G 2 cost optimisation in paint industry - by subir bose

PRESENTATION PRESENTATION

ON ON

““PAINT INDUSTRYPAINT INDUSTRY

COST OPTIMIZATION”COST OPTIMIZATION”

BASIC OBJECTIVE OF COST CONTROL IS PROFITABILITY IMPROVEMENT.

PROFITABILITY CAN BE MAXIMISED EITHER BY IMPROVING PRICE REALISATION OR LOWERING COST.

MOST ORGANISATIONS FOR IMPROVING PROFITABILITY GO FOR THE SEEMINGLY EASIER OPTION OF COST CONTROL SINCE IT IS INTERNAL TO THE SYSTEM AND THEREFORE HOPEFULLY CONTROLLABLE.

PAINT INDUSTRY COST STRUCTURES INDICATE THAT VARIABLE COST IS 89 % FIXED COST IS 11%VARIABLE COST CONTROL IS THE KEY TO SUCCESS

COST CONTROL

MAJOR COST ELEMENTS IN THE PAINT INDUSTRY

LOW HI GH

VARIABLE COSTRAW MATERIAL COST 55.80 72.80 70.00

PRODUCTION COST 1.20 2.90 3.00

FREIGHT & HANDLING COST 3.90 5.20 5.10

SELLING & DISTRIBUTION COST 3.00 14.10 10.90

FIXED COST 89.00

MANPOWER COST 4.90 5.90 6.20

IT COST 0.20 0.30 0.20

OVERHEADS 3.00 7.60 4.20

INTEREST 0.10 2.50 0.4011.00100.00TOTAL

% TO NET SALESCOST ELEMENT

% TO

TOTAL

COST

SUB-TOTAL

SUB-TOTAL

Basis : Data Based On Published Balance Sheets Of Five Major Paint Companies of last 3 yrs.

PURCHASE COST

BULK DISCOUNTS.

SINGLE SOURCE Vs MULTIPLE SOURCE.

ALTERNATE RAW MATERIALS.

IMPORT Vs LOCAL.

MAKE OR BUY DECISION.

VENDOR DEVELOPMENT ACTIVITY.

FACTORS IMPACTING RAW MATERIAL COST

FORMULATION COST

LEAST COST FORMULA.

BATCH COST CONTROL.

i ) USAGE VARIANCE.

ii ) YIELD VARIANCE.

FACTORS IMPACTING RAW MATERIAL COST

THE MAJOR FACTORS IMPACTING PRODUCTION COST ARE :

POWER / FUEL COST.

MAINTENANCE COST.

LEVEL OF AUTOMATION.

MANPOWER COST.

WASTE MINIMISATION.

CAPACITY UTILISATION.

PRODUCTION COST

POWER COST

AUTOMATIC POWER FACTOR CORRECTION ( APFC) PANEL.

AUTOMATIC VOLTAGE REGULATOR ( AVR ).

MAXIMUM DEMAND CONTROLLER.

ENERGY EFFICIENT MOTOR.

FACTORS IMPACTING PRODUCTION COST

FUEL COST

DG WITH AUTO MAIN FAILURE ( AMF ) PANEL.

PROPER INSULATION OF EQUIPMENT, PIPELINES ETC.

USE OF NATURAL GAS .

FACTORS IMPACTING PRODUCTION COST

MAINTENANCE COST

PREVENTIVE MAINTENANCE .

ROUTINE SHOP FLOOR CHECK UP.

IMPORTED SPARE PARTS / CONSUMABLES Vs LOCAL DEVELOPMENT.

EFFICIENT SPARE PARTS MANAGEMENT SYSTEM.

FACTORS IMPACTING PRODUCTIVITY

MANPOWER

PRODUCTIVITY NORMS.

PROPER MANPOWER ALLOCATION.

CONTRACT LABOUR.

AUTOMATION.

FACTORS IMPACTING PRODUCTION COST

AUTOMATION USE OF PLC / DCS IN OPERATION CONTROL. AUTOMATIC POWDER CHARGING SYSTEM WITH SILOS. AUTOMATIC LIQUID TRANSFER. ASRS ( AUTOMATIC STORAGE & RETRIEVAL SYSTEM ). ROBOTIC PALLETIZATION. FULLY AUTOMATIC FILLING M/C.

FACTORS IMPACTING PRODUCTION COST

WASTE MINIMISATION

WEIGHMENT PRACTICES OF SOLIDS / LIQUIDS.

SHOPFLOOR DISCIPLINE TO AVOID HANDLING LOSSES.

MINIMUM RETENTION.

TO REUSE THE RM POWDER DUST & WASHING SOLVENTS.

AUTOMATION .

FACTORS IMPACTING PRODUCTION COST

CAPACITY UTILISATION

FACTORS IMPACTING FREIGHT COST

RM SOURCING VS PRODUCTION CENTRES.

PRODUCTION CENTRES VS SALES OUTLETS.

FACTORS IMPACTING SELLING & DISTRIBUTION COST

ADVERTISEMENT COST.

SALES PROMOTION COST.

GODOWN RENT.

PAYMENT PERFORMANCE DISCOUNT.

FACTORS IMPACTING FIXED COST

MANPOWER COST.

INFORMATION TECHNOLOGY COST.

INTEREST COST.

OVERHEAD COST.

SUMMARY

COST CONTROL MEASURES ARE IMPORTANT AND ESSENTIAL FOR SURVIVAL IN A COMPETITIVE INDUSTRY.

VARIABLE COST CONTROL IS THE KEY.IMPROVEMENTS ACHIEVED WILL HAVE MAXIMUM IMPACT ON COST STRUCTURES.

COST CONTROL GAINS ARE SMALL INCREMENTAL IN NATURE AND REQUIRE CONSTANT FOCUS AND EFFORTS FOR

OPTIMUM RESULTS.

Thank you