Optimising logistics cost through innovations
Predictive analytic tools would anticipate buyer's demand, automatically trigger orders and enable payments through smart contracts. Autonomous robots would then pick products from plants, place them into driverless. Drones could even carry products from trucks to the doorsteps of consumers. Most of the technologies are already here, but in India, around 90 per cent of the logistics service providers in the market are in the unorganised segment. So, penetration of new technology will be slower as compared to developed economies, where larger chunk of game is with organised players.
Logistics costs in India accounts for 13 to 14 per cent of the gross domestic product. This is higher than the global average of 8 per cent, as the Indian logistics sector is largely unorganised and inefficient compared with its global counterparts. Thus, the onus is on the service receivers to push technology into use, of course for logistics, so as to reduce overall Indian logistic cost as majority of time of trucks is wasted in loading, unloading, waiting for orders, in transit traffic and tolls, and because of this in India, trucks run per day is nearly half of what is there in developed economies.
With above in mind, we, at Shree Cement, are continuously innovating ways to reduce logistic cost, and are early to realise that inefficiency is there on service receiver side also, which ultimately increases logistics cost, say for example, if we keep on wasting time, of trucks, by delayed loadings and unloading, then the transporter will ultimately be billing the delay in freights. As "Time is Money", we have worked a lot, be in automation/mechanisation, in predictive analysis or be in machine learning, to reduce time and are continuously exploring new innovative ways and technology to further enhance the performance and the customer experience. Here are a few ways that are playing a major role in SCL journey to optimise logistics by working on time and also the related future plans:
Getting more productivity: Insufficient use of vendor's assets, such as underutilised fleet, directly affects revenue of vendor and in turn provides less scope of optimisation. By optimising the utilisation of fleets, one can greatly improve efficiency.
This can be done through proper planning of the delivery schedules in order to keep the entire fleet of vehicles active throughout the year, as opposed to use of the large number of fleets and keeping these idle for want of order at many times. Also, well-timed planning of requirement and planning of operations such as production schedule, loading, transit time and unloading is imperative.
In cement business, clinker is manufactured near to limestone quarries and is transported to distant grinding units, which is near to customer location. The concept of grinding unit is to source raw material locally with reduce logistic cost.
Shree Cement has 10 distant grinding units and daily around 0.30 lakh MT is dispatched to these units from mother plant at RAS and Baloda Bazar, Raipur. We have done a pilot run of limiting fix trucks for despatching clinker from RAS plant to one of our grinding unit at Khuskhera, Bhiwadi. Monthly around 2 lakh MT clinker is required to be sent to this unit which is at a distance of 400 km. Earlier, this lane was open to all market trucks; hence uncertainty of getting orders has restricted these fleets to have only 6,000 to 7,000 km run in a month.
So, SCL Logistic has decided to explore, if we increase the certainty of orders for all trucks, which will ensure revenue maximisation by increasing km run to 10,000 to 11,000 km in a month. So, by limiting number of trucks on this particular route, freight of this particular lane has been bought down.
In days to come, with use of big data analytics, we are planning to automate decision makings with respect to prediction of how much quantity is to be dispatched and to allocate orders to vendors based on their past performances.Apart from this, new technologies which can predict with accuracy are being explored which can further help increase asset utilisation. This is because technology is no longer seen as a cost, but an opportunity and a revenue driver. We believe, the most successful businesses will be those that invest in technology and hire the skills to make those investments work.
Modernisation and mechanisation: The adoption of new technologies is driven by the need to improve operational efficiency as well as to increase utilisation of the existing infrastructure. Thus, more and more industrial manufacturers are moving towards automated solutions both to improve efficiency, increase asset utilisation and to solve staffing dilemmas. We were, continuously, facing issues of delayed clinker rake loading and thus, heavy penalties were being imposed as demurrage charges and railway was reluctant to give rakes to us, when we use to load rake manually.
Yearly we use to despatch 200-220 rakes from Ras Location and cost of demurrage and handling was around Rs 30 million yearly, but after investing in mechanised loading infrastructure, loading is being done in three hours from 12-13 hours earlier. This is not only saving demurrage and handling cost but railway has increased supplies of rakes to us.
In line with above, to load loose commodity-clinker trucks, volume of which is around 8 MT yearly, with accurate quantity, with a vision to save time of re-loading or un-loading from loaded truck, we are working on IoT-based instruments to save time wasted on accurately loading loose commodity trucks and ultimately, increasing utilisation of trucks.
Apart from this we have plans to build material testing mechanism where in place of taking sample from each of the trucks, testing will be done through screening while material is being unloaded, so that lots of valuable time, which is wasted in testing and clearance, is saved.
