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Topic : Gujarat Ambuja ‘Cost Leader

in the Indian cement Industry’

 Economic Case Study


 Submission to Prof. Anamika Banerjee
Introduction
• Ambuja Cements Private Ltd Was Established By Satyanarain Sekhsaria In
1981 With Two Partners Suresh Neotia And Vinod Neotia
• In 1983 The Company Floated A Public Issue And Its Name Was Changed To
Gujarat Ambuja Cements Limited.
• Gacl Experienced Tremendous Growth In The Late 1990’s
• Third Largest Producer Of Cement In India With The Net Profit Of 221.73
Crore For The Year 2003.
 Lowest cost producer in the Indian Cement Industry.
 Innovative and unconventional.
 Cost Cutting Measures.
 Trained Company Engineers.
 Quest for cost leadership had been driven by productivity improvement
and cost cutting measures
 The company had won various awards for management excellence
quality and environment management
Indian Cement Industry

 In 2003 with a total capacity of 144 mn tons India was World's second
largest cement producer after China.
 Production capacity 15 Million Tones (MT).
 The top 5 companies accounted for over 48.5% of the total capacity.
 Total 120 plants, owned by 50 major companies across the nation.
Indian Cement Production
 The rest of the companies, typically, were operating single-location plants
with capacities ranging from 0.5 to 2.0 mtpa.
 Leading cement companies like Grasim, Larsen & Toubro, Gujarat
Ambuja, ACC, India Cement, Madras Cement and Shree Cement alone
had added over Rs 20,000 crore to their market capital as the combined
market capital had touched Rs 31,724.40 crore in Dec 2003.
Competitors Market Share
 Gujarat was the largest cement producing state with a capacity of
around 15 million tonnes in end 2003.
 The total cement demand was, however, only around 6 MT. The excess
output was sold in states like Maharashtra, Rajasthan and Kerala.
 The demand for cement was closely linked to the performance of the
Indian economy. Cement was consumed in large quantities by the
infrastructure sector.
Manufacturing of Cement

 Basic raw materials used for manufacturing of cement are : –


 Limestone
 Clay
 Silica
 Gypsum
 Cement manufacturing process involves the following steps: –
 Quarrying and crushing
 Grinding and blending of raw materials
 Clinker production
 Finish grinding
Types of processes for production of
cement

 Wet process
 Semi dry process
 Dry process
The Cement Manufacturing Process
 GACL’s total cost management (TCM) drive had concentrated on two
key areas – productivity and consumption of coal and power.
 GACL had achieved more than 100 % capacity utilization from 1999.
 GACL consumed only 96 kwh of power per ton of cement against the
industry average of 110-115 kwh per ton.
 In the process, GACL brought the
 Energy bill down by Rs. 20 for every tonne of crushed sugarcane used.
 GACL replaced V belt drives (which consumed more energy due to
friction) by flat belt drives.
 Even though mechanical conveyors gave problems like spillages and
breakdowns, GACL did not shift to pneumatic conveyors, which
consumed more power.
 Instead, the company devised an improved version of the mechanical
conveyor to eliminate the drawbacks.
 GACL engineers successfully reduced the power costs, from 120 units/ton
to 90 units/ton, by adjusting the retention time, maximum temperature
and the rate of cooling.
Methods used

Cost Cutting : Cost cutting refers to measures implemented by a company to


reduce its expenses and improve profitability.
• Kilns : a thermally insulated chamber that produces temperatures sufficient
to complete some process, such as hardening, drying, or chemical changes.
• Freight : goods transported in bulk
• Clinker : the stony residue from burnt coal or from a furnace
• mtpa : million tonnes per annum • Captive Power Plant : a facility
dedicated to providing a localised source of power to an energy user.
Logistics

 GAGL was one of the first cement producers of the country to introduce
an Integrated logistic system
Order processing Systems:
 Linked with WAN(Wide area network), EDE(Electronic data exchange),
MRP(Material resources Planning)
Inventory Management :
Inventory decisions involved knowing both, When to order(timing) and how
much to order(Quantity).
Packing :
GACL was the first to use paper bags for cement packaging which offered a
significant advantages such as better preservation and appearance.
Transportation

 Economic Impact On Transportation


 GACL become the first cement company to use water transportation
- Reduce transportation cost
- GACL Freight mix was Road 40% , Rail 30% and Sea 30% - 350 self financed
track & railway siding in its factory premises.
Warehousing & Distribution

 The Dumps
 Trans-shipment point storage
 Connected online with various departments- efficient delivery
Future Outlook

 To become leader in cement industry, GACL is pursuing a combination of


strategies
 The company had set up 2 million ton Greenfield cement unit in
Maharashtra worth Rs.500 crores and is also planning to set up 2 million ton
Greenfield project in Andhra Pradesh worth Rs.600 crores
 It has also set up 1 million ton grinding units, one at Bhatinda and other at
West Bengal
 GACL had also started offering ready –mix cements, the demand for
which was expected to grow in future
Conclusion

 The company followed different measures like Raw material control,


Power, Energy, Inventory Management, Quality control due to which the
profits were maximized
 Controlled Pre-Production, Production and Post-Production in such a way
that they get maximum output.
 This helped the company to become Market Leaders.
 Always look forward to ideas which would reduce their input cost.
 By reducing the different costs on raw materials, power, fuel and
transportation, Gujarat Ambuja brought down its average cost which
helped in increasing the overall profits.
Presented by-

 Surabhi Vyas
 Teja Gurajapalli
 Simran Shaikh
 Srishti Sachdeva
 Somesh Sindhwani
 Somik Jain
THANK YOU