The cement sector is plagued by certain operational problems related to distribution and distribution channels and procurement, and thus requires streamlined, effective processes to address these, says Vinaya Varma, CEO, mjunction.
The cement industry in India is driven by the immense growth in housing and commercial sectors, infrastructure development, and construction of the transportation ecosystem.
India is the second largest cement producer in the world. Infrastructure projects are getting a tremendous boost. Hence, this industry is a priority sector for the country right now.
Challenges faced by the industry
The cement sector is plagued by certain operational problems related to distribution and distribution channels, procurement and thus requires streamlined, effective processes to address these. mjunction, through its basket of services, provides key benefits and solutions to these using innovative digital technology to bring in efficiency and transparency.
We need to contribute to operational excellence in the sector, by helping to create a cost-efficient cement industry which henceforth will lead to a quicker realisation of the´Make in India´ dream.
A major challenge for the cement sector lies in engaging with trade partners and gaining mindshare, as most purchase decisions are influenced by opinion leaders and product differentiation is negligible. Building a database of this critical segment, and capturing the performance data to objectively reward, are not only cumbersome but also often ineffective in terms of actual and timely implementation. Hence a favourable, friendly and motivated distribution channel is a key need of this sector. At mjunction, we are using analytics capabilities as enablers to improve the channel performance by up to 7 per cent by designing, implementing and managing a structured loyalty and gifting programme for the resellers. A leading cement company, which wanted to make its existing loyalty or recognition programme more effective for its influencers such as engineers, dealers and contractors, engaged mjunction for the same.
The company said that mjunction digitised its programme completely, bringing in greater efficiency and reducing cost. Using digital technology to capture real-time leads, this completely online solution already has almost 60 per cent of the company´s dealers and nearly 50 per cent of its influencers under its ambit. Analytics brings in a greater degree of correlation between the quantum of sales facilitated by the contractors and engineers and the rewards received by them. A spokesperson of the company said, ´mjunction´s programme is all-encompassing. Recently, they conducted a tambola game completely online for 2,700 of our dealers. This was a part of the loyalty programme. For the winners, gifting will also be sourced from their online portal. For us, these programmes are marketing efforts that recognise the contribution of the channel partners and reward them to encourage loyalty behaviour. mjunction is helping us to do it in a streamlined and structured manner,´ he added.
Procurement of key cost drivers such as packing bags, which comprise a lion´s share of the distribution cost, was a huge headache earlier for cement companies. E-procurement supplemented by mjunction´s knowledge intensive e-sourcing strategies, have made it a seamless, efficient, cost-effective and transparent process.
Also, logistical concerns such as the shortage of railway wagons and inadequate rail links, makes the roadways a preferred mode of transportation. Hence, identifying the right logistics provider who will provide the service at optimum cost is important. Coal and other raw materials lack adequate number of vendors and hence the production cost of cement usually goes up. mjunction aids procurement of these as well as non-critical items. Through e-tendering and outcome-based dynamic e-negotiation strategies, the company aids cement companies in finding the optimum vendor.
´mjunction´s live bidding platform eliminates the involvement of intermediaries, ensuring that the price arrived is completely market driven,´ said a cement company. This leads to savings and reduction in the time cycle for sourcing of materials. For the cement companies, it cuts down on both the manual negotiation process as well as the time taken to do that.
Using this service, mjunction has facilitated the procurement of PP bags for leading cement companies and has delivered savings of up to Rs 5.63 cr. It has also procured raw/washed coal for a cement major resulting in up to 8 per cent savings.
India produces 300 million tonnes (MT) of cement annually, with a forecast capacity of 550 MT by 2020. Massive capex spends amounting to Rs 300,000 crore have been planned for replacement of old plants. Expansion plans and production increase is inevitably accompanied by generation of idle assets, which includes decommissioned units, and scrap. Disposing them is a time-consuming and arduous process, which begins with manual tendering, speaking to each buyer, negotiating with them and finally arriving at a price. For the buyers too, it means frequent travel, involving time and cost, due to which the entire process had become cumbersome.
According to a leading cement plant, ´mjunction´s e-auction process has helped us to sell various types of scrap generated across all our plants, including a few in remote locations, at a fair market price and reduced cycle time when compared to our manual and offline processes. We have experienced good numbers of buyer´s participation in the e-auctions and the best part is that it is convenient and hassle-free for us and buyers both.´ mjunction informed that it has done inventorying and valuations of decommissioned units, and for various types of equipment for leading cement companies. When it comes to e-selling, it devises customised auction strategies based on the needs of the client, nature of the asset and market scenario.
The dealers and distributors, who are a crucial success factor for any cement manufacturing industry, face challenges while buying industrial items which require huge working capital. mjunction plans towards identifying the pain points of such industries plagued by follow up for payments, constricted demand, operational cost, etc., to create a win-win situation for both the company and the channel partners. It has banks and financial institutions on board to provide access to finance at essential points of the transaction lifecycle at competitive terms (with conditions applied), thus increasing the buyer base for the industry and also enabling the dealers to fund bigger buys. This programme has been running very successfully in mjunction for several leading steel companies.
Despite the convenience, transparency and effectiveness of online programmes and transactions, there is a scepticism which still exists in a traditional sector such as cement. mjunction has taken up this challenge to instill more trust and confidence in the minds of all stakeholders about the online systems.