Cement, being a bulk commodity, transporting is a costly affair.

The selling
and distribution costs account for around 18 per cent of sales revenues. In
2009-10, top 30 cement companies spent more than Rs 10,000 crore to carry
cement to the consumer. The domestic cement industry has been making
continuous efforts to cut its logistic costs.
At the time when the industry was entering into the downside of the cycle,
with profit margins coming down to 20-25 per cent from 35-40 per cent,
better logistics management proved beneficial to many of 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 were some of the ways the industry
explored. Currently, for every 50-kg bag of cement, the logistic cost comes to
around Rs 18-25 by road and Rs 12-15 by the railway, depending on the
distance. For example, the countrys third-largest cement maker, Ambuja
Cements, opted for sea-routes to transport its cement from Gujarat to
southern market.
Today, 70 per cent of the cement movement worldwide is by sea compared
to just 1-2 per cent in India. However, the scenario is changing with most of
the big players like L&T, ACC and Grasim having set up their bulk terminals.

About 3 per cent of the gross revenue is spent on inward logistics while
outward logistics accounts for another bulk of 15 per cent. Inward logistics
include, coal and limestone transportation, while outward logistics is mostly

the final product cement. Some companies also incur outbound logistics cost
on transporting clinker to their grinding plants. Plants that are closer to the
collieries, the inbound transportation costs are less. For plants located far
away from the collieries they have the option to import coal.
While the freight cost could be optimised on the imported coal through usage
of companys own ships for part of the quantity, the international prices of
imported coal and its volatility together with the strengthening of the dollar
against rupee could derail this. This could impact the delivery prices of
imported coal and also the cost of production.
In case of final product, the costs of handling and secondary movement are
very high. Although transportation by sea is the cheapest option, unless
there is right connectivity from the port to the consuming centre the gains
are minimum.
Companies, which have plants located closer to the markets as well as to the
source of raw materials have an advantage over their peers, as this leads to
lower freight costs. Also, plants located in coastal belts find it much cheaper
to transport cement by the sea route in order to cater to the coastal markets
such as Mumbai and the states of Gujarat and Tamil Nadu.
Checking logistics costs is an ongoing process for the cement companies.
Many are trying to reduce the costs by around 5-7 per cent by optimising the
distance of transport. Statistics suggest that about 45 per cent of the cement
produced in the country is being transported by the railway. Cement makers
prefer roads for shorter distances.
Logistics rail transport
Railways should target attaining minimum 50 per cent share of the total
dispatches of cement and clinker.
Wagon supply agreement
Railways should enter into annual agreements with cement manufacturers
where it should commit to certain number of month-wise supplies of wagons
during the year. On demand availability of two point and three point
combinations of rakes: This facility shall help cement companies wherein a
single rake can be used to service two-three markets, especially with the
deployment of larger tonnage capacity Bogey Covered New Metric High Axle
Load (BCNHL) wagons carrying 4,000 tonnes in comparison to 2,300 tonnes
capacity of regular BCN wagon rakes.

Resolution of operational problems

Revising downward the loading capacity of BCNHL wagons from 68 tonnes to
62 tonnes: Since loading of 68 tonnes is technically neither practical nor
feasible, the railways, therefore, needs to find possible solutions with the
help of technical experts to enable full loading of wagons to their stated
capacity. Till such time the solution is found, realistic carrying capacity of 62
tonnes per wagon be permitted due to safety reasons of labour, also.
Permitting additional free time for loading/unloading of BCNHL rakes - In
comparison to regular BCN rakes, BCNHL rakes have a larger number of
wagons and thus have higher tonnage loading capacity. Thus, it is proposed
that the free loading/unloading time for BCNHL wagons be increased from
the current 9 hours to 13 hours.

Clinker
Long-term contract at concessional rates for clinker movement. Development
of special infrastructures for clinker handling at rail terminals.
Railway terminal
Development of new goods sheds outside of major cities. Infrastructure
facilities at terminals and goods sheds handling cement be created of world
class standard like approach roads, platforms, lights, etc, for faster
evacuation of materials.
Policy matters
Incentive policies should not be framed only for incremental traffic, retention
of traffic is equally important. Need for customer friendly private wagon
procurement. Railways must ensure that the policies announced by them
should be simple, clear and transparent to avoid any chances of their
misinterpretation at zonal / field levels. Bulk movement of cement and fly
ash be encouraged through a conscious policy.
Need for establishment of regulatory mechanism
A suitable Rail Traffic Regulatory Mechanism may be established to resolve
all rail matters including tariff and demurrages. Such a mechanism shall help
in removing distortion.

Logistics - road transport

Increasing load carrying capacity of trucks: Due to the multi-axle feature of
new generation trucks, the carrying capacity of trucks has increased
significantly. Also, the multi-axle feature reduces the wear and tear impact
on roads due to its uniform load distribution ability. Thus, the government
needs to amend the Motor Vehicles Act to increase the loading capacity
allowance of trucks and take into account the axle load of a truck to be 13
tonnes instead of the current 9 tonnes. This shall aid in adding economies
and efficiencies to road transport of cement which remains the major sharebearer of cement transport.
Logistics - inland waterways
Inland Water Transport (IWT) is a fuel efficient, environment friendly and
cost- effective mode of transport. Accordingly, the following aspects may be
considered while formulating the policy / programme for IWT promotion:
Necessary infrastructure needs to be created at the identified IWT terminals /
jetties so as to integrate with other modes of transportations.Wherever mode
specific concession is applicable, the same may be made for IWT at par with
the other modes. If the waterway passes through more than one state,
taxes/cess/duties etc, needs to be rationalised .Wherever port-hinterland
connectivity exists through waterways, multi-modal transportation concept
may be followed up to the riverine ports/terminals.
Wherever waterway advantage exists, Ro-Ro facility may be encouraged to
de-congest the cities (e.g. Kolkata, Mumbai, etc.)
What are the challenges in supply chain management as faced by
the cement industry?
Logistics cost account for almost 25 to 30 per cent of the total delivered cost
of cement. Recent hikes in rail freight rates and diesel prices have put an
enormous burden on the industry. On the other hand, service level
expectations of the customers have risen significantly in recent years.
Customers are insisting on on-time deliveries, smaller loads and fresh
material. The key challenge faced by the industry today is to strike a balance
between cost and services.
How is your supply chain cost divided on different fronts such as
inbound and outbound transportation, warehousing, inventory,
transit loss, etc?

Essentially depends on plant location, distance from market / mines, mode of

transport for inward and outward traffic, etc. On an average, inbound
transportation costs account for 25 per cent and outbound for 70 per cent of
the total transportation costs. The balance 5 per cent is accounted for by
warehousing, inventory, transit loss, etc.
Unavailability of land:
Existing stations along the Indian railway network are very congested.
Limited availability of land in the vicinity of the connecting station makes
getting the last mile connectivity with the Indian railway network an
extremely tedious task. To make the matters worse, the railways, of late , has
been very reluctant to give railway land to private parties for last mile
connectivity.
Lack of station infrastructure: Rail yard and signalling infrastructure at the
existing stations is generally very poor. Due to the financial crunch faced by
the railways, they are unwilling to invest in the connecting station
infrastructure. Thus, the private party not only has to bear the cost of rail
terminal but also the cost of augmenting the infrastructure at the connecting
station. This raises the investment cost of setting up a private rail sidings /
terminal very high.
What are the advantages / disadvantages of employing carry and
forward agents?
Having carry forwarding agents has both pros and cons to it. Advantages:
The act as your business developer for new /existing markets. They play the
role of an influencer. They are a means of secured payments. They provide
the necessary additional manpower when required. Disadvantages:There is
always a high risk of the CFA leaving the organisation. Additional discounts.
Low market control.
What are the major issues of integrating one mode of transport to
other modes, for better movement of materials?
For integrating one mode of transport to other modes, multi-modalism is the
only way. This can be done if the railways or any other transport authority
takes the entire responsibility of the safe receipt of the product at its
destination with only one freight.

What are the problems faced by the industry in last mile delivery?
The major problems being faced by the industry in the last mile delivery are
concerning
(a)Infrastructure constraints at rail terminals.
(b)Non-availability of trucks for onward movement of the material at
terminals.
(c)Movement restrictions imposed by state authorities in mega cities.
(d)Labour problems for loading and unloading of material.