India: cement firms to cut logistic costs

India: cement firms to cut logistic costs
Published: 09 September 2008

The domestic cement industry is making continuous efforts to cut its logistic costs. At a time when the industry is entering into the downside of the cycle, with profit margins coming down to 20-25 per cent from 35-40 per cent, better management of logistics could prove beneficial to the cement manufacturers.

Using more railway routes than roads, shrinking lead distance (distance between the manufacturing facility and market) and opting for sea-routes wherever possible are some of the ways the industry can explore.

At present, for every 50kg bag of cement, the logistic cost comes to around Rs 15-22 and Rs 10-15 by the road and the railway respectively, depending on the distance.

A L Kapur, managing director, Ambuja Cements, said, “Cement is nothing but a logistic business. If you have a perfect transportation model, you are the best cement producer.” The country’s third largest cement maker is opting for sea-routes to transport its cement from Gujarat to southern market.

The sea-route will drastically reduce the transportation cost from Re 1 per tonne per km by rail and Rs 1.5 per tonne per km by road to 50-70 paise per tonne per km.

“Logistics are critical for cement business. We will keep making efforts to keep a check on it,” said D D Rathi, whole-time director of Grasim Industries, country’s fourth largest cement maker.