.
Two major transporters in South India who are doing bulk
transport operations to cement industries in South India are
proposed to be studied. The names are kept confidential as
they do not want their names to be mentioned for providing
certain sensitive data on cement industries transportation.
The details are taken from the interview with owners of the
company and also the operating people involved down the
line.
The transporters have a large fleet of bulk transport
vehicles with one transporter having 150 vehicles and other
transporter having 350 vehicles in the operation. Both cater
to the major cement industries in South India.
6.0 Techniques used for identifying the
problems
6.1 Opportunities for value engineering
There is a need to check the transportation system to
find out whether the best in technology is in place. As
discussed earlier only primitive technology is being used
due to age old practices and investments considering short
term operations. Real saving potential can be expected
in the long term having the right equipment in operation.
Value engineering techniques will be used to evolve the
transporting equipment.
Value Engineering Job plan is a powerful tool capable of
solving all product and cost improvement problems. It
is universal in its approach and application. Each phase
of the Job plan comprises, or is supported by, one or
88 The Indian Concrete Journal July 2016
more techniques- some new, others already in wide use
in industrial situations- all organized into a twenty five
techniques are employed. While brief references are made to
these techniques below:
General phase or preparation phase: During this phase
a stage is set by organizing the task force, identifying the
decision – maker, selecting the areas of effort, assigning
specific task to each members of the team and inspiring them
for coordinated team work.
Information phase: In this phase the problem is broken into
specifics avoiding generalities. All relevant and meaningful
data are collected for helping decision-making process. Facts
are ascertained at this phase.
Function phase: This phase is the key of the Value effort.
One of the basic problems a manufacturer faces is that of
providing a function. In this phase, the function needed is
first identified, then defined and classified as the BASIC and
SUPPORT FUNCTIONS.
Creation phase: In this phase creative ideation techniques are
used to generate a multitude of ideas, products, processes,
methods, etc., to accomplish the defined function(s).
Evaluation phase: The judicial mode is brought into active
use. The ideas generated in the Creation Phase, are now
appraised, modified, refined and combined to generate the
Change Proposal.
Investigation phase: The creative ideas so refined, evaluated
and compared are then subjected to investigation in this
phase - .Iyer (2009) [19].
Frame work for transportation in cement industries
From the Supply chain of cement industries in vogue, it is
noted that varieties of vehicles are utilized in transportation
for bulk movement of material. They are:
a. Bulkers or bulk trailers ( Specialized vehicles)
b. Tippers or tip trailers
c. Open body trucks
d. Tipping bulk tank vehicles
The transporter decides on the type of vehicle to be used
unless and until the cement companies insist on the type
of vehicle that will suit the operation. Existing vehicles are
suitably modified to meet the requirements. Normally cement
is bagged or transported in bulk (loose) condition. Cement
POINT OF VIEW
will be fresh if transported in bulk to the required sites; in
this way, wastage and pilferage can be avoided. Fly ash is
transported normally in bulk either in tippers or bulkers.
Due to pollution, transportation by tippers is tapering off;
instead bulkers are used; Clinkers are transported in Tippers
or tip trailers or tipping bulk tank vehicles.
Presently, Fly ash and cement only can be transported in Bulk
tanks. Tippers are used separately to transport Clinkers. If
the existing Bulk tanks can be suitably modified to transport
clinkers, fly ash and cement, it will lead to an overall
advantage for the industry to reduce the transportation cost
due to “return load” options. Suitable modification of the
vehicle or the process through Value Engineering, if realized,
will be a great advantage to the cement industry in reducing
the logistics cost of transportation. This also calls for suitable
infrastructure modification to suit the operation in cement
industries.
7.0 Data collection
7.1 Cement industries
Vehicles being used in cement industries for the logistical
movement of materials depend upon the type of materials
transported. Broadly the materials used are classified as: (a)
raw materials like lime stone, gypsum, fly ash, coal, fuel etc.
and (b) finished goods like clinkers, loose cement and bagged
cement. Typical Inbound and outbound logistics are detailed
in Figure 5 based on observation and after discussions with
various cement plants in India:
The Indian Concrete Journal July 2016 89
 POINT OF VIEW
Table 1. Different transport vehicles in cement industries 4. Key challenges faced by Manufacturers are:
Model used Material From - To
transported a. Keeping the transportation cost low which
Warehouse - contributes directly to the logistics costs.
Flatbed trucks
Construction site

