ACC Ltd, part of Switzerland-based Holcim Group, plans to cut logistics costs by Rs 150 crore a year, as the cement maker battles to tide over sluggish market conditions.
At present, the company’s transportation costs alone account for 33 per cent of sales realisation. ACC is adopting modern technology and utilising assets more efficiently to cut logistics costs and improve margin, said Tushar Rameshchandra Dave, Vice-President (Central Logistics).
The focus on logistics has become imperative after the Government decided to reduce fuel subsidies, leading to a sharp spike in diesel and petrol prices. “With raw material prices remaining high, the only way we can protect our margins and market share is by improving our efficiency. Logistics stands out as it accounts for the lion’s share of the cost,” added Dave. ACC annually handles about 36 million tonnes (mt) of goods, including 12 mt of raw material at its 17 plants in 15 remote locations. Further, it faces the mammoth task of taking cement to 700 godowns.
About 60 per cent of the goods are moved by trucks that can transport 12-22 tonnes of cement. The exercise involves engaging 10,000 to 12,000 trucks a day from 18,000 to 20,000 logistic operators in 17 locations. ACC recently formed a team of 300 staffers, led by 25 logistics leaders, to manage 20,000 logistic operators.
Tech to the rescue
ACC has rolled out a logistic excellence programme at three plants — Tikaria in Uttar Pradesh, Damodhar in West Bengal and Thondebhavi in Karnataka. It is installing a radio frequency identification (RFID) software along with global position system (GPS) on all the 12,000 vehicles serving the company.
RFID is a tracking system that uses intelligent bar codes to track items.
As a pilot project, it installed RFID and GPS in 600 vehicles servicing the three plants. The company can now load 58 rail rakes in 7-9 hours compared with 16-20 hours taken earlier.
Similarly, truck movement inside the Tikaria plant was reduced from 120 to 20 by improving efficiency.
With the installation of RFID, the loading schedule has been fine-tuned to reduce the waiting time of trucks inside the plant to two hours from five hours earlier, said Dave.
After the successful pilot, the company intends to install GPS and RFID in all 17 plants over two to three years. Of the 10,000 trucks utilised, 8-12 per cent are dedicated for the company’s use, 15-20 per cent are attached vehicles, while the rest is sourced according to need.
Dave said that while ACC will take care of 70 per cent of the cost of the GPS instrument in the vehicle, the truck operators will foot the rest — they feel it will help them keep track of their vehicles. .
A slowdown in home-building and infrastructure projects in India has hit the country’s cement makers. In the September quarter, ACC, India’s second largest cement maker, saw its consolidated profit fall by half to Rs Rs 118.9 crore.
Holcim had said in July it will restructure its Indian operations to cut costs.