Cost optimization study is crucial to maximize returns under the given constraints, by maximizing desired factors and minimizing undesired ones.
Costs of running a plant are escalating every year and cement plants have limited influence on external variables such as market prices, fuel cost, etc. Thus, the focus, today, for improving the bottom line is on optimizing operations and reducing costs. Some of the cost optimization possibilities are follows:
- Optimization of available raw material, correctives, additives, fuel.
- Measures to enhance life of mines.
- Optimum utilization of equipment, enhanced performance/ efficiency.
- Control on stores and spares/consumables, saving in direct cost.
- Reduction in energy consumption.
- De-bottlenecking and modernization.
- Reduction in Logistics Cost.
- Sales Dispatch Rationalization.
- Product Mix Optimization.
- Optimizing organization structure.
Cost Optimization involves:
- Identification of Cost Drivers: List areas which have significant contribution to cost.
- Data Collection: Organize data on cost influencers.
- Activity Cost Head Matrix: Map the cost against activities which influence cost.
- Benchmarking against Industry Standards: Compare the process and costs against the industry standards to better under the improvement areas.
- Analysis: Analyzing the data with help of statistical tools like linear programming.
- Strategic Option: Define the steps for cost optimization.
- Action Plans: Layout the action plan for implementation of proposed cost optimization measures.
It helps in identifying the cost drivers and reducing costs in the identified areas.