CEMs have started feeling the heat of rising inflation that affects production costs. Sumptuous raw materials and outgo of higher wages is reducing profit margins of manufacturers. Rising inflation is a natural phenomenon in any economy when demand exceeds supply. However, the present situation seems different for equipment producers, as rising inflation followed by the initiative of the central bank to restrict monetary supply, is bringing the actual demand of equipment down when competition among equipment manufacturers is high in the price sensitive construction sector.
According to Mr. Sharma, "at ECEL, we carry out design changes making it easier for customers to afford the equipment from operation point of view. Design and engineering modifications are being made in sync with Indian job site requirements, enabling the equipment to withstand the abuses and misuse while performing its task. Equipment are much exposed to abuse as operating hands are comparatively less technically qualified in India." He mentions, "engineering improvements can be seen in our equipment, allowing them to function more effectively in India's diverse and harsh weather conditions. The improvements are being incorporated in all of our products."
Mr. Sharma said that we are undertaking value engineering in our pick-n-carry cranes by improving safety features and engines. The value engineering will allow machines to be more fuel-efficient and deliver higher productivity." He adds, "to make the equipment further affordable for customers to own and operate, we have introduced customized service solutions." ECEL will launch new products across the world shortly.
Mr. Sharma informed, "our new production facility in Faridabad has a flexible assembly line to manufacture equipment across verticals. The layout of the plant is ready to restrict unnecessary movement of materials. Besides, systems are in place to cut down on material wastage, enabling us to restrict cost of production to a good extent." ECEL's unit in Faridabad, Haryana has an annual production capacity of 7,000 units comprising backhoe loaders, pick-n-carry cranes, and compactors.
The manufacturers during recent years have been increasingly impacted by the volatility in commodity prices. Now rising inflation is enhancing their fixed production costs. To counter the impact, JCB has made its flagship plant in Ballabgarh, Haryana producing backhoe loaders and pick-n-carry cranes well integrated, & supported by extensive automation.'
Fully integrated; the facility contains a fabrication shop, powder coating shop, assembly shop, transmission and engine assembly shop, all under a single roof. The line of shops is entirely integrated with one another. The integration of the shops reduces any possible production downtime.
Challenge of Quality Retention
Mr. Kudva said further, "we have reduced bin heights of our mobile concrete equipment. The change will allow front hoe and wheel loaders carry loading operation without material losses & quick usage as no requirment of loading ramp." Height modification has been made in Conmat's 20-25 cum model CBP 200M and CBP 250 M mobile concrete batching plants.
Regular review of the order position and delivery schedule of orders is made, jointly by company's marketing and production personnel. Production plan is made based on the reviews made. This in turn allows Conmat avoid inventory blockage timely deliveries.
To provide cost competitive products to customers in a large way, Mr. Kumar informed, "we have completed 100% indigenization of 20 tons hydraulic rock breakers, manufactured under technical collaboration with Socomec of Italy. The localisation has allowed us to bring the cost of the equipment from Rs.14.5 to Rs.12.5 lakhs. Taking the process forward, we will also localize other range of Propel-Socomec rock breakers." He added, "to maintain quality standards, the complete production of our equipment is undertaken inhouse. This allows us to have better economies of scale."
Given prevalence of high competition in the market, companies to a large extent are willing to absorb costs rather than passing it entirely to customers. Value engineering is being done in the productline, to make customers avoid brand substitution.
According to Mr. Dilip Mirchandani, Manufacturing & Engineering Head, (M&CE) Voltas Limited, "rising cost of production has been a concern for us but we are tackling the issue by setting up a CFT (Cross Functional Team) which constitutes personnel from production, design and materials department.Our CFTs have been working out on various alternate methods to keep production costs in check by doing value engineering, alternate vendor development, standardization and good deal of non-moving inventory items at our plant have been changed through design modifications making them to be used in various equipment. All the modifications are being carried in house to ensure quality and in turn keeping us abstained from passing out rising costs to customers to a good extent."
Components to be used in equipment are produced by Voltas. It also outsources parts from vendors. However, outsourced parts are in modest volumes. To keep prices of outsourced items in check, the company procures items from its pool of vendors. Mr. Mirchandani says, " we ensure that quality products are being delivered by our vendors. We have appointed technically qualified personnel to carry out inspections of the production facilities of the vendors. The personnel on a regular basis carry out both field inspection of finished components and inline inspection while the components are being produced.
However, it is difficult for Voltas to secure sizeable volume discounts from vendors, since quantity of outsourced items remains very low due to market conditions.Mr. Mirchandani informed, "to bring down production cost of crushers, we are making design changes to optimize the usage of steel on the product aided through necessary design tools. Further, to minimize inventory load only long lead components which takes time to be sourced are stocked in advance, while other components are sourced as required based on production volumes."
It is quite commendable that equipment manufacturers have put up a well drawn plans to counter escalating production costs. It is well likely to bring dividends to producers by ensuring retention of market presence. Equally, customers will benefit as they stand to gain from improved features of the products, thereby having better equipment uptime, during present period when profit margins are increasingly coming under acute pressure.