How to maximise the profit

from customers & products in

cement plants
George Handley
MBA Management Consultants

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

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%

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

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

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

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

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

CRUSH

KILN
MILLS

SILOS

IF KILN IS BOTTLENECK..SWITCH TO
HIGH ADDED VALUE/KILN HR
CUSTOMERS/PRODUCTS. THEY ADD
LOTS OF VALUE AFTER KILN

CRUSH

KILN
MILLS

SILOS

IF MILLS ARE BOTTLENECK..SWITCH TO

HIGH ADDED VALUE/MILL HR
CUSTOMERS/PRODUCTS. THEY ADD LOTS
OF VALUE AFTER MILLBAGGED/ADDITIVES

Profit on the critical path/bottleneck

For every customer calculate
Added value (price-materials-energy-transportpackaging)
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

DOGS, STARS, CASHCOWS, &

PROBLEMS

high

Added value per hour

average

average
Busy
fools

low

Customer size
small
Each dot is a customer

large

Dos and Donts

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

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

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 worlds top 2 groups

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%

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

How to maximise the profit

from customers & products in
cement plants
George Handley
MBA Management Consultants