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Gujarat Ambuja - Cost Leader in the Indian Cement Industry.
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Gujarat AmbujaCost Leader in the Indian Cement
Industry
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.
Location Capacity Production qty
'000 tonnes '000 tonnesAmbujanagar (Amreli, GUJ) 4150 4876.45Bhatinda (Bathinda, PUN) 520 335.42Chandrapur (Chandrapur, MAH) 1730 1734.67Daburji (Rupnagar, PUN) 1400 1918.96Suli (Solan, HP) 1200 974.8
Gujarat 4.00Himachal Pradesh/ Punjab 3.00Rajasthan 1.50Chattisgarh/ West Bengal 2.00Maharashtra 2.00Total 12.50
Plant Locations and Their Capacities (June 2003)
Capacity by Region: GACL & Its Subsidiaries (2003)
Information
• The company started its production in 1983 with a a plant in Ambuja nagar in Gujarat – Ambuja Cements• In 1993 GACL commissioned its second plant in Ambuja
Nagar – Gujambuja Cements• In 1996 GACL set up its third Plant in Ambuja nagar –
Guj Line 2• In December 1999 GACL acquired 51% stake in DLF
Cements and 7.2 % stake in ACC Cements• In 2003 the company recorded a sales figure of Rs 2173
Crore
Indian Cement Industry• With 144mn tonnes(in 2003) Indian Cement industry ranks
second in world.
In India there were 50 companies with 120 plants working
Market Share (2003)
The Cement Industries demand was always there as there was overall infrastructure development for National Highway building, Concrete Roads were made. Due to which cement consumption was high
Manufacturing of Cement
• Raw material- limestone, clay, silica, gypsum.• Steps including- 1) Quarrying & Crushing 2) Grinding & Blending 3) Clinker Production 4) Finish Grinding
Process Capacity (TPD ) %age to Total
Dry 3,21,695 94
Semi-Dry 5,930 2
Wet 13,220 4
Total: 3,40,845 100
Cement Capacity in India (Break up by process)
GACL’s Efficient Practice• Raw material usage- Good Limestone quality, hence high
efficiency.
• Total cost management (TCM)- productivity and consumption of coal and power.
• 100% capacity utilization.
• Consumed only 96 Kwh power
• Reduced dependence on expensive power supply.
• Coal consumption low- 170kg/ tonne of cement.
• Used substitute for coal- groundnut husk and crushed sugarcane.
• Energy Bill down by Rs.20 for every tonne of sugarcane used.
Processing control:-
• Replaced V-belts by flat belts• Mechanical conveyor to eliminate drawbacks.• Determine crystal structure of clinker.• Reduced mining expenses- sent engineers to
Australia to study extraction of metals (Surface Miner)• Used Ripping technology.• Computerized Process control and central room
control.• Quality control practices streamlined- 48 times a
day.• Right quantity of cement in bags.
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.• Route Survey
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
Production Function• Technical relationship between factor inputs and outputs.• Function showing the highest output for every specified
combination of inputs. • Long run v/s Short run.• Increasing returns to scale.• Constant returns to scale.• Decreasing returns to scale.
Applying Economics concepts:
• Expansion- Gujarat Ambuja to GACL.• Demand analysis- infrastructure development.• Production function- efficient combination of inputs.• Power cost• Fuel cost• Cost of production• Direct cost.
Oct-Dec Jul-Sept
2003 2002 2003
Units consumed 85 86 90
Cost (Rs./Ton) 180 187 183
Power Cost
Oct-Dec Jul-Sept
2003 2002 2003
K. Cal/ Kg of Clinker 718 729 727Cost (Rs./Ton) 229 224 230
Fuel Cost
Oct-Dec Jul-Sept 2003 2002 2003Power 180 187 183Fuel 229 224 230Raw material 146 134 140Consumables 51 56 67Direct cost 606 601 620
Cost of Production
FY 2003 FY 2002
Increase / (Decrease) (%)
Power 187 179 4Fuel 227 254 -11Raw material 136 133 2Consumables 47 48 -2Direct cost 597 614 -3
Expenses (Rs. / tn)
• Opportunity cost- clinker, coal, electricity, etc.• Social cost- mining• Economic cost- replacing coal with husk &
sugarcane.• Isocost curves- capital and raw material
combinations.
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
Presented by-
• Asmita Patil• Dhaval Patil• Jugal Thakkar• Nita Prasad• Rajath Shetty• Rhythm Mitra• Ujwal Suvarna
THANK YOU