FEATURED PROJECT

CEMENT

 

 

The problem….. There were 3 main problems.  Profitability was very low and no-one knew which customers and products were profitable.  All the works were operating well below maximum capacity and market share was falling in some areas.

 

 

The project MBA examined the true profitability of all products and customers. We created a model of the business containing all the works, the customers, the silos, the bagging plants, the kilns, the mills, and the products. All was in one simple database which was then optimised to maximise profit.

 

The solution…. The kilns were found to be the key bottleneck resource of the company. They are the greatest expense and need to be maximised. All customers and products were ranked in added value per kiln hour. All variable costs were included……. Raw materials, energy, transport etc.

10% of customers were unprofitable and their prices were increased by an average of 25%. 3 of the 20 products were hardly profitable and their prices were increased by 10% to 12%. Most customers were retained

Some products were overpriced and discounts were offered to new large customers. Two extra bagging plants were commissioned and one works was taken out of commission for two years. Profitability and market share was increased.

 

The company is a $200 million group with 6 cement works in several European countries. Three of the works are within 500 kilometres of each other. The other 3 are over 1500 kilometres from the headquarters. Over 20 different varieties of cement were produced, including 12 which were bagged. Four of the works had bagging facilities.