Increasing customer experience: The cement industry in India is still delivering more than 85 per cent in 50 kg bags. But as in the last few years, since that the infrastructure projects have started picking up, there is a real need to complete the project as quick as possible.
Bulk users of cement are always looking for better and efficient cement management solutions. Since a few years, bulkers are used for making deliveries to large sites and ready-mix concrete plants, having cement silos for storage. Such sites use cement efficiently and have very little labour costs. No bags. No dusting. Environment friendly and clean plants.
But, there are several customers which have concreting plants but do not have facility to store cement. So, these customers purchase bag cement and feed, after tearing, into concreting system which is not environment friendly, is labour intensive and generates lots of plastic waste.To cater to this segment and overcome above problem, SCL has come with a unique idea of providing the movable steel silos with compressors which can be used by customers as long as project is in progress and thereafter can be shifted to another location or customer.
But this is only one side of the story. The major benefit, we are getting is by optimising the bulk fleets, where fleets do not have to wait at customer site to get the cement unloaded even when concreting plant is not working. This has helped in increasing trips of bulkers and ultimately has helped us in reducing freight cost.
Reducing lead time: Transporting cements to long distance consumption areas means high logistics cost. Also, the consumers has to wait for long to get the material, though which can be sorted out by using warehouses but multiple handling at warehouses deteriorates quality and also increases cost.
Shree Cement lead from integrated plant to consumer was 0 to 700 km (average 470 km), this means distant area consumer has to wait for 2-3 days to get the material. To overcome this challenge, split grinding units are commissioned in distant consumer areas. By more and more commissioning of Split grinding units, in recent years, cement supply lead has now reduced to 250-260 km only.
Thus, long haul higher capacity trucks are now replaced with small capacity vehicles, which service local areas from grinding units, thereby increasing customer experiences.The prompt decisions of split grinding units is based on concept to replace trucks carrying long distant cement with 30 per cent cost effective clinker trucks because number of trips in clinker trucks are more as redundancy is not there in clinker loading and unloading by fully mechanised equipment.This way, cost of cement production lowered at grinding units in comparison to integrated plant to increase profitability.
Automated plant truck movement: Cement manufacturers usually face challenges while dispatching their products as desired. Even though they have the capability to dispatch over thousands of trucks every day, they always have difficulty in doing it efficiently and making the most out of their production unit.
We have 14 cement manufacturing units across India, which handles outbound movement of around 1.25 lakh MT or 3,500 to 4,000 trucks daily and around 800 inward trucks of raw material. At RAS Unit alone, which is world's biggest single location cement plant, daily 0.45 lakh MT or 1,500 trucks outbound (cement and clinker) movements is handled along with 300-400 trucks of inward raw material. This massive volume was leading to average plant turnaround time of 10 Hours which is very high and was adding to cost of freights.
We knew weighbridges and security check points has to play a role in traffic management inside plant premises. Also, valuable data for incoming and outgoing vehicles generated at security and weighbridge can help in curtailing the turnaround time.
Earlier, we used to have weighbridges, which were operated by one personnel per shift, and there were instances of wrong weight capture or no weight capture. Also, there were instances of prolonged checking's or no checking's at security check points, leading to increase in turnaround time and heavy jams in plant premises. Further, real-time correct data of truck position inside plant was not available, leading improper traffic management.
To address these challenges, we came up with a world class dispatching and logistics solutionùautomated plant truck movement and unmanned weighbridge operation. Now, inside the plant, truck movement is completely automised without any errors, and omissions are reduced near to nil and we are able to reduce the turnaround time. Traffic jam problem is also reduced as real time data of plant truck is available and trucks are sent inside plant for loading/unloading after analysing trucks waiting at different stage in plant.
With this we are able to reduce two hours of plant time. This translates into massive yearly saving of Rs 20-25 crore (Considering Rs 150 cost of truck per hour for 4,300 trucks daily). Not only this, movement is now seamless and all our 90 weighbridges are man less saving 360 manpower.
Way forward, we are working on automated truck calling system/traffic management system, where with the use of machine learning and predictive analysis of truck status through RFID and GPS, whole truck movement inside plant will be optimised where system will take most optimal decision on its own to manage traffic movement so there will be more ease to logistics. There is no doubt that digitalisation and automation is having an incredible impact on logistics across the globe and is here to stay. Companies are faced with many options as new products and applications enter the market and gain acceptance in the industry. Having a purposeful strategy for supply chain digitalisation and automation is now essential to assess the new technological landscape and chart a way forward to reap the benefits and stay ahead of the competition.
About the author: Yogesh Mehta, Vice President (Commercial) and Head-Logistics, Shree Cement.