12 feb 2021
How automated planning lowers distribution costs in the cement industry
AMCS Cement Planner increases efficiency and boosts both profit and margins
If the worldwide cement industry wants to profit from growing demand for global construction activities, then companies have to drive efficiencies into their operations. The solution is an innovative and automated planning system which reduces distribution costs, thereby increasing profitability and margins in the short-term, while strengthening the competitive edge of the cement industry into the future.
Globally, the cement market is growing, which provides companies a series of opportunities to take advantage of. On the other hand, there is the challenge of rising distribution costs - estimated to make up somewhere between 30 and 35% of the production cost of cement. Another challenge is to manage large orders on large contracts, either in bulk and/or bags. Manual planning can be extremely demanding on the cement company’s resources.
Empty runs and a rigid, non-flexible planning scheme between vehicles, plants and regions drive the costs of cement distribution up even further. Another factor which can impact operational efficiency and margin expansion is the use of external hauliers. The management and communication with those third-party partners, as well as the tracking of orders and execution, remains challenging since it traditionally means dealing with paper processes and documents.
State-of-the art solution to optimise cement planning and transport
State-of-the-art technology for the cement industry is the answer to tackle the challenges described above. It’s what we at AMCS calls “Intelligent Optimisation”, with superfast algorithms enabling real-time route planning, transport optimisation and dispatching of routes.
As a result, this dynamic planning and optimisation enables companies to meet everyday demands and complexities; whether it’s planning bulk distribution via tankers or in bags, to handling orders with narrow time windows. It also includes the integration of ad hoc cash orders on the fly, to minimise empty driving.
To streamline operations, all relevant IT systems are seamlessly integrated to create an efficient and logical workflow for the planning process. This is achieved through real-time integration between the ERP system and AMCS Cement Planner, as well as automatic exchange of weighing data from the weighbridge system.
The solution provides a series of features - for example; to build plans incrementally, monitor execution and re-plan as needed, including automatic suggestions to redirect a load already en route in order to minimise the impact of late cancellations or changes. As new orders are placed or traffic reports come in, routes can be optimised to deliver optimum customer service. Also, based on historical data, the solution will forecast when stocks need to be replenished. This really beefs up efficiency, as orders are automatically generated and moved into the planning system for route optimisation.
Centralised planning improves deployment of resources
In comparison with traditional systems, where the planning is not centralised, intelligent optimisation plans all orders centrally for different sites and trucks - for bulk as well as for bags. The daily planning starts when the system automatically generates the base plan for the next day’s routes.
The automatic planning feature is incredibly fast, providing a complete overview of the plan. Ad hoc and last-minute orders are optimised, eliminating late or missed deliveries. This distribution set-up covers the complete operation and blurs the lines between the previously divided regions. As a result, centralized planning provides cement companies with a series of major benefits. For instance, it brings transparency between the regions enables planning across districts, while maintaining a complete overview of all the orders and deliveries.
One positive business outcome is to knock down silos
One of the key factors in being an innovative IT solution is knocking down silos and achieving complete transparency between the different sites, even within the supply chain piece. With the real-time data exchange, the planning engine knows all vehicle positions and qualifications at any one time, as well as the vehicles’ distances to the sites. Vehicles are no longer restricted to the same plant for every pick-up but can move freely between them. As a result, the planner is easily able to choose the optimal vehicle for order fulfillment via the fastest and most efficient route.
Due to the end-to-end integration, both planning and dispatching orders are sent to local plants automatically. Cement companies can also work with order booking in time slots instead of locking the plan. Plans can then be reshuffled based on the latest data and decisions can be delayed as much as possible, giving yourself every possible chance to book that last-minute order!
Down the line, this results in intelligently determining the most cost-efficient location to deliver from. In the meantime, it also supports cement distributors to achieve agility and strengthen their competitive edge in highly demanding and dynamic planning environments. With this, the planning solution enables the cement industry to cut operational costs, improve customer service and free up resources in the planning department.
Case study Aalborg Portland
Seeing that transport costs had grown too high, Aalborg Portland decided to initiate a cost reduction process, while at the same time keeping customer service at the same high level as before.
The company is the largest producer of cement in Northern Europe and the world’s biggest exporter of white cement. At the beginning of the 1990s, Aalborg Portland had a fleet of more than 100 vehicles and 18 dispatchers who handled order entry and planning. As ready-mix concrete is delivered according to the just-in-time principle, delivery accuracy and efficient handling of urgent orders are crucial. As a result, Aalborg Portland decided to implement a system that could support the transport planning process.
An innovative planning system results in lower operational costs
Besides being able to cut operational costs, the system also enabled Aalborg Portland to free up resources in the planning department. Furthermore, the innovative planning system contributed to a significant reduction in empty running and a break-up of inefficient and rigid regions. Also, there has been a great improvement in capacity utilization, large administrative savings due to process automation and improved customer service through automatic warnings and faster response times.
“When we receive an order, the system immediately calculates which site is the cheapest to deliver from”, explains Knud Erik Busk. “The system knows all vehicle positions and qualifications at any one time, as well as the vehicles’ distances to the sites. We are therefore able to choose the optimal vehicle for order fulfillment very efficiently.”