Rajnish Kapur, Business Head-Grey Cement, JK Cement, is of the opinion that unless there is an economy of scale, RMC- as a channel of distribution-will not be successful in India.
Tell us about the various experiments and innovations being tried out by cement players to make the entire distribution channel an exciting proposition?
At present, we are in the digital age and there is a lot of technology intervention happening in various aspects of our life. On the supply chain management front, we have witnessed how companies like Amazon have changed the supply management scenario completely.
In commodities business like cement there is an increasing need to find the right carrier need to the right location. So basically the whole thing is revolving around asset utilisation and technology. Cement companies, to utilise their assets efficiently have now installed GPS systems. The GPS system not only gives a carrier direction but anticipate the exact time of delivery. Since cement is a vital commodity, it also helps the companies to keep a track on the fleet on a real-time basis. So innovations currently in the logistics sector or commodities business are revolving around integrating technology and integrating data knowledge that is coming in terms of freight availability, in terms of finding out integration possibilities and to say in short to be able to improve the total truck turnaround time or the asset utilisation time of the vehicle.
How the company is developing and implementing the right supply chain management strategies which will lead to an increase in productivity?
The logistics cost in any industry, specifically in the cement industry is a matter of concern. Logistic cost forms almost one-fourth of the total cost. And, if a cement company engaged in export, it (cost) is even more. So it is extremely important to implement our strategies to curb the cost in a most efficient manner. Logistics does not only remains to be mere delivering your cement products at the right place, but it also means ensuring the customer a timely delivery.
If a cement manufacturer able to supply its cement product at the right place at the right time and in the right cost to the customer then you have an edge over your competitor. Increasingly all cement companies are seriously thinking about innovation. So productivity should not have situations where you are not able to deliver your product because you do not have pay loaders getting ready to carry your stuff and waiting time for loading and unloading is high. So any cement bag does not reach its destination is a sale lost. It is efficiency as well as productivity.
Considering the road and rail transportation is on a higher side, then why industry is not exploring waterways as a cost-effective mode of transportation?
I completely agree with your observation. If the cement players transport through waterways that would be most economical and most environmental friendly way of transporting, not only cement but also getting your inbound material like coal, fly ash, gypsum etc.
Why I favouring water transportation is mainly because, in my previous stint as a Managing Director of Holcim (Bangladesh), our entire logistic operation was based on waterways.
We were importing clinkers, fly ash, gypsum, slag, etc. via waterways. In fact, every cement plant in Bangladesh is located on the river-side, and equipped with jetty for unloading materials.
In India, with a vast waterways network and government's emphasis on Sagarmala projects, which is a port-led programme, in coming days, waterways will be a major mode of transport.
In India, success will depend on having complete integration of road, rail and waterways. In fact, in India, some of the companies have already started utilising waterways. But this is at a very initial stage.
Can you tell us about various distribution channels of cement industry? And as a company how do you incentivise these channels?
The best supply distribution channel would be connecting directly with the non-trade consumers. That of course is happening in India. This part of the business contributes a significant amount to the company's coffer. In addition, there is a need to have depots, which can be used as bulk breaking depots, which you carry to a long distance in bigger pay loaders which have higher capacity. This will bring down per tonne/kilometre cost. So these are some of the things which come to my mind. Digitisation is also going to come and play an important role. So companies are now trying to have a digital distribution channel where customer can book order and knows where your network is and stuff. But still these are early days of cement industry at this point of time.
RMC, as a medium of the distribution channel, is a successful example in western and European countries. Do you think the same can be replicated in India? What are the steps that need to be addressed to make it more successful?
As the density of construction starts increasing and as we start moving from bag to bulk, RMC will be a big success in India. As economy of scale increases, we shift from bag-based cement to bulk-based cement utilisation. However, this shift is possible only in the bigger cities where large number of infrastructure projects. To my surprise, while visiting Ahmedabad, it was brought to my notice the usage of bulk cement by contractors in individual house construction than bag-based consumption. But even today, India is mostly a bag-based cement economy. RMC is certainly an important distribution element.
- RAHUL KAMAT