EXECUTIVE SUMMRY

Supply chin mngement is n importnt spect of business opertions becuse it

helps to reduce the costs ssocited with inventory holding nd stock wstge, nd
to improve business competitiveness. The mngement of supply chin
encompsses the plnning nd mngement of ll ctivities involved to bring the
end products to the mrket, nd includes coordintion nd collbortion with
suppliers, internl business services units, intermediries, third prty service
providers nd customers. Trnsport, through which the movement of goods
physiclly tkes plce, is n importnt prt of logistics nd supply chin
mngement. The efficiency of trnsport rrngements ffects the led time for
delivery nd the level nd costs of stock holding, which in turns ffects the
competitiveness of businesses. Efficient logistics mngement is bout providing
the right quntity nd qulity of the right goods t the right times nd loctions, in
wy tht minimizes trnsport costs, time, storge nd stock wstge. Hence, n
efficient supply chin requires n effective informtion system to llow monitoring
of the supply of, nd demnd for, freight nd its movements. The choice of
trnsport mode, the distribution model nd the loctions of distribution centers
or wrehouses re lso importnt in improving freight logistics nd supply chin
efficiency. The logistics industry is n importnt driving force for ntionl
economic development, nd the cost of logistics is n importnt fctor to mesure
the level of development of the logistics industry. The economicl nd socil
benefits due to the effective logistics cost control re notble, nd it becomes the
most direct mens in extending the third-prt profit. Therefore, how to reduce
the logistics cost in cement industry hs been incresingly focused, explored nd
fulfilled.
1

TBLE OF CONTENTS
Chpters

Pge No.

Introduction
Industry Profile
Literture Review
Reserch Objectives
Reserch Methodology
Findings nd nlysis
Conclusion
Recommendtion
References
Questionnire

INTRODUCTION

fter posting the poorest show in decde in 2013, the Indin Cement Industry
sold 223.02 million tonnes (mt) of the building mteril inFY14 compred with
209.5 million tonnes in FY13. Production, too, rose to 223.6 million tonnes
ginst 210.5 million tonnes, up 6.2 per cent. The industry hd in wy outpced
itself, rmping up production cpcity nd sprking off spte of mergers nd
cquisitions to spur growth. Going forwrd these drivers will ssist the industrys

growth in the next five yers. On n verge Indis GDP is expected to grow t
positive rte, thereby giving cler visibility of demnd.
Yet s the industry continues to grow, costs seem to be on the rise too.
Compred to other industries, Cement hs the highest logistics cost s
percentge of sles. ll freight cost is highly dependent on the cost of
trnsporttion which reltes directly to fuel prices. In Indi trnsporttion cost of
cement is round Rs. 1.03 or Rs. 1.04 per ton Kilometer. The cost rises high
when the mteril is unloded nd crried on rod for further distnce nd if the
mteril is brought from or tken to hinterlnds, trnsporttion cost by rod
increses. The industry depends hevily on rod trnsport for movement of
clinker to cement. The trnsporttion cost by truck trnsport over period of lst
10 yers hs incresed by nerly 50%. Moreover, the trnsporttion cost to most of
the big consumer centers, tier 2 nd tier 3 cities nd villges hve been ffected by
rising rilwy trnsporttion cost, both for input mterils like col nd gypsum nd
more glringly for clinker nd cement.

The chllenge for the cement industry is going to be logistics. Cement is high
volume, low vlue commodity. Even t Rs. 350 bg, it is only Rs. 7 kg. The
logistics cost my either equl or exceed mnufcturing cost. Five to 10 yers
down the line, for mny compnies the distribution cost will be more thn the
mnufcturing cost.
The Indin logistics sector hs typiclly been driven by the objective of reducing
trnsporttion costs tht were (nd often continue to be) inordintely high due to
regionl concentrtion of mnufcturing nd geogrphiclly diversified distribution
ctivities s well s inefficiencies in infrstructure nd ccompnying technology.
3

Freight movement hs slowly been shifting from ril to rod with implictions on
qulity of trnsfer, timeliness of delivery nd consequently costs except for
commodities which over long distnces, predominntly, move through the
extensive ril network. More on the infrstructure issues lter. The trnsporttion
industry is frgmented nd lrgely unorgnized lrge number of independent
plyers with regionl or ntionl permits tht crry freight, often with smll fleet
size of one or two single-xle trucks. This segment crries lrge percent of the
ntionl lod nd lmost ll of the regionl lod. This frgmented segment comprises
owners nd employees with indequte skills, perspectives or bilities to orgnize
or mnge their opertions effectively. Low cost hs been trditionlly chieved by
employing low level of technology, low wges (due to lower eduction levels), poor
mintennce of equipment, overloding of the truck beyond cpcity, nd price
competition mongst lrge number of service providers in the industry. Often,
one finds trnsporttion crtels tht regulte supply of trucks nd trnsport costs.
However, the long run verge cost of trnsport opertions cross the entire
supply chin my not turn out to be low.