g 2 cost optimisation in paint industry - by subir bose
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PRESENTATION PRESENTATION
ON ON
““PAINT INDUSTRYPAINT INDUSTRY
COST OPTIMIZATION”COST OPTIMIZATION”
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BASIC OBJECTIVE OF COST CONTROL IS PROFITABILITY IMPROVEMENT.
PROFITABILITY CAN BE MAXIMISED EITHER BY IMPROVING PRICE REALISATION OR LOWERING COST.
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.
PAINT INDUSTRY COST STRUCTURES INDICATE THAT VARIABLE COST IS 89 % FIXED COST IS 11%VARIABLE COST CONTROL IS THE KEY TO SUCCESS
COST CONTROL
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MAJOR COST ELEMENTS IN THE PAINT INDUSTRY
LOW HI GH
VARIABLE COSTRAW MATERIAL COST 55.80 72.80 70.00
PRODUCTION COST 1.20 2.90 3.00
FREIGHT & HANDLING COST 3.90 5.20 5.10
SELLING & DISTRIBUTION COST 3.00 14.10 10.90
FIXED COST 89.00
MANPOWER COST 4.90 5.90 6.20
IT COST 0.20 0.30 0.20
OVERHEADS 3.00 7.60 4.20
INTEREST 0.10 2.50 0.4011.00100.00TOTAL
% TO NET SALESCOST ELEMENT
% TO
TOTAL
COST
SUB-TOTAL
SUB-TOTAL
Basis : Data Based On Published Balance Sheets Of Five Major Paint Companies of last 3 yrs.
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PURCHASE COST
BULK DISCOUNTS.
SINGLE SOURCE Vs MULTIPLE SOURCE.
ALTERNATE RAW MATERIALS.
IMPORT Vs LOCAL.
MAKE OR BUY DECISION.
VENDOR DEVELOPMENT ACTIVITY.
FACTORS IMPACTING RAW MATERIAL COST
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FORMULATION COST
LEAST COST FORMULA.
BATCH COST CONTROL.
i ) USAGE VARIANCE.
ii ) YIELD VARIANCE.
FACTORS IMPACTING RAW MATERIAL COST
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THE MAJOR FACTORS IMPACTING PRODUCTION COST ARE :
POWER / FUEL COST.
MAINTENANCE COST.
LEVEL OF AUTOMATION.
MANPOWER COST.
WASTE MINIMISATION.
CAPACITY UTILISATION.
PRODUCTION COST
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POWER COST
AUTOMATIC POWER FACTOR CORRECTION ( APFC) PANEL.
AUTOMATIC VOLTAGE REGULATOR ( AVR ).
MAXIMUM DEMAND CONTROLLER.
ENERGY EFFICIENT MOTOR.
FACTORS IMPACTING PRODUCTION COST
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FUEL COST
DG WITH AUTO MAIN FAILURE ( AMF ) PANEL.
PROPER INSULATION OF EQUIPMENT, PIPELINES ETC.
USE OF NATURAL GAS .
FACTORS IMPACTING PRODUCTION COST
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MAINTENANCE COST
PREVENTIVE MAINTENANCE .
ROUTINE SHOP FLOOR CHECK UP.
IMPORTED SPARE PARTS / CONSUMABLES Vs LOCAL DEVELOPMENT.
EFFICIENT SPARE PARTS MANAGEMENT SYSTEM.
FACTORS IMPACTING PRODUCTIVITY
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MANPOWER
PRODUCTIVITY NORMS.
PROPER MANPOWER ALLOCATION.
CONTRACT LABOUR.
AUTOMATION.
FACTORS IMPACTING PRODUCTION COST
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AUTOMATION USE OF PLC / DCS IN OPERATION CONTROL. AUTOMATIC POWDER CHARGING SYSTEM WITH SILOS. AUTOMATIC LIQUID TRANSFER. ASRS ( AUTOMATIC STORAGE & RETRIEVAL SYSTEM ). ROBOTIC PALLETIZATION. FULLY AUTOMATIC FILLING M/C.
FACTORS IMPACTING PRODUCTION COST
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WASTE MINIMISATION
WEIGHMENT PRACTICES OF SOLIDS / LIQUIDS.
SHOPFLOOR DISCIPLINE TO AVOID HANDLING LOSSES.
MINIMUM RETENTION.
TO REUSE THE RM POWDER DUST & WASHING SOLVENTS.
AUTOMATION .
FACTORS IMPACTING PRODUCTION COST
CAPACITY UTILISATION
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FACTORS IMPACTING FREIGHT COST
RM SOURCING VS PRODUCTION CENTRES.
PRODUCTION CENTRES VS SALES OUTLETS.
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FACTORS IMPACTING SELLING & DISTRIBUTION COST
ADVERTISEMENT COST.
SALES PROMOTION COST.
GODOWN RENT.
PAYMENT PERFORMANCE DISCOUNT.
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FACTORS IMPACTING FIXED COST
MANPOWER COST.
INFORMATION TECHNOLOGY COST.
INTEREST COST.
OVERHEAD COST.
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SUMMARY
COST CONTROL MEASURES ARE IMPORTANT AND ESSENTIAL FOR SURVIVAL IN A COMPETITIVE INDUSTRY.
VARIABLE COST CONTROL IS THE KEY.IMPROVEMENTS ACHIEVED WILL HAVE MAXIMUM IMPACT ON COST STRUCTURES.
COST CONTROL GAINS ARE SMALL INCREMENTAL IN NATURE AND REQUIRE CONSTANT FOCUS AND EFFORTS FOR
OPTIMUM RESULTS.
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Thank you