Cement companies adopt innovative cost-cutting measures
by Anil Sasi

FOR cement companies innovation may be the key to cost competitiveness. Hence, larger cement companies are seen to be shifting to a number of innovative cost-cutting measures to enhance bottomlines.

Bypassing the dealers to sell cement directly to the customer
–dealer-free route to supply to bulk consumers, including builders and infrastructure companies to save on the dealer margin
–customers encouraged to contact the cement companies directly with their requirements, following which the manufacturer delivers the cement to their doorsteps

Shifting from the traditional rail-road option to cheaper sea transportation to target distant markets
–saving on logistics expenses
–coastal transportation route, rather than rail or road
–high capacity Volvo trucks for road transportation to cut down on costs

Using crushed sugarcane for meeting fuel requirements.
–to bring down energy costs, most of the cement companies have already shifted entirely to captive power stations
–using a variety of fuels, including pet coke and lignite
Cement companies are also tracking the international polypropylene prices to strike deals with manufacturers of polypropylene bags, used as packaging material in the country

(Source: Hindu Business Line here.)

“People usually think of innovation as technology,” but that’s not the only way to demonstrate innovation. They can show innovation by producing an existing product or service in a new way or doing something creative with an old kind of business.”

(Source: The Journal Times here.)

One of the most memorable case studies I came across on Japanese Management was the case of the empty soap box, which happened in one of Japan’s biggest cosmetics companies. The company received a complaint that a consumer had bought a soap box that was empty. Immediately the authorities isolated the problem to the assembly line which transported all the packaged boxes of soap to the delivery department. For some reason, one soap box went through the assembly line empty. Management asked its engineers to solve the problem. Post-haste, the engineers worked hard to devise an X-ray machine with high-resolutionmonitors manned by two people to watch all the soap boxes that passed through the line to make sure they were not empty. No doubt, they worked hard
and they worked fast but they spent a whoopee amount to do so. But when a rank-and-file employee in a small company was posed with the same problem, did not get into complications of X-rays, etc but instead came out with another solution.

He bought a strong industrial electric fanand pointed it at the assembly line. He switched the fan on, and as each soap box passed the fan, it simply blew the empty boxes out of the line. Moral of the story: always look for simple & effective solutions. Devise the simplest possible solution that solves the problem So, learn to focus on solutions not on problems. And hence “Innovate”.

Clayton Christensen – Innovation Day 3
Ten Types of Innovation – Category 2

Process:

Innovation type 3: Enabling Process

Description of Type: How you support the company’s core processes and workers
How do you innovate in this type: Innovation typically attracts talent to the organization and helps people do their work faster, more easily, more efficiently and more profitably.
Business example: Starbucks can deliver its profitable store/coffee experience to customers because it offers better-than-market compensation and employment benefits to its store workers – usually part-time, educated, professional and responsive people.

Innovation type 4: Core Processes

Description of Type: How you create and add value to your offerings
How do you innovate in this type: Innovation typically involves a dramatic change in “business as usual” that delivers blistering speed-to-market, enables the enterprise to quickly allocate or reallocate resources around big new opportunities, enables rapid prototyping and testing and/or realizes market-leading margins due to new cost-saving processes.
Business Example: Wal-Mart continues to grow profitably through core process innovations such as real-time inventory management systems, aggressive volume/pricing/delivery contracts with merchandise providers and systems that give storage managers the ability to identify changing buyer behaviors and respond quickly with new pricing and merchandising configurations.

“The competitiveness of a business lies in its ability to innovate and improve itself, Lin Hsin-i, a senior adviser to the president said yesterday in Kaohsiung.

He said many chief executive officers are reluctant to institute changes or examine their businesses and make needed improvements, because doing so would be a denial of the past. However, these steps are vital for keeping a company viable since there is not a single solution that can cope with the ever-changing market and situations that are liable to shift without notice.”

(Source: E-Taiwan News here.)

Clayton Christensen – Innovation Day 2
Ten Types of Innovation – Category 1

Finance:

Innovation type 1: Business Model

Description of Type: How you make money
How do you innovate in this type: By fundamentally reconsidering how the company and its offerings are structured to obtain revenue.
Business example: DELL revolutionized the personal computer business model by collecting money before the consumer’s PC was even assembled and shipped (resulting in net positive working capital of seven to eight days)

Innovation type 2: Networks and Alliances

Description of Type: How you join forces with other companies for mutual benefit
How do you innovate in this type: No company can or should do everything by itself. Networks provide a way for companies to leverage each other’s offerings, customers and capabilities.
Business Example: Consumer goods company Sara Lee realzed that its core competencies were in consumer insight, brand management, marketing and distribution. Thus it divested itself of a majority of it manufacturing operations and formed alliances with manufacturing and supply chain partners.