Gujarat Ambuja Redefining Operational Efficiency Case Study

2. IntroductionIntroduction
❖ Gujarat Ambuja Cement Ltd was established as Ambuja Cement Pvt Ltd
in the year 1981 by Mr. Narotam Satyanarayan Sekhsaria.
❖ Mr. Sekhsaria was originally a cotton trader
❖ He entered into the cement business because of,
1. High & Stable Demand
2. Less Competition
3. Lack of Substitutes
❖ Along with his two partners Mr. Suresh Neotia & Mr. Vinod Neotia and
support of Gujarat Industrial Investment Corporation (GIIC) the
company floated a public issue and its name was changed to GACL in the
year 1983
❖ In late 1990`s it emerged as one of the most energy efficient and
technologically advanced cement manufacturers in India.

3. PlantsPlants
Year Name of Plant City Capacity
1983 Ambuja Cements
Ambuja Nagar,
Gujarat
0.7 mtpa
1993 Guj Ambuja Cements Ambuja Nagar 1.0 mtpa
1995
Ambuja Cements
Himachal Unit
Suli , Himachal Pradesh 1.5 mtpa
1995 &
1996
Cement Ambuja
International Ltd.
Subsidiary in Mauritius &
Srilanka
-
1996 Guj Line – II Ambuja Nagar, Gujarat 1.0 mtpa
1997 Acquired Modi Cement Raipur, Madhya Pradesh 1.4 mtpa
*mtpa – million tons per annum

4. PlantsPlants *mtpa – million tons per annum
For FY 2000-2001, GACL had total capacity upto 12.5 mtpa
&
The Company recorded a turnover of Rs.12.52 Billion & Net profit Rs.1.5 Billon
Gujarat 4.00 mtpa
Himachal Pradesh/ Punjab 3.00 mtpa
Rajasthan 1.50 mtpa
Chhattisgarh/ West Bengal 2.00 mtpa
Maharashtra 2.00 mtpa
Total 12.50 mtpa

5. Gujarat Ambuja Cement Ltd was first company toGujarat Ambuja Cement Ltd was first company to
recognizerecognize
the importance of branding.the importance of branding.

6. Position in Cement IndustryPosition in Cement Industry
● World's second largest cement producer after China.
● Production capacity 151.2 Million Tones (MT).
● The top 20 cement companies account for almost 70% of the total cement
production of the country.
● Total 129 plants, owned by 54 major companies across the nation.

7. Indian Cement Industry and their Market Shares %Indian Cement Industry and their Market Shares %
in 2001in 2001

8. Working Hard Towards OperationalWorking Hard Towards Operational
ExcellenceExcellence
 Take advantages of substantial sales tax and income tax incentives
 After 1983 enjoyed benefit, Gujarat, Himachal Pradhesh, Punjab plants get sales
tax benefit of about 90% of its fixed assets for a period of 14 years
 Chandrapur plant got sales tax benefit for 18 months
 Himachal Pradesh Plant Benefits :-
1. Prioritized power supply at a guaranteed cost for five years from the date of
commissioning
2. This region was cement deficit at that point of time.
3. Plant was closer to the mines and the Punjab grinding unit.
4. Area had substantial limestone deposits.

9. Difficulties of Transportation in Himachal PradeshDifficulties of Transportation in Himachal Pradesh
PlantPlant
 Three hills directly between the quarries and the nearest piece of flat land large enough for the
plant.
 The actual distance was just 17 km stretch road but full of potholes.
 To take limestone to the plant location there was a delay in time and large fuel bills of
transporting.
 GACL engineers decided to get a conveyor belt built across the three valleys, through the
mountains, but many big construction firms refused to do the job of conveyor belt.
 Then GACL engineers themselves decided to built the conveyor belt on their own and in just 18
months they completed the job.
 It cut down the distance to just 2.8 kms and the belt moved 800 tonnes of limestone every hour.
 Video - https://youtu.be/C1h_NYecrm0

10. Manufacturing of CementManufacturing of Cement
 Basic raw materials used for manufacturing of cement :
- Limestone
- Clay
- Silica
- Gypsum
• Cement manufacturing process involves the following steps:
- Quarrying and crushing
- Grinding and blending of raw materials
- Clinker production
- Finish grinding

11. Manufacturing of CementManufacturing of Cement

12. Material required for Production of CementMaterial required for Production of Cement
Per TonsPer Tons
 1.2 – 1.5 tons of limestone
 0.25 tons of coal
 120 kwh of power
 0.05 tons of gypsum

13. Cost ManagementCost Management
Electricity (Power)
• In the year 1998 set up fuel based captive power plant in Gujarat and Himachal
Pradesh.
• Selling the extra power generated to the local state government.
• Small measure were taken to reduce GACL power by using lower capacity
motors which bought down the consumption from 120 units/ton to 88-90 units
per ton in the year 1995

14. Fuel
•Used cheaper quality coal imported from South Africa
•Better quality furnace oil were imported for the diesel generator for the power
requirement.
•Ambuja Nagar plant located in agriultural belt of Saurshtra so they used groundnut
husk as a replacement for coal which brought down the coal consumption by 3%.
•The company also replaced the V belt drive with flat belt drive.
Cost ManagementCost Management

15. Freight
•Used sea route to transport rather than other way of transportation.
•Modern ports and freight-handling terminals at Muldwarka ,Surat and Panvel was
set up.
•The cost of transporting cement to Bombay was Rs 400 per tonne as compared to
1800 Rs per tonne by road.
•Rs 160 millions was saved roughly by GACL.
Cost ManagementCost Management

16. Enhance ProductivityEnhance Productivity
 Mining Process :-
 GACL worked hard to reduce mining expense
 The company introduced an Australian device surface miner
 Surface miner is energy efficient and it also recovered more material from a given area.
 Kiln Operations :-
 Required high power and directly related to the cement quality.
 GACL arranged training in JAPAN cement plant for engineers
 Brought down power cost from 120 units/ton to 90 units/ton
 Kiln Productivity :-
 Implementation of larger pre-heater
 Productivity increased by 12.5%

17.  Quality :-
 GACL installed a centrally operated computerized process control system
 Useful to evaluate optimum mix of raw material and redesign accordingly.
 Capacity Utilization :-
 GACL installed 24 hours monitoring system and introduced weekly checks
 Run its plants for 40 days continuously
 GACL achieved more than 100% capacity utilization during 1999
 Quality Control :-
 The Practice of reporting quality related data 48 times per day.
 Zero Error Electronic Rotary machine were installed for checking right quantity.
Enhance ProductivityEnhance Productivity

18. Techniques used by GACL to reduce its cost ofTechniques used by GACL to reduce its cost of
productionproduction
 V belt drives which consumed more energy were replaced by flat belt drives.
 Improved version of mechanical conveyor was used to eliminate breakdown and spillages.
 Adjusted retention time, maximized temperature and the rate of cooling to reduce power cost from
120 units per ton to 90 units per ton.
 Reduced mining expenses by implementing ‘ripping technology’.
 Introduced an Australian device called Surface miner to recover more material from the given area
and save energy.
 Computerized process control system for easy access and regulating the production process.
 Zero Error Electronic Rotary Machines to increase capacity utilization.
 Improvement in efficiency and lower shutdown rates to increase capacity utilization.

19. TRANSPORTATIONTRANSPORTATION
• GACL was the first Company to use water transportation for domestic as well as export
consignments, as a result the cost came down drastically.
• GACL setup a special cell to develop this idea. They build a special port at Muldwarka, Surat & Panvel.
• They also brought 3 Ships to transport Cement. (1 designed in Singapore & 2 from India)
• Cement is highly freight intensive in nature. Manufacturing of each tonne involved a transportation of
1.6 tonne of limestone, 0.25 tonnes of coal & 0.05 tonnes of gypsum.
• Unavailability of wagons for transportation on western and southeastern railways.
• Transporting Cement to Bombay by waterway cost Rs.400 /tonne as compared to Roadways
Rs.1800/tonne, GACL was able to save roughly around Rs. 160 Millions annually. (Which was a big
Profit)

20. LOGISITICSLOGISITICS
 GACL was one of the 1st cement producer company to introduce Integrated Logistics
System (ILS)
 Order Processing System
 Involved the flow of information about the orders from generation to fulfillments.
 Linked with WAN(Wide area network), EDE(Electronic data exchange), MRP(Material
resources Planning)
 Involved transmission of customer order, paper processing, retrieval from the
warehouse , dispatch to the transporters, transmission of information to production
planning department.

21. Inventory ManagementInventory Management
 Involved knowing both, when to order and how much to order.
 Management had to control the cost of carrying larger inventory.
 Had well developed system for inbound raw materials.
 Cement was packed in 25-50 kgs packet bags using jute bags.
 Was 1st
to use paper bags for packaging having advantage of low pilferage, better
preservation, appreance with low cost.
 Each bag contained the brand name, ISI logo, with identification number, price of the bag
and net weight of the bag.
PackagingPackaging

22. Future of GACLFuture of GACL
• GACL has been pursuing a combination of strategies like
 Strategic alliances
 Capacity expansion
 New plants
 Aggressive takeovers.
 It had also set up a one million ton grinding units, one at Bhatinda and another one at West
Bengal.
 GACL has also started offering ready mix cement.
 As 2004 got under way, GACL looked well placed in the Indian Cement Industry.
 Best quality cement, Good packaging, Higher customer satisfaction, Strong distribution network
 Eco friendly operations such as surface miners- blast free mining, Tree Plantation, Follow Global
Standards of environment.

23. ConclusionConclusion
 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 & maximise the
profit.