Cement IndustryRisk Analytics For Private circulation onlyJune 2018

Risk Advisory

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Finance in the Digital ageCement Industry Risk Analytics

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OverviewIntroductionIndia is the second largest producer of cement in the world. No wonder, India's cement industry is a vital part of its economy, providing employment to more than a million people, directly or indirectly. Ever since it was deregulated in 1982, the Indian cement industry has attracted huge investments, both from Indian as well as foreign investors.

Deloitte Risk Analytics SolutionOur teams help design, implement, and embed technology, enabling our clients to identify critical to have insights into these metrics for businesses, which can be achieved by incorporating data from source systems such as SAP, Oracle, SunGuard, etc., using technology-driven analytical tools to highlight exceptions, outliers, and trends which helps clients to improve and at times reinvent their processes – enforcing accurate decision-making and efficiency.

Ad hoc to Technology-DrivenIndustry is extremely conscious of quality, environmental health and safety. Most of the cement plants have received ISO 9000 series of accreditation, ISO 14001 and OHSAS-18001 certification. Organizations spend huge amounts on the best ERP systems to record and track transactional data but rely on manual processes to make sure that the information is valid, correct, and appropriate.

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The cement consumption is expected to increase at a CAGR of 7.3% during 2011-2019 to reach 385 million tonnes.

The housing sector accounts for the highest demand, accounting for 65% of the total consumption in India in 2014. The other major end markets of cement include infrastructure at 17%, commercial construction at 13%, and industrial construction at 5% in 2014.

The trend of increasing cement consumption is likely to continue, owing to the rise in demand from housing and infrastructure sectors.

Cement Industry Risk Analytics | Overview

Cement Industry Risk Analytics | Key Operation Areas

Key Operation AreasProcure to Pay

• Material receipts v/s tolerance monitoring• Quality monitoring and related debit

notes• Vendor analysis• Rate variation for same products• Open Purchase Orders

Sales and Marketing

• Price changes and updates to price masters

• Sales related credit and debit notes

• Accounting of receipts and collections

• Receivables monitoring• Credit limit monitoring

and compliance

Logistics

• Rate changes linked to fuel price changes

• Truck load, route optimization, and turnaround time

• Stock in transit monitoring and recoveries from transporters for shortages/damages

• Sales related credit and debit notes products

Inventory Management

• Slow moving and ageing analysis

• Inventory levels monitoring• Classification of Inventory

into Vital, Essential, and Desirable

• Stock outs & over burden at godowns

Production

• Input v/s Output ratio monitoring

• Accounting of abnormal losses and approvals

• Consumption accounting• Reconciliation of quantity

produced and consumed v/s DCS quantities

Packing Plant Operations

• Contract Labor deployment• Shift optimization• Power consumption –

regular v/s peak hours

Areas covered under each focus

area in cement division

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Cement Industry Risk Analytics | Key Industry Challenges

Key Industry ChallengesThere are a number of constraints and bottlenecks which are hindering the growth of this core sector industry. A few of the major concerns of the industry are mentioned below:

• Coal price variation and high cost• High cost of transport• Fleet utilization and route selection

in-efficiency• Fuel cost impact• Cash discount & other discounts

(Prompt payment discount)• Revenue leakage through price change• Debtors performance• High plant maintenance and cost

impact• Disablers impacting the throughput of

the plant

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Risk Analytics ApproachAt Deloitte, our teams help design, implement, and embed technology, enabling our clients identify, assess, and mitigate risks in the various processes by integrating and analyzing the data from multiple source systems. As the ERP systems become more and more powerful to maintain huge databases across geographies, the complexity of the data structure increases manifolds. The analytics platform provides insight into the overall health of controls from all areas from Requisitioning through to Payment and from Order to Receipt as well as Segregation of Duties and Master Data.

Cement Industry Risk Analytics | Risk Analytics Approach

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Data-to-Insight-to-ActionWith the use of analytics, organizations can run their customer order processing, purchasing, and other business-critical transactions through preset filters, such as value thresholds and data completeness parameters. These exception reports act as an early warning system for potential business risks and regulatory non-compliance and reduce the risk of material financial leakage.

Cement Industry Risk Analytics | Risk Analytics Approach

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Potential BenefitsProcurement• Highlighting Potential Duplicate

vendors• Material price variation• Invoicing analysis and trending

Inventory Analysis• Dead & slow-moving stock analysis• Top/bottom purchased items• Material movement analysis• Excessive inventory level changes• Plant sales vs expenses analysis

Payment Analysis• Payments do not match Invoice• Duplicate payments across payment

systems (ERP, E-payables, P-cards)• Split payments• Payment SoD conflicts

Logistics• Fleet and route optimization• Tonnage outlier (over-capacity)• Fuel cost impact analysis• POD & payment trending

Sales & Marketing• Cash discount analysis• Scheme analysis and variation trending• High- value credit note analysis• Price change and impact (Revenue

Leakage)• Expected credit loss analysis

Reporting Dashboard

Cement Industry Risk Analytics | Reporting Dashboard

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Overview DashboardThe overview dashboard gives insights to various views like monthly sales, share of business by vendors, share of materials along with material price outliers.

The tool’s interactive data filtering gives you the ability to slice and dice the data in any way, e.g., Price variation by product, Spend volume by category, organization unit, cost center, project, or other relevant dimension.

Fleet Utilization DashboardDashboard shows weight and volume utilization of fleet across plants, lanes, and monthly view to identify efficiency of fleet. A scatter plot also highlights fleet with low utilization from both weight and volume.

Facilitates Trends, Correlations, and Drill-Down Interactively

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Cement Industry Risk Analytics | Overview

Regional Sales AnalysisBased on Sales / Sales Return, spatial analysis can help identify hotspots across the nation (or globe) and co-relate sales activities with plant operations.

The rate of data is increasing faster than ever before. Pressurefrom competition is fierce, and everyone wants to know howthey can harness the power of data and analytics to realizereal business values and drive better efficiencies. The DeloitteAnalytics solution can help you discover the art of possible usinganalytics to answer your toughest business questions. Anythingfrom “are the processes compliant to defined processes?” to“how can I forecast my sales return / claims?”, and much, much

more. The objective is to demonstrate our interactive dashboard,industry knowledge, and analytics expertise with latest tools,technology, data sets, and live examples.

Deloitte Analytics is an opportunity for cultivation – of ideas,professional relationship, and opportunities – to help acceleratebreakthroughs using data. The focus is to help our clients solvesome of the biggest risks using advanced analytics and data.

Finance in the Digital age

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ContactRohit Mahajan President Risk Advisory rmahajan@deloitte.com

Kedar Sawale Partner Risk Advisory ksawale@deloitte.com

Johar Batterywala Partner Risk Advisory jobatterywala@deloitte.com

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Cement Industry Risk Analytics

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