G 2 cost optimisation in paint industry - by subir bose

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G 2 cost optimisation in paint industry - by subir bose

  1. 1. PRESENTATION ON “ PAINT INDUSTRY COST OPTIMIZATION”
  2. 2. <ul><li>BASIC OBJECTIVE OF COST CONTROL IS </li></ul><ul><li>PROFITABILITY IMPROVEMENT. </li></ul><ul><li>PROFITABILITY CAN BE MAXIMISED EITHER BY IMPROVING PRICE REALISATION OR LOWERING COST. </li></ul><ul><li>MOST ORGANISATIONS FOR IMPROVING PROFITABILITY GO FOR THE SEEMINGLY EASIER OPTION OF COST CONTROL SINCE IT IS INTERNAL TO THE SYSTEM AND THEREFORE HOPEFULLY CONTROLLABLE. </li></ul><ul><li>PAINT INDUSTRY COST STRUCTURES INDICATE THAT </li></ul><ul><ul><ul><li>VARIABLE COST IS 89 % </li></ul></ul></ul><ul><ul><ul><li>FIXED COST IS 11% </li></ul></ul></ul><ul><li>VARIABLE COST CONTROL IS THE KEY TO SUCCESS </li></ul>COST CONTROL
  3. 3. MAJOR COST ELEMENTS IN THE PAINT INDUSTRY Basis : Data Based On Published Balance Sheets Of Five Major Paint Companies of last 3 yrs.
  4. 4. <ul><li>PURCHASE COST </li></ul><ul><li>BULK DISCOUNTS. </li></ul><ul><li>SINGLE SOURCE Vs MULTIPLE SOURCE. </li></ul><ul><li>ALTERNATE RAW MATERIALS. </li></ul><ul><li>IMPORT Vs LOCAL. </li></ul><ul><li>MAKE OR BUY DECISION. </li></ul><ul><li>VENDOR DEVELOPMENT ACTIVITY. </li></ul>FACTORS IMPACTING RAW MATERIAL COST
  5. 5. <ul><li>FORMULATION COST </li></ul><ul><li>LEAST COST FORMULA. </li></ul><ul><li>BATCH COST CONTROL. </li></ul><ul><li>i ) USAGE VARIANCE. </li></ul><ul><li>ii ) YIELD VARIANCE. </li></ul>FACTORS IMPACTING RAW MATERIAL COST
  6. 6. <ul><li>THE MAJOR FACTORS IMPACTING PRODUCTION COST ARE : </li></ul><ul><li>POWER / FUEL COST. </li></ul><ul><li>MAINTENANCE COST. </li></ul><ul><li>LEVEL OF AUTOMATION. </li></ul><ul><li>MANPOWER COST. </li></ul><ul><li>WASTE MINIMISATION. </li></ul><ul><li>CAPACITY UTILISATION. </li></ul>PRODUCTION COST
  7. 7. <ul><li>POWER COST </li></ul><ul><li>AUTOMATIC POWER FACTOR CORRECTION ( APFC) </li></ul><ul><li>PANEL. </li></ul><ul><li>AUTOMATIC VOLTAGE REGULATOR ( AVR ). </li></ul><ul><li>MAXIMUM DEMAND CONTROLLER. </li></ul><ul><li>ENERGY EFFICIENT MOTOR. </li></ul>FACTORS IMPACTING PRODUCTION COST
  8. 8. <ul><li>FUEL COST </li></ul><ul><li>DG WITH AUTO MAIN FAILURE ( AMF ) </li></ul><ul><li>PANEL . </li></ul><ul><li>PROPER INSULATION OF EQUIPMENT, </li></ul><ul><ul><ul><li>PIPELINES ETC. </li></ul></ul></ul><ul><li>USE OF NATURAL GAS . </li></ul>FACTORS IMPACTING PRODUCTION COST
  9. 9. <ul><li>MAINTENANCE COST </li></ul><ul><li>PREVENTIVE MAINTENANCE . </li></ul><ul><li>ROUTINE SHOP FLOOR CHECK UP. </li></ul><ul><li>IMPORTED SPARE PARTS / </li></ul><ul><li>CONSUMABLES Vs LOCAL DEVELOPMENT. </li></ul><ul><li>EFFICIENT SPARE PARTS MANAGEMENT SYSTEM. </li></ul>FACTORS IMPACTING PRODUCTIVITY
  10. 10. <ul><li>MANPOWER </li></ul><ul><ul><li>PRODUCTIVITY NORMS. </li></ul></ul><ul><ul><li>PROPER MANPOWER ALLOCATION. </li></ul></ul><ul><ul><li>CONTRACT LABOUR. </li></ul></ul><ul><ul><li>AUTOMATION. </li></ul></ul>FACTORS IMPACTING PRODUCTION COST
  11. 11. <ul><li>AUTOMATION </li></ul><ul><ul><ul><ul><li>USE OF PLC / DCS IN OPERATION CONTROL. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>AUTOMATIC POWDER CHARGING </li></ul></ul></ul></ul><ul><ul><ul><ul><li>SYSTEM WITH SILOS. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>AUTOMATIC LIQUID TRANSFER. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>ASRS ( AUTOMATIC STORAGE & </li></ul></ul></ul></ul><ul><ul><ul><ul><li>RETRIEVAL SYSTEM ). </li></ul></ul></ul></ul><ul><ul><ul><ul><li>ROBOTIC PALLETIZATION. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>FULLY AUTOMATIC FILLING M/C. </li></ul></ul></ul></ul>FACTORS IMPACTING PRODUCTION COST
  12. 12. <ul><li>WASTE MINIMISATION </li></ul><ul><li>WEIGHMENT PRACTICES OF SOLIDS / </li></ul><ul><li>LIQUIDS. </li></ul><ul><li>SHOPFLOOR DISCIPLINE TO AVOID </li></ul><ul><li>HANDLING LOSSES. </li></ul><ul><li>MINIMUM RETENTION. </li></ul><ul><li>TO REUSE THE RM POWDER DUST & </li></ul><ul><li>WASHING SOLVENTS. </li></ul><ul><li>AUTOMATION . </li></ul>FACTORS IMPACTING PRODUCTION COST <ul><li>CAPACITY UTILISATION </li></ul>
  13. 13. FACTORS IMPACTING FREIGHT COST <ul><li>RM SOURCING VS PRODUCTION </li></ul><ul><li>CENTRES. </li></ul><ul><li>PRODUCTION CENTRES VS </li></ul><ul><li>SALES OUTLETS. </li></ul>
  14. 14. FACTORS IMPACTING SELLING & DISTRIBUTION COST <ul><li>ADVERTISEMENT COST. </li></ul><ul><li>SALES PROMOTION COST. </li></ul><ul><li>GODOWN RENT. </li></ul><ul><li>PAYMENT PERFORMANCE DISCOUNT. </li></ul>
  15. 15. FACTORS IMPACTING FIXED COST <ul><li>MANPOWER COST. </li></ul><ul><li>INFORMATION TECHNOLOGY COST. </li></ul><ul><li>INTEREST COST. </li></ul><ul><li>OVERHEAD COST. </li></ul>
  16. 16. SUMMARY <ul><li>COST CONTROL MEASURES ARE IMPORTANT AND ESSENTIAL FOR SURVIVAL IN A COMPETITIVE INDUSTRY. </li></ul><ul><li>VARIABLE COST CONTROL IS THE KEY. IMPROVEMENTS ACHIEVED WILL HAVE MAXIMUM IMPACT ON COST STRUCTURES. </li></ul><ul><li>COST CONTROL GAINS ARE SMALL INCREMENTAL IN NATURE AND REQUIRE CONSTANT FOCUS AND EFFORTS FOR OPTIMUM RESULTS. </li></ul>
  17. 17. Thank you

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