Cement bags Factory - Warehouse b. Managing timely delivery and multiple

Closed body trucks/
Flatbed trucks deliveries of goods.
Factory - Retailer

Closed body trucks/ c. Evolving suitable transporter mix and ensuring

Grinding unit - Dealer
Flatbed trucks
the vehicles are available consistently.
Tipper trucks Lime stone Quarry - Factory

Rigid closed body 5. Other particulars gathered are:

trucks

Bulkers Fly ash Power plant - Factory a. Most of the transporters are attached to a single
Factory - Consumption manufacturer for a long span of time.
Bulkers Loose cement point (ex. Ready mix
concrete)
b. Transporters have a tendency to overload their
Tractor trailer Cement bags Factory - Warehouse  vehicle since they are charged a fine of INR
1000/- only for overloading irrespective of the
quantum of overload.
It is also ascertained that type of vehicles used for both
transportation are : Flat Trucks, Body trucks, Tipper Trucks, c. The load availability varies from day to day as
Flat bed Trailers, Fixed body trailers, Tipping trailers, Bulkers the contract specifies tonnage to be transported
etc. The applications of these vehicles are also detailed in per month.
Table 1.
d. Many times the transporters take multiple
Interviews with the cement manufacturers and the deliveries when they have to deliver directly
transporters revealed the following: to the consumption sites.

1. There is a need for a “model” for transportation of e. Paucity of drivers and operators.
materials to meet the emerging requirements in an
optimal manner. f. Vehicles are made to wait at loading and
unloading points.
2. Reduction/elimination of warehouses if possible
without sacrificing service level. g. Though the transporters are aware of the latest
technology, they are not able to use the same
3. Necessity to increase the number of grinding/packing due increased fixed costs and consequential
units closer to the consumption points.

Table 2. Typical Bulker transportation details with trip time

S. no. Cement plant Start point Loading point Unloading point KMs Payload Trip time Idle time
carried (T) (Hrs) (Hrs)

1 Plant 1 Chennai Jagyappet Chennai 960 32.86 43 7

2 Plant 2 Chennai Jagyappet Chennai 1075 32.86 63 8
3 Plant 3 Chennai Ariyallur Bangalore 35.24
1489 105 30
4 Plant 4 Bangalore Tadapathri Chennai 33.32
5 Plant 5 Chennai Jagyappet Chennai 1146 33.32 66 22
Note: Since the trial was monitored the idle time is reduced else the loading and unloading time held up is nearly 2 days

90 The Indian Concrete Journal July 2016

POINT OF VIEW
limitations of reaching the breakeven point
and thereby profitability.
h. Limitations to the availability of transportation
vehicles conforming to legal norms.
i. Periodic maintenance is carried out only for
the tractor while the maintenance of the trailer
is need based.
By default, both the transporter and end customer will
depend on the least cost of transportation which is normally
defined by the initial investment based on the terms and
conditions of contract.
The above factors act as a hedge to the Cement manufacturers
and force them not to look at the other options available.
The researchers have made an attempt to study the salient
features of bulk transportation of cement by a few companies.
Table 2 highlights such details:
transportation vehicle also causes a great concern due to
Gross combination weight restrictions. Hence “light weight”
vehicles are the need of the hour.
It is informed by transporters that the overloading has
become a big issue and the fine collected is 1000 INR per
ton. Other than “fine” there is an operation loss in terms
of fuel mileage, tyre wear and the less payload that is
transported. If the weight of the vehicle is reduced say by
2 ton then a similar amount of payload can be transported
with the same fuel spent on the vehicle, which will also
increase the efficiency, less fuel consumption and address
the environmental concerns as well. Though the cement
manufacturers are aware of the problems relating to axle
load, it is the transporter who decides on the type of vehicles
to be used for transportation.
It is also seen that the return load option is invariably
not considered in transportation. If such provisions are
logistically planned with certain modifications, it will add a
great deal of value to the entire “value chain”.

