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