We realized that dealers expect delivery within five to six hours of placing an order. While this is possible, dispatching smaller orders of 8-10 tonne is a wasteful expense until another dealer from the same area also places an order. In that case, we can use larger trucks of 18-20 tonne capacity. But waiting for orders could cause an indefinite delay.
There was no control over whom the lorry driver would first deliver the order. By the time these decisions were taken, it would be five to six days since the first person placed the order. Within 24 hours of realizing the need, we deployed LCVs and we are now growing by 25 percent in the area. That's why our information system is the backbone of our operations.
CIO: What's your strategy behind increasing capacity utilization to 90-95 percent?
Dharmakrishnan A.V.: We have identified markets where there is a scarcity of cement. Our strategy is to move semi-finished goods to a location where other raw materials are available and manufacture cement at such locations.
Clinker, for example, is a semi-finished product. In the case of fly ash-based cement (ash produced during combustion of coal), almost 65 to 70 percent is clinker and around 25 to 30 percent is fly ash. So, we move clinker to the place where fly ash is available and grind the cement and sell it in nearby locations. This also helps drastically reduce transportation costs.
So, moving gypsum or even slag from a place like Vijayawada, where it is abundant, to a location where clinker is produced and then moving the finished product back to Vijayawada--because the demand there is high--is wastage of transportation. Instead, we move clinker to Vijayawada and grind it there, saving space and costs of transporting slag or gypsum. We currently have three grinding units and have plans of opening up three or four more units.
CIO: Vijayawada falls in A.P. which is politically unstable. How do you cope with decline in demand?
Dharmakrishnan A.V.: We have always anticipated a situation where the demand for cement will be much less than its supply, especially as many companies are planning to invest in Andhra Pradesh (A.P.). We also need to realize that within 10 years, only four states will be able to produce incremental capacity of cement.
A.P., Rajasthan, and Gujarat have additional resources and incremental capacity can come only from these places. We have no alternative but to rely on the raw materials from A.P., produce clinker, and grind it elsewhere. This is why we have put up a grinding unit in Bengal, close to a thermal station where we can acquire fly ash at cheap rates. That unit is the farthest grinding unit from a clinker source. Our capacity in A.P. is three million tonnes of which one million will be taken to Bengal for grinding.
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