Details gathered about road tanker weights and listed cubic
capacity-wise are also tabulated in Table 3.
Based on these details collected, axle loads are calculated and
detailed in Table 3. Even though axle’s loads are stipulated
in Central Motor Vehicle rules framed by GOI and State
Governments in India, the individual axle loads are not
being normally measured and overall Gross Combination
Weight (GCW) is only being considered. In Table 3, it may
be seen that the load distribution exceeds in most of the axles
contravening the legal norms. The un-laden weight of the
8.0 Analysis of Data
The collected data can be tabulated in excel sheets for analysis.
Function analysis, Cost Analysis and Life Cycle Cost Analysis
as Value Engineering techniques in defining the owning and
operating/maintaining cost, during the product life cycle of
the vehicles can be done. Considering “bulkers” as critical
transporting equipment and such a need for “bulkers” is
also felt by Government as a special transportation device
for both, road and rail movement, an in-depth study can be
made using Function analysis of defining the function of the
each vehicle used in transportation to arrive at a decision.

Table 3. Axles load distribution

Axles load distribution on double axle bulker( Air slide design) of different cubic capacity
S. no. Cub. capacity Unladen Wt. Payload Front axle Rear axle Trailer axle GCW Remarks
of vehicle of trailer (kg) weight of weight of weight (kg)
m3 (kg) tractor tractor (kg)
(kg) (kg)
1 22 7200 26400 5087 13284* 20549* 38920* Exceeds
2 24 7300 28800 5248 14016* 22156* 41420*  Exceeds
3 25 7400 30000 5266 14748* 22706* 42720*  Exceeds
4 26 7450 31200 5445 15247* 23278* 43970*  Exceeds
5 27 7500 32400 5872 17447* 21901* 45220*  Exceeds

Permissible
      6000 10200 19000 35200 As per law
weights

* Exceeds permissible weight as per regulations

The Indian Concrete Journal July 2016 91

 POINT OF VIEW
During the discussions with the transporters and the
operators, it is noted that the weight of the vehicle can be
reduced further and manufacturers are looking at high
tensile steel and Aluminium as an alternative material,
but this should meet the unfired class III pressure vessel
(Indian Standard equivalent to IS: 2825) category for tank
construction. It is seen that the local manufacturers are
not fully aware of this aspect. Hence this aspect requires a
detailed study. Transporters are not also aware of the entire
transport regulations.
Two types of concepts are being used in fabricating bulk
tank vehicles and accordingly the designs of the tanks vary.
One is “Air Slide” design and other is “gravity discharge”
design. Air slide design is more predominantly used in India
due to ease of manufacturing but the tanks fabricated using
this design are heavy; also load distribution causes concern
related to stability in vehicle configuration. Certain critical
dimensions of the vehicles using ‘Air Slide’ design have
been measured and detailed in Table 3. It is noted that the
load distribution on the axles vary and is not within legal
limit for both fly ash and cement movement. Even though
the transporters are aware of this aspect, they do not care to
take suitable action. The tank also grows up in weight as the
moisture content increases weight of the payload further.
Uneven load distribution, increases fuel consumption of
92 The Indian Concrete Journal July 2016
the vehicle, tyre wear and operator’s “driving comfort”. It
will also lead to “stability issues” and causes damages to the
road infrastructure. Each one has associated cost and if it is
reduced will have an impact on the total logistics cost. In
short, use of proper technology will lead to reduction in total
logistics cost.
A sample cost analysis is worked out below with the
collected data from the transporters with reference to
Current Standard vehicle and , Vehicle weight reduced by
5%, - (and hence with increase in payload) and with “return
load” options are represented in Figure 6.
The analysis details with reference to Profit and Loss
statement for the three different scenarios are represented
in Figure 7.
It may be seen from the above discussions, that reduction
in transportation equipment weight increased the Earnings
before Interest and Tax (EBIT) by nearly 4% and the creating
“return load” option in the vehicle will improve the EBIT
by nearly 17%. But this could be achieved only if the
infrastructure of the cement industries supports the logistic
options of return load availability and transportation.
8.1 Results
The discussions above reveal that value engineering
techniques will help to improve the logistics system of
POINT OF VIEW
cement manufacturing industries. These research findings
broadly outline the following:
1. Technological inputs are necessary to increase the
efficiency of the transportation system.
2. Effective utilization of transportation vehicle will lead
to savings by eschewing idle time during operation.
3. Weight reduction of the transportation vehicle is
called for, to increase the “throughput” as well as to
adhere to the legal norms.
4. Cement companies need to inculcate the necessity to
use the latest technology in the design of transportation
vehicle and also to cater to environmental concerns
and reduction in fuel cost.
5. Following the example of western countries, grinding
and packing operation will have to be moved nearer
to the extent possible to the distribution centers. As
clinker movement will become predominant “return
load”, option has to be created for this to happen with
planned infrastructure. Such an action will to lead to
cost savings.
9.0 Conclusion
This is an approach paper for looking at some key aspects
of supply chain of cement Industries in Indian environment
to increase their competitive advantage. This approach is
all the more necessary as globalization has given birth to a
new form of competition. The fundamental difference from
the previous model of competition is that an organization
can no longer act as an isolated and independent entity in
competition with other similarly standalone organizations.
Instead the need to create value delivery systems that are
more responsive to fast changing markets and that are much
more consistent and reliable in delivery of that value called
for, to build an efficient supply chain. In the past, marketing
successes were through strong brands, packed up by large
advertising budgets and aggressive selling. This is no more
valid today. In the changing competitive environment, there
has been the trend towards ‘Commoditization’ of products
in many markets. A commodity market is characterized by
perceived product equality in the eye of customers resulting
in a high preparedness to substitute one make of product
for another. Cement is one such product. The fact now
is that the success of brands depends on the supply chain
supporting it to make it available at the right time and at
right place but most important at optimum cost. The need
of the hour is cost reduction. The researchers are therefore
attempting to solve this ‘management problem’ through
Value engineering solutions in respect of material handling
cum transportation devices. It must be pointed out in this
context, that Companies must be able to adapt and evolve if
they want to survive. Businesses operate with the knowledge
that the competitors will inevitably come to the market with
product that changes the basis of competition. The ability to
change and adapt is essential for survival.
10.0 Recommendations and further
research
This study is limited with case study of Transporters and
Cement Industries in South India and with respect to the
transportation of Bulk cement and fly ash. Only certain
relevant perspectives of logistics systems are studied in
cement industries. There is a lot of potential cost savings
that could be realized having the best technology in place
even though the initial capital cost is bound to be higher. The
environmental concerns have to be addressed with reference
to the ideal technology in place for this energy intensive
industry. Logistics personnel are to be well informed about
the availability of the latest technology and the transporters
have to utilize them to improve the efficiency of the system.
The old practices still in place are to be critically reviewed
and changes made.
More research studies are to be carried out for addressing
environmental concern due to the transport vehicles. Rail
road multi-purpose vehicles may have to be looked at, in
the future. The immediate need is to study the existing
process and transportation system addressing the axle
load distribution. Studies with reference to implication of
return load options are to be done considering the requisite
infrastructure modifications that are necessary.
References
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2011.
2. Ninety Fifth report on Performance of Cement Industry by Parliamentary
Standing Committee on Commerce, 2011.
3. Cement Sustainability Initiative, June 2012.
4. Paul Shrivastava, Environment Technologies and Competitive Advantage,
Strategic Management Journal, Vol.16, 183-200, 1995.
5. Dr. Diego Medina and Dr. Juan Manuel Gracia, Sustainability as a Major
Source of Competitive Advantage for Small and Medium Sized Enterprises,
The Indian Concrete Journal July 2016 93
 POINT OF VIEW
7th International Conference of the Greening of Industry Network
November 15-18, 1998, Rome, Italy.
6. Kopicki R., Berg M.J., Legg L., Dasappa V. and Maggioni, C., Reuse
and Recycling - Reverse Logistics Opportunities, Council of Logistics
Management, Oak Brook, IL., 1993.
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Chain Management, 4.3,1999.
14. Somerby Dowst, Buyers say VA is more important than ever, Purchasing,
June 26, 1986, pp. 64.
15. Dobler W., Donald & David N., Burt, Purchasing & Supply Management,
Tata-Mc Graw- Hill, New Delhi,1996.
16. Lawrence D.Miles, Techniques of value analysis and engineering, McGraw-
Hill Book Company 1972.

8. Gazala Yasmin Ashraf, Arpita Raichoudhary, Mukherjee P.N.,
Srivastava R.K., Greening the supply chain: A New initiative in India with
Special reference to Chhattisgarh, 2009.
9. Gazala Yasmin Ashraf, A study of eco-friendly supply chain management
at Cement Industries of Chhattisgarh, 2012.
10. Stanley E.Fawcett, Lisa M. Ellram and Jeffrey A.Ogden, Supply Chain
Management, From Vision to implementation, Pearson Education, 2008.
11. Isabel Agudelo, Supply Chain Management in the Cement Industry,
Massachusetts Institute of Technology, 2009.
12. Reev J., Srinivasan M., Which Supply Chain Design is Right for You?
Supply Chain Management Review, 2005, 9(4), pp.50-57.
17. Jairi F. and S.H. Zegordi S.H., Quality Function Deployment, Value
Engineering and Target Costing, an Integrated Frame work in Design Cost
Management, A Mathematical Programming Approach, Scientia Iranica,
2008,Vol. 15, No. 3, pp 405-411.
18. Claes, Lowgren, Samuli Kortelainen, Incremental Innovations in a Value
chain- Model and Case study, 2004.
19. Iyer S.S., Value Engineering A How to Manual, 3rd Edition New Age
International (P) Ltd, Publishers, India, 2009.
20. Porter, Michael E., Competitive Strategy, Free Press. ISBN 0-684-84148-7,
1980.

13. Simichi-Levi D., Kaminsky P.Simchi-Levi E., Designing and Managing 21. Iyer S.S., Managing for Value, 3rd Edition, New Age International (P)
the Supply Chain, Third Edition, New York, United States: McGraw- Ltd, Publishers., India, 2010.
Hill/Irwin, 2008.

B. Ramesh is B.E. Mechanical, M.B.A ( Finance), M.S. ( Manufacturing Management) from BITS, Pilani;
pursuing his PhD at Birla Institute of Technology, Mesra, Ranchi. He is a Director at SDR Auto Pvt. Ltd.,
Chennai, dealing with application engineering and research in automotive field. He has an industrial
experience of over 23 years and specialized himself in Automotive Trailer Design and Manufacturing and
Application Engineering. He is the Executive Council member in Indian Institute of Materials Management
and Convener for Automotive Industry Standards - AIS 091 and AIS 092 dealing with Mechanical couplings
with Automotive Research Association of India (ARAI), India. He is also the member for GRRF group and
TED 22 working group for Bureau of Indian Standard (BIS).

Dr. Utpal Baul, B.E. Mechanical, M.B.A., PhD, is Professor and Head of Department of Management at
Birla Institute of Technology, Mesra, Ranchi. He has worked for 13 years in Industry and about 17 years
in Academic and Research. His work interest is industrial marketing, technology, management, business
statistics, operation research and operation management. He is Member and Fellow of Institution of
Engineers, Qualified Lead Assessor; with publications in various national and international journals.

Dr. V. Srinivasan, B.Sc., B.E.,TP(Cert.)., M.A.MCJ., M.B.A., M.Phil., PhD, is former Deputy General
Manager, Madras Refineries Ltd., Chennai. Mr. Srinivasan was also Visiting Professor to several Universities.
Mr. Srinivasan has contributed several articles on various management topics. He has been member of
IIMM from 1974 and held the position of Chairman, Chennai Branch in 1987-88. Mr. Srinivasan received
the ‘Best Faculty’ Award , ‘Honorary Fellowship’ Award and ‘Distinguished Member’ award from the
National Body of IIMM. He is also a Fellow of the institute of Marketing Management .

94 The Indian Concrete Journal July 2016

POINT OF VIEW
Annexure I - Operating economy calculations
S. Description Current standard Vehicle wt. Return load option Remarks
no. vehicle reduced by 5% and created in vehicle
hence increase in
payload

Bulker tractor trailer - 28 cum

A Purchase  

1 Vehicle price (INR) 3000000 3200000 3400000 Standard prices

2 Tenure (Yrs) 5 5 5  

3 Interest rate ( %) 18% 18% 18%  

4 Down payment ( INR) 300000 300000 300000  

5 Finance (INR) 2700000 2900000 3100000  

B Operating costs - variable costs per vehicle  

1 Fuel cost per litre (INR) 54 54 54 Current Diesel price

2 Fuel consumption(lit)/100 km (Avg) 35 35 48  

3 No. of Tyres 22 22 22  

4 Life length of tyres (KM) 50000 50000 40000  

5 Cost per tyre (INR) 20000 20000 20000  

C Operating costs - repair and maintenance  

1 Maintenance cost/km 1 1 1.2

Increased based on
feedback
2 Repair cost/km 2.75 2.75 3.15

D Toll expense  

1 Road toll cost per trip (INR) 5000 5000 5000  

E Fixed costs (Per month)  

1 No. of drivers 1 1 2
For Return load
2 Driver salary per month (INR) 20000 20000 20000 option drivers
increased
3 Insurance cost per month (INR) 4000 4500 5000

F Vehicle details  

1 No. of years 5 5 5  

2 Residual value (INR) 1500000 1550000 1600000  

3 Depreciation (INR) 300000 330000 360000  

4 Interest (INR) 378000 400500 423000  

G Other costs

1 Miscellaneous cost (INR) 20000 20000 30000  

H Operation revenue  

1 Payment (INR)per km per ton 2 2 1.7

For Return load
2 Total ton per load, Onward, Ton 30 32 32 option payment
assumed
3 Return load, Ton 0 0 32

The Indian Concrete Journal July 2016 95

 POINT OF VIEW

S. Description Current standard Vehicle wt. Return load option Remarks

no. vehicle reduced by 5% and created in vehicle
hence increase in
payload

I Operation time  

1 Uptime per day(loading time)(hrs) 3 3 6  

2 Unloading time(hrs) 3 3 6  

3 Resting( hrs) 9 9 2  

4 Hours of operation/day(hrs) 9 9 10  

J Operating days per year  

1 Rest days 100 100 100

2 Maintenance 10 10 10 Reduction of usage

of vehicle feasible
3 Repairs/VOR 1 1 1 and cost savings

4 Operations days/year 254 254 254

5 Operations hours/year 2286 2286 2540  

K Utilisation  

1 Average speed 40 40 30  

2 Total mileage ( Per year) KM 91440 91440 76200  

3 KM per day 360 360 300  

4 Length of trip 120 120 120  

5 Theoretical trips/day 3 3 2.5  

6 Actual trips/day 3 3 2.5  

L Cost workings ( Annual) INR  

1 Fuel 1728216 1728216 1975104  

2 Repair & Maintenance 342900 342900 331470  

3 Tires 804672 804672 838200  

4 Road Fees 15000 15000 12500  

5 Insurance 48000 54000 60000  

6 Salaries 240000 240000 480000  

7 Vehicle capital costs 678000 730500 783000  

8 Other costs 20000 20000 30000  

M Profit and Loss account (INR)  

  Total sales 5486400 5852160 8290560  

  Cost of Gross sales 2890788 2890788 3157274  

  Gross Profit 2595612 2961372 5133286  

  Fixed cost 986000 1044500 1353000  

  Net Profit 1609612 1916872 3780286  

  EBIT(%) 29 33 46  

96 The Indian Concrete Journal July 2016