PRESENTATION ON

PAINT INDUSTRY
COST OPTIMIZATION

COST CONTROL

BASIC OBJECTIVE OF COST CONTROL IS PROFITABILITY IMPROVEMENT. IMPROVING

PROFITABILITY CAN BE MAXIMISED EITHER BY 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

MAJOR COST ELEMENTS IN THE PAINT INDUSTRY

COST ELEMENT VARIABLE COST RAW MATERIAL COST PRODUCTION COST FREIGHT & HANDLING COST SELLING & DISTRIBUTION COST FIXED COST MANPOWER COST IT COST OVERHEADS INTEREST % TO NET SALES LOW 55.80 1.20 3.90 3.00 HIGH 72.80 2.90 5.20 14.10 % TO TOTAL COST 70.00 3.00 5.10 10.90
89.00

SUB-TOTAL

4.90 0.20 3.00 0.10

5.90 0.30 7.60 2.50

6.20 0.20 4.20 0.40

11.00 100.00

SUB-TOTAL TOTAL

Basis : Data Based On Published Balance Sheets Of Five Major Paint Companies of last 3 yrs.

FACTORS IMPACTING RAW MATERIAL COST

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

FORMULATION COST
LEAST COST FORMULA. BATCH COST CONTROL. i ) USAGE VARIANCE. ii ) YIELD VARIANCE.

PRODUCTION COST
THE MAJOR FACTORS IMPACTING PRODUCTION COST ARE : POWER / FUEL COST. MAINTENANCE COST.

LEVEL OF AUTOMATION.
MANPOWER COST.

WASTE MINIMISATION.
CAPACITY UTILISATION.

FACTORS IMPACTING PRODUCTION COST

POWER COST

AUTOMATIC POWER FACTOR CORRECTION ( APFC) PANEL.

AUTOMATIC VOLTAGE REGULATOR ( AVR ). MAXIMUM DEMAND CONTROLLER. ENERGY EFFICIENT MOTOR.

FACTORS IMPACTING PRODUCTION COST

FUEL COST DG WITH AUTO MAIN FAILURE ( AMF ) PANEL. PROPER INSULATION OF EQUIPMENT, PIPELINES ETC. USE OF NATURAL GAS .

FACTORS IMPACTING PRODUCTIVITY

MAINTENANCE COST

PREVENTIVE MAINTENANCE .
ROUTINE SHOP FLOOR CHECK UP.

IMPORTED SPARE PARTS / CONSUMABLES Vs LOCAL DEVELOPMENT.

EFFICIENT SPARE PARTS MANAGEMENT SYSTEM.

FACTORS IMPACTING PRODUCTION COST

MANPOWER PRODUCTIVITY NORMS. PROPER MANPOWER ALLOCATION. CONTRACT LABOUR. AUTOMATION.

FACTORS IMPACTING PRODUCTION COST 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 WASTE MINIMISATION

WEIGHMENT PRACTICES OF SOLIDS / LