Asphalt Plants Do Produce Profits, if Discerned Well
Blesson Varghese, Director of Marini in India, and serves SAARC, SEA and Australasia.
An asphalt plant purchase is unlike any other purchase of road building equipment. Road building contractors are used to changing brands and models faster than their apparels for equipment like rollers, loaders or dump trucks.
Asphalt plants cannot be dumped off, like rollers, loaders or excavators. Capital investments cannot be reversed quickly and are almost irreversible, especially when an asphalt plant, which will stay put with your company for the next fifteen to twenty years or more. Hence a hasty decision without critical thinking could prove costly in a fiercely competitive market and an ever-evolving environment.
As asphalt plant purchase involves substantial capital investment, added to it the very nature of the equipment doesn't allow contractors & company managers to get a lot of experience in buying them. Confusion will be a sure emotion that you will experience greatly, as salesmen would bring viewpoints, which are entirely different and contradictory to each other. The success of any road project, which again involves sizeable amount of investment, hangs on the performance of this crucial equipment. No amount of experience or project management skills can help salvage, if the decision is wrong. While the loss arising due to the high downtime, low performance and low productivity with a wrong asphalt plant is quite high, it isn't the only loss. Even long after the roads are built, improper mix, if produced and laid will continue to haunt and even damage a company's bottom lines. Therefore, it is quite likely that purchase of a new plant would be one of the most difficult decisions you will make in your career.
A clear perspective is what required to get through the marketing stunts and to understand what rightly deserves your investment. Although your purchase decision is focused to meet your company's immediate need, the future of the market and competition must not be forgotten.
Making a decision based on your company's future needs, is one that calls for visionary eyes, and a truly discerning mind.
We are all in our respective businesses to make decent profits, without cutting corners. Visionary eyes are those which are able to see beyond the present situation and able to look in to what the future will become.
The simple formula to make profits without cutting corners is to reduce production costs. Ingredients that comprise the asphalt production cost are Raw material cost, Plant maintenance costs and Energy costs (including Fuel & Power). This will be the turf on which the market will compete and where your profitability hangs.
Productivity matters: Productivity and efficiency are two key words, that asphalt producers should never miss. It is easy to understand the savings that can result from asphalt plants which deliver capacities as promised by manufacturers.
For example, when you buy a plant rated at 200 Tph, which delivers only 160 Tph in reality, you may feel to have cut an absolute deal, however the final numbers will deny anything close. Lesser output means longer project duration, higher equipment running & operating costs and losses that could be turned into profits, if you had just made the right choice.
Presently, technologies world-wide limit the use of Recycled asphalt to a maximum of 50-70%. If thoughtfully worked upon, RAP can help sustain our natural resources, and reduce our mix production costs greatly. Do note Recycled asphalt contains precious bitumen, the most expensive of all components in a mix, which can be re-vitalised ensuring high levels of profitability. The existing roads will become the future quarry – in a future not very distant from now.
A very important point that you must not miss here is: Only energy-efficient plants with the technology to process RAP will benefit the producer in the future. If you are smart, your decision today hence must be geared to take up this challenge that you will surely face tomorrow. New plants hence must be able to produce up to 50% RAP without additional energy costs, for you to stay competitive, when the market would be ready for recycled asphalt. Simply put, you must be able to produce Recycled asphalt cheaper than all your competitors.
In addition to conservation of natural resources and energy savings, the plants of the future must be able to meet increasingly strict environmental regulations. We already have witnessed the trouble that various asphalt producers had to face, when they were forced to move out of New Delhi.
Some additional points your decision should include:
Carbon Friendliness: The world is facing the heat of carbon emission. Carbon taxes are already in place, road construction activity is being closely monitored now for carbon emissions, this will necessitate that to stay in the race, carbon emissions from your asphalt plant must be controlled today.
Alternative fuels: Reduction of carbon emission will force us to look at alternative resources for energy. While on the other side, raising fuel costs, will force us to look at using cheaper solutions. Asphalt producers hence must be able to find the right balance, which calls for a partner who can sustain you to face these challenges confidently.
Night time readiness: Asphalt Plants must necessarily be able to operate silently at night, since much of the paving in urban areas will happen post sundown. To facilitate night time paving, plants must be equipped with large storage silos that can hold mix for longer durations. You will need to produce during the day hours, stock them in large storage silos, in order for you to be bang on for your night time laying operations.
Low Downtime: As markets become more competitive, asphalt producers will be forced to look at each paise that is spent. Manpower cost is increasing, investment costs will become more demanding, which in turn will make downtime costs unbearable and a serious threat to the profitability of the company. This is the reason we need plants, which must be built to perform, face tough site conditions, have high level of reliability, can be hooked up and serviced remotely and assistance must reach immediately.
Future Ready: The world of asphalt is witnessing some massive changes. Each asphalt producer will be forced to meet the regulatory requirements. If your plant does not meet the norms, then it does not matter what it costs.
Some of these product features mentioned may not seem to be of tremendous importance to most asphalt producers today, they are sure to become inevitable in the near future.
The facts mentioned here can be consolidated to reduce a plant's total operating costs. These facts must be considered by the asphalt producers to ensure sustainable profits and success for them and the generations.
To put things into perspective, a 20% price differential between two competing hot-mix plants is only about 2% over 20 years. But again, you can easily overcome this cost gap if you choose a plant that can give you increased energy efficiency, allow use high content RAP in your mixes, and operating savings of 10 to 20%.
It doesn't need rocket science to understand this and that is exactly why I encourage you to look beyond the price when buying a new plant.
We at MARINI have been developing technologies for over 100 years to ensure that our asphalt plant not only delivers high quality asphalt but also help customers churn their expenses in to profits. Marini MAC is one such example, where we have tried to equip our clients to confidently face the future. We are convinced like our customers, that because of the increased costs of fuel, asphalt and electricity the MARINI plants have become the plant of choice. We have hence ensured that all plants delivered in India have the highest fuel efficiency compared to any other manufacturer, is Recycling ready up to 40%, reflect green plant technology and are future ready.
Selecting the right asphalt plant is a critical decision, that calls for discernment, as this decision of yours will affect the success of your company and its future. It is a decision that should be based not on what your company's needs today, but what your company's needs in the future. Profitable decisions aren't merely based on today!
Asphalt plants cannot be dumped off, like rollers, loaders or excavators. Capital investments cannot be reversed quickly and are almost irreversible, especially when an asphalt plant, which will stay put with your company for the next fifteen to twenty years or more. Hence a hasty decision without critical thinking could prove costly in a fiercely competitive market and an ever-evolving environment.
As asphalt plant purchase involves substantial capital investment, added to it the very nature of the equipment doesn't allow contractors & company managers to get a lot of experience in buying them. Confusion will be a sure emotion that you will experience greatly, as salesmen would bring viewpoints, which are entirely different and contradictory to each other. The success of any road project, which again involves sizeable amount of investment, hangs on the performance of this crucial equipment. No amount of experience or project management skills can help salvage, if the decision is wrong. While the loss arising due to the high downtime, low performance and low productivity with a wrong asphalt plant is quite high, it isn't the only loss. Even long after the roads are built, improper mix, if produced and laid will continue to haunt and even damage a company's bottom lines. Therefore, it is quite likely that purchase of a new plant would be one of the most difficult decisions you will make in your career.
A clear perspective is what required to get through the marketing stunts and to understand what rightly deserves your investment. Although your purchase decision is focused to meet your company's immediate need, the future of the market and competition must not be forgotten.
Making a decision based on your company's future needs, is one that calls for visionary eyes, and a truly discerning mind.
Long–term Planning Needs Visionary Eyes
The simple formula to make profits without cutting corners is to reduce production costs. Ingredients that comprise the asphalt production cost are Raw material cost, Plant maintenance costs and Energy costs (including Fuel & Power). This will be the turf on which the market will compete and where your profitability hangs.
Productivity matters: Productivity and efficiency are two key words, that asphalt producers should never miss. It is easy to understand the savings that can result from asphalt plants which deliver capacities as promised by manufacturers.
For example, when you buy a plant rated at 200 Tph, which delivers only 160 Tph in reality, you may feel to have cut an absolute deal, however the final numbers will deny anything close. Lesser output means longer project duration, higher equipment running & operating costs and losses that could be turned into profits, if you had just made the right choice.
Prepare to Meet the Future, Today
The costs of aggregate production is bound to increase, while the dearth of natural resources, guarantees its further escalation. Our country is on the building stage at the moment, however we are already facing the heat of raising costs. This will necessitate use of Recycled asphalt (RAP) in the mixes. Moreover, we cannot be laying layers over layers, raising kerb heights, reduced clearances on underpasses, weight limitations on bridges would further force use of Recycled asphalt mixes.Presently, technologies world-wide limit the use of Recycled asphalt to a maximum of 50-70%. If thoughtfully worked upon, RAP can help sustain our natural resources, and reduce our mix production costs greatly. Do note Recycled asphalt contains precious bitumen, the most expensive of all components in a mix, which can be re-vitalised ensuring high levels of profitability. The existing roads will become the future quarry – in a future not very distant from now.
A very important point that you must not miss here is: Only energy-efficient plants with the technology to process RAP will benefit the producer in the future. If you are smart, your decision today hence must be geared to take up this challenge that you will surely face tomorrow. New plants hence must be able to produce up to 50% RAP without additional energy costs, for you to stay competitive, when the market would be ready for recycled asphalt. Simply put, you must be able to produce Recycled asphalt cheaper than all your competitors.
In addition to conservation of natural resources and energy savings, the plants of the future must be able to meet increasingly strict environmental regulations. We already have witnessed the trouble that various asphalt producers had to face, when they were forced to move out of New Delhi.
Some additional points your decision should include:
Carbon Friendliness: The world is facing the heat of carbon emission. Carbon taxes are already in place, road construction activity is being closely monitored now for carbon emissions, this will necessitate that to stay in the race, carbon emissions from your asphalt plant must be controlled today.
Alternative fuels: Reduction of carbon emission will force us to look at alternative resources for energy. While on the other side, raising fuel costs, will force us to look at using cheaper solutions. Asphalt producers hence must be able to find the right balance, which calls for a partner who can sustain you to face these challenges confidently.
Night time readiness: Asphalt Plants must necessarily be able to operate silently at night, since much of the paving in urban areas will happen post sundown. To facilitate night time paving, plants must be equipped with large storage silos that can hold mix for longer durations. You will need to produce during the day hours, stock them in large storage silos, in order for you to be bang on for your night time laying operations.
Low Downtime: As markets become more competitive, asphalt producers will be forced to look at each paise that is spent. Manpower cost is increasing, investment costs will become more demanding, which in turn will make downtime costs unbearable and a serious threat to the profitability of the company. This is the reason we need plants, which must be built to perform, face tough site conditions, have high level of reliability, can be hooked up and serviced remotely and assistance must reach immediately.
Future Ready: The world of asphalt is witnessing some massive changes. Each asphalt producer will be forced to meet the regulatory requirements. If your plant does not meet the norms, then it does not matter what it costs.
Some of these product features mentioned may not seem to be of tremendous importance to most asphalt producers today, they are sure to become inevitable in the near future.
The facts mentioned here can be consolidated to reduce a plant's total operating costs. These facts must be considered by the asphalt producers to ensure sustainable profits and success for them and the generations.
Profitable Decisions Require Forward Thinking
We all know, the bitter taste of poor quality lingers long after the sweetness of low price is gone. Asphalt plants geared for the future do not come cheap, as these features require more than just steel. Years of experience, research and intuition along with technology can only deliver features that will help you face the future.To put things into perspective, a 20% price differential between two competing hot-mix plants is only about 2% over 20 years. But again, you can easily overcome this cost gap if you choose a plant that can give you increased energy efficiency, allow use high content RAP in your mixes, and operating savings of 10 to 20%.
It doesn't need rocket science to understand this and that is exactly why I encourage you to look beyond the price when buying a new plant.
We at MARINI have been developing technologies for over 100 years to ensure that our asphalt plant not only delivers high quality asphalt but also help customers churn their expenses in to profits. Marini MAC is one such example, where we have tried to equip our clients to confidently face the future. We are convinced like our customers, that because of the increased costs of fuel, asphalt and electricity the MARINI plants have become the plant of choice. We have hence ensured that all plants delivered in India have the highest fuel efficiency compared to any other manufacturer, is Recycling ready up to 40%, reflect green plant technology and are future ready.
Selecting the right asphalt plant is a critical decision, that calls for discernment, as this decision of yours will affect the success of your company and its future. It is a decision that should be based not on what your company's needs today, but what your company's needs in the future. Profitable decisions aren't merely based on today!
NBM&CW July 2011
