1. How to maximise the profit from customers & products in cement plants
George Handley
MBA Management Consultants

2. Top ways to increase profits quickly……
MILK COWS & SHOOT DOGS
Dogs and cows insert diagram
FIND BOTTLENECKS & MAXIMISE PROFIT
OPTIMISE ALL PRODUCTION & DISTRIBUTION
LEAGUE TABLES OF CUSTOMER PROFITABILITY

3. Very quick ways to increase profits
Simple first steps…… 4 week programme
(Exercises you can do yourself in 4 weeks)
Advanced steps……. 2 to 4 months
Within months you can increase profits by 10% to 50%
Reduce cost of production and distribution by 5% to 20%

4. Simple ideas… steps How to measure profitability
Find plant bottleneck(s)… and critical path
Determine the most profitable products and customers
Make your bottleneck/critical path more effective
Milk cows and shoot dogs

5. Why throughput, critical path and bottlenecks are important
Added value per kiln hour varies from $1,300/hr up to $9,750/hr depending on product and customer
An inefficient plant can still double added value and increase profits tenfold by changing marketing mix
The smaller the plant the easier this is to achieve
Many investments are a waste of money
Cost/tonne is a poor way to measure cost
Use cost/bottleneck-hr & profit/bottleneck-hr

6. Exercises you can do yourself
Find the critical path and bottlenecks
League table of customer & product profit at bottlenecks
Create Boston Grid of cows and dogs

7. How to measure profitability
Use added value per hour on bottleneck
First find the bottleneck
Then calculate the added value of each customer and product on the bottleneck
Create a league table for customers
Create a league table for products
Get rid of dog customers

8. Finding the bottleneck
Make a diagram of the plant… about 10 to 20 boxes
Mark the non-constrained boxes in green
Mark the constrained boxes in red
Join up the boxes in main process sequence
This is the critical path
The red boxes on the critical path are bottlenecks

10. CRUSH
KILN
MILLS
SILOS
IF KILN IS BOTTLENECK…..SWITCH TO HIGH ADDED VALUE/KILN HR CUSTOMERS/PRODUCTS…. THEY ADD LOTS OF VALUE AFTER KILN

11. CRUSH
KILN
MILLS
SILOS
IF MILLS ARE BOTTLENECK…..SWITCH TO HIGH ADDED VALUE/MILL HR CUSTOMERS/PRODUCTS…. THEY ADD LOTS OF VALUE AFTER MILL…BAGGED/ADDITIVES

12. Profit on the critical path/bottleneck
For every customer calculate…
Added value (price-materials-energy-transport-packaging)
Calculate added value per bottleneck hour
Create a league table of customer added value per hour
Remove the worst customer added value per hour until bottleneck is free/removed
Always compare bottleneck investment to worst customers through the bottleneck

13. DOGS, STARS, CASHCOWS, & PROBLEMS
high
average
Added value per hour
average
Busy fools
low
Customer size
large
small
Each dot is a customer

14. Do’s and Don’ts Do not invest in or speed up a non-bottleneck
Only invest in bottlenecks
All investment is paid for by the least profitable products and customers that will use the investment
If bottleneck is a very expensive process, change the products and customers that use it/improve the mix/ remove & find more
If the bottleneck is not expensive, buy more capacity

15. Advanced steps
A linear programming optimisation model of production and distribution to optimise complex groups of resources
Optimise pricing to maximise profits in market
Optimise distribution to minimise costs
Capacity investment plan

16. examples
European group of 3 plants reduced total production & distribution cost by 18%
A small producer improved customer and product mix…. Profits increased by 30%
One plant dropped 3 simple products and doubled bagging capacity. Customer profit increased by 25%
A major group reduced distribution cost by 12%
Used by the world’s top 2 groups

17. If you have several sites/works……
Optimise over all the sites combined
Minimising the combined cost of production & distribution
Which plant should make which product
Minimise cost of distribution
Which plant should supply which customer
Which plant should reduce production
Costs can be reduced by 10% to 20%

18. Benefits No major investment Short time scale
In a reduced market, increase profits by
Reduction in production & distribution cost per tonne
Sell to high profit customers, even at lower prices
Maximise yield from plant
Decide which plant to scale down/reduce

19. How to maximise the profit from customers & products in cement plants
George Handley
MBA Management Consultants