Author: Carlos Centurion
The cement industry, a cornerstone of construction, is rife with challenges that demand attention. In this blog post, I’ll analyze the hurdles cement manufacturers face and explore the opportunities cement supply chain strategy offers to increase agility in the decision process and drive additional revenue.
1. Siloed Approach That Hinders Optimization
Traditionally, the cement industry has been fixated on the output from the plant to the customer, neglecting the critical starting point – suppliers and intermediate products. The lack of a comprehensive end-to-end approach blocks the design of the supply chain, leaving significant opportunities on the table. Understanding supplier contracts, manufacturing options, and capacity planning remains an unaddressed challenge.
2. Relying On A Shortsighted Costing Method
The reliance on standard costing in cement production masks the true economic complexities at play. A shortsighted focus on per-unit costs, fixed for each plant, limits the company’s ability to understand the real dynamics between shipping costs, material costs, conversion costs, and labor costs. This delusive approach prevents leaders from finding opportunities and optimizing their supply chain to drive revenue and profitability effectively.
3. Lack Of Granularity
The cement industry’s tendency to stay at a high-level, limits potential improvements achievable through network design and granular analysis. Opportunities for blending throughout the production network remain untapped as companies remain fixated on logistics instead of delving into the specific details that could significantly drive efficiency and cost-effectiveness.
4. Sustainability Pressure: Shifting The Cement Production Strategy
As one of the leading contributors to carbon emissions, the cement industry faces a dilemma. While some see sustainability as an opportunity, many view it as a threat. The industry is under pressure to transform how cement is produced, where it is produced, and how it reaches the customer. This transition is seen as a financial burden, when instead it could be an opportunity to transform traditional practices and redesign the production strategy to capture more customers who want more sustainable green cement.
The cement industry is grappling with many challenges that demand strategic and optimized supply chain decisions. A fragmented approach, shortsighted costing methods, a lack of granularity, and sustainability pressures collectively keep supply chain leaders up at night. Tools and approaches exist to manage all these challenges. In my experience, the delta can be as high as 2-5 margin points and the opportunity to be recognized as an industry leader.
Don’t miss out on the video 4 Key Opportunities in Cement Supply Chain Optimization and discover how cement companies are overcoming these issues and leading the way in the industry.