AMBUJA CEMENT A Concrete Story..

VALUE CHAIN ANALYSIS & SUPPLY CHAIN(DISTRIBUTION CHANNEL) FOR AMBUJA CEMENT

AMBUJA CEMENT Presented by: Pallav H. Chandrani

Sea terminals

Cement factories

UNIQUE LOGO

FOUNDATIONS

Began its operations in 1986

The Swiss Company Holcim has a 78% stake in ACIL while GACL owns 22%

Capacity built up from 0.7 Mn tonnes in 1986 to 18.0 Mn tonnes at present

Vision – To be India’s most admired company

Mission – delighted customers, inspired employees, empowered partners, energized society

STRATEGY A COMPREHENSIVE PLAN GUIDING RESOURCE ALLOCATION TO ACHIEVE LONG-TERM ORGANIZATION GOALS

COMPETITIVE ADVANTAGEOPERATING IN SUCCESSFUL WAYS THAT ARE DIFFICULT TO DUPLICATE

PURPOSE & OBJECTIVE OF RESEARCH

PURPOSE:

To gather information about all the departments in GACL that are concerned for the value chain and in turn supply chain management system(Distribution channel) of an organization and the contribution of activities of all the departments to overall results.

OBJECTIVE:

My objective of this research is analyzing the value chain system in GACL and to find out what else can be done to improve the value chain system of it and to find out how is the strength of GACL supply chain management system.

MARKETING RESEARCH FOR VALUE CHAIN MODEL - GACL

1) INBOUND LOGISTICS

Turning attention to inbound logistics will not only reduce costs, but also generate more collaborative relationship with internal organizations, suppliers and logistic providers, which will ultimately result in a more effective business process from which all parties will benefit.

In my study, i tried to exploit the system which AMBUJA is using, because efficient and effective inbound logistic performance would benefit all participants in the value chain.

SCOPE OF LOGISTICS

Suppliers

Inventory in the field

Transit Depot

Intermediary

Customer

Inbound materials flow

Outbound finished goods

Materials management Physical Distribution

LOGISTICS

WIP Production FinishedGoods

2) OPERATION

Production is the basic activity of all the industrial units. All other revolve around this activity. We can say that production activity is nothing but the step conversion of one from of material into another either chemically or mechanically.

GACL uses the dry process for cement manufacturing. Selection is based on the fact that dry process consumes less thermal energy and minimizes the pollution.

3) OUTBOUND LOGISTICS

In recent years companies and academic organizations have focused on outbound operations due to their being the customer-oriented part of the business whereas the control of the inbound operations was generally left to the suppliers. But now outbound operations have become modernized and extracting additional benefits has become more and more difficult.

Manufacturer

Stockiest/dealer

Sub stockist

Retailer

Consumers

4) MARKETING & SALES

Marketing is a comprehensive term and it includes all resources and set of activities necessary to direct and facilitate the flow of goods and services from producer to consumer in the process of distribution.

Essentials of cement marketing

Focus on brand name

Effective differentiation

Effective public relations

Price differentiation

Strong distribution network

GACL has created marketing department in Gujarat, Maharashtra, Rajasthan, etc. states of country as well as in foreign countries too. The head office of marketing department is at Mumbai, which looks after the marketing of all regions centrally.

OBJECTIVES OF MARKETING

DEPARTMENT The following are the objectives of marketing department

at GACL To find new & new customers to sell them more & more of

companies product. Try to convince the customer about better & quality

product. To provide a successful distribution of consumer product. To study the market problems according to circumstances

& suggest the solutions. To sell their products in new areas to make new customers

& satisfy old ones. To encourage the customers & know the fault in their

products & then try to make quality or faultless product.

Product Mix

Cement industry does not have a large product mix and the same applies for Ambuja Cements.

Product item: A single product - Cement.

Product line G.A.C.L. is producing mainly Ordinary Portland Cement (OPC). (Grade-53)

Market Segmentation

Price Mix:

Price is the only element of marketing mix that produces revenue. So we can say that price is one of the most important element determining company’s market share and profitability.

When it comes to setting up the price, it is the most crucial decision. Price decides the market share and profitability. So any mistake in deciding price will affect too much to unit.

The present price of Ambuja Cement is approx. is Rs.280 per 50kg bags. GACL also follows policy of resale price maintenance is that all the retailers are bound to sell their brand of goods at a fixed retail price decided by them. No retailer can exceed the limit fixed by the manufacturer.

SALES & DISTRIBUTION

TRANSPORTATION

Transportation in value chain refers to efficient and price sensitive movement of final finished goods from source to destination the physical distribution aims at 7 R’S in transportation

RIGHT PRODUCT RIGHT QUALITY RIGHT CONDITION RIGHT TIME RIGHT PLACE RIGHT CUSTOMER RIGHT COST

ACTION PLANS

To ensure execution of orders within 48 hrs. To ensure adequate availability of material at muldwarka terminal

as per ship planning To plan & monitor the tanker movement to bring down the cycle

time to minimum 10 trips per tanker. Better co-ordination, fed back with marketing branches. To comply with all statutory requirement/ documentation, to avoid

unnecessary pressure/ action by Govt. authorities, for non-compliance.

Effective liasoning with the concerned Govt. officials. To study the activities of nearby plants To co-ordinate and monitor unloading operation of material trucks

for speedy unloading.

SERVICES

GACL provides services to customer in tremendously helpful way it has created different departments for that like CUSTOMER SUPPORT department which has number of civil engineers to provide testing facility and technical support to the customer.

Recently in earthquake time these engineers has provided technical guidelines in terms of seminars for topics like consistency and strength in construction and also have provided construction guidelines to people free of charge.

So we can say GACL has mechanized after sales service the major activities done by GACL as a tool to enhance its after sales services is as follow:

Set up complaint redress committee of experts.Seasonal seminars by technical expertsQuality exhibitionsConstruction guidelines by civil engineers.

Its concrete testing lab and the engineer’s staff is famous in the whole world.

ANALYSIS OF COMPANY’S VALUE

CHAIN For Inbound Logistics

Use of imported coalContinue searching for new sources of raw material availability at

nearby areas.Basic raw material order placing at center level to take the advantage of

Bulk ordering.Mines in nearby areas to reduce the material movement cost.

For production plantHigh efficiency fans for all process fans.

Mechanical conveying in place of pneumatic conveyingSix stage low pressure drop cyclone preheaterCaptive power generation by sets GEB power cost 7.75 per unit while

this captive power plant gives 2.25 per unit. Use of agro waste fuels like Ground nut husk (GNH),rice husk, and different

types of agro waste etc. Roller press for cement grinding

In house energy audit for effective monitoring of energy consumption.

For Outbound logisticsSea transport of loose cement. If transporting in packed

bags, it can transport maximum 200 bags in one trip that is 10 tons per trip but transporting in loose give 21 to 35 tons per trip.Grouping orders area wise to reduce the transportation

cost.Established Regional and central sales office to transfer

the orders of nearby area so as to minimize the transportation cost.

Established own jetty to speeding the export and domestic distribution of cement Using technique of big vehicle to small vehicle to reach

at remote area and reduce wait time of big heavy vehicle to be used at other places.

ANALYSIS OF CUSTOMER’S VALUE

CHAIN As the cement industry is one of the most energy and power intensive

industry so, GACL is doing through many activities for energy conservation as discussed above for which it has got awards too which no any competitor is doing. This adds value to the final consumer.

GACL is the pioneer in thinking about Environment protection & has done many activities for Environment prevention it has fitted dusting control bag at every dust producing stage in production plant and has established green city nearby and GACL is using surface miner rather than blasting technique for environment protection.

GACL has performed its corporate citizenship very well. It has built check dams and temples and many more things for citizens.

GACL is providing excellent after sales services to the customer for that it has establish altogether different department of civil engineer for guiding customer in construction activity.

GACL is concerned for giant strength it assures this things to customer customers that their decision is worth.

GACL always believes in delivering value product to the customer for that it is doing the following things.

Focus on brand name : “VIRAT COMPRESINVE STRENGTH” Ambuja cement has given more focus on Strength as any cement

manufacturing company is supposed to do. One of its ad 100-7 = 0 which means if the 7 th part of the cement is extracted from the concrete that its nothing. This is thoroughly understood to dealers.

Effective differentiation Ambuja is crating differentiation by the following ways.

Firstly there was no ad in cement industry. The trend started with Ambuja it was the pioneer in giving ad of cement like products. The first ad was given in newspaper. Now they giving

more in sports events.Ambuja is the first in providing engineering services to the customer as after sales services.It is proving many services to the dealer like scholarship & other supportive programs specially

designed for its dealer and treating dealer as the family members. It was the first in proving foreign tours to dealers.It’s using best quality lime stone in manufacturing of cement to provide best strength to the

customer.It has established totally different unit in the plant for controlling the quality of the produced

cement hourly checking is done and then only given for dispatch.It using best quality bags that are HDPE bags to pack the cement which are reusable.It is the first line name in providing ON TIME delivery to the customer which is very important

in cement like product without which entire activity is worth less.It is the pioneer in giving saving concept to the customer.Added value in skilled labor.Thus we can say after entry of Ambuja the strength has gone double.

Effective public relationAmbuja has maintained good relations with the public for that it has organized many seminars done many things for public welfare as corporate governance.

Price differentiation :

Ambuja has always maintained the premium price which is truly convinced to the customer by the activities listed above.ACL is pricing on the bases of Supply and demand gap.

Strong distribution network :

Ambuja has its presents in the entire market in interior levelof villages too. In this area too all are direct dealer and reputed personality in town.

FINDINGS - CORPORATE INFRASTRUCTURE

First cement producers of the country to introduce an Integrated Logistics System (ILS).

Establishment of Internal Audit Framework

Strong financials and expansion strategy through mergers and acquisitions enabling growth

Set up own R&D facility in 1989 department to encourage innovation

Adhering to International quality standards

Having stringent Internal Control Systems

TECHNOLOGY

PROCUREMENT

Basic raw materials: limestone, clay, silica and gypsum

An Australian device ‘Surface Miner’ was installed in 1997 which helped in procuring more limestone from a given area

It ensured cement quality

In 1998, GACL acquired the Nadikudi (about 100 kms from Guntur) and Proddatur (near Cuddaph) limestone mines to enhance its presence in Southern India

A strong network of clinkerisation plants and grinding units

PROCUREMENT

Cement-Linkages were taken off

Cheaper and better quality coal was sourced from South Africa and furnace oil from the Middle East

Ambuja’s leading position has strengthened its bargaining power

The company’s engineers had picked up best practices during visits to overseas plants in countries like Japan and Australia

OPERATIONS

Captive power plant

GACL set up captive power plants in Gujarat (40 MW) and Himachal Pradesh (12 MW) in 1998.

Rs 1.30 per kilowatt, compared to Rs 4.50 per kilowatt

60.3% of its total power requirement

OPERATIONS

Coal production - central and eastern parts

the cement industry - western and southern parts

Transporting coal

Quality of coal

Cement companies had to decide whether to use imported coal or substitutes like lignite, natural gas and oil.

OPERATIONS

Imported coal

Imported better quality furnace oil

Operating costs of power plants

Consumed only 96 kwh of power per tonne of cement against the industry average of 110-115 kwh per tonne

OPERATIONS

Coal - 170 kg per tonne of cement, industry average 250 kg per tonne

Ambuja Nagar plants located in the agricultural belt of Saurashtra, groundnut husk available in plenty

Groundnut husk, crushed sugarcane

OUTBOUND LOGISTICS

Rs 1 billion - modern ports and freight-handling terminals at Muldwarka and Surat (south Gujarat) and Panvel (near Bombay).

Cost of transporting cement to Bombay - Rs 400 per tonne by sea, Rs 1800 per tonne by road.

Cement moved in bulk – reduced packaging costs

Savings of roughly Rs 160 million annually

OUTBOUND LOGISTICS

Far less wastage and spillage

Untouched by human hand - finest quality

Many coastal markets within easy reach, became one of the largest exporters of cement

Convenience to import coal owing to the ports

Strong focus on logistics management - reduce finished goods inventory levels

A Mumbai dealer could obtain stocks within 8 hrs because of the company-owned jetty where the cement was packed at the rate of 100 tonnes/hr.

OPERATIONS

Going beyond 100% capacity utilization

20 years old Ambujanagar plant, keeps increasing productivity year after year

At the Mumbai terminal , handling capacity increased to 100,000 tonnes as against the terminals stated capacity of 60, 000 tonnes. With no additional capital expenditure.

Managed to keep power bills to virtually the same amounts they were in 1989.

Managed to cut stabilizing time from upto 18 months to a mere 3 months.

MARKETING STRATEGY

Emphasis is on Quality

Advertising and Publicity campaign

Improvement in Packaging by information provided by suppliers

Stronger positioning in the housing sector in smaller towns and rural areas over the last two decades

FMCG approach was adopted to create a wide retail network of small shops, down to the village level

MARKETING STRATEGY

Channel Excellence Programme (CEP)

Over 7000 dealerships and 20,000 retailers across India are covered under this model.

Initiatives are structured and packaged as Ambuja Parivar and Ambuja Parivar Mahotsav.

MARKET SHARE (10-11)

THE ROAD AHEAD

DISTRIBUTION NETWORK

Strong presence in growing markets of North & West Largest exporter of cement Grinding close to market Premium brand Extensive & primarily exclusive distribution network

Over 6,600 dealers and 20,500 retailers Captive Infrastructure

Port, Receiving Terminals and Power Plants (230 MW)

Sea Transportation

Seven vessels

Thank You