Essay about Cement Logistic Challenges

1864 Words Feb 24th, 2012 8 Pages
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
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Railways to levy surcharge
Indian Railways will levy a surcharge of up to 7 % from 1 April to earn a higher freight earning during busy season. The move is likely to add to the inflationary pressure on the economy even as finance ministry is expecting a lower inflation during 2011-12.
As per the railway decision, a surcharge of 5 % will be charged on coal and coke group, while all other commodities will attract a busy season charge of 7 %. Container traffic has been exempt from any such charge. Railway considers the entire year barring July-September of every year as busy period.
In 2010-11 also, railways had increased freight rates of iron ore, coal, sugar, cement, steel, potash, coke and some petroleum products.
Logistics cost reduction cannot be the sole objective and seen in isolation by the cement industry. The most important part is the service. At the end of the day, if one is unable to serve the customer he will never be in the industry. - Rajeev Mehta

How do you evaluate logistics in cement industry?
Logistics costs are going to come down provided one is on the right track. If he chases cost in isolation by just working in cost reduction, he cannot reduce cost in an inflationary world. The process of cost negotiations of olden days are over now. Under negotiation, one arrived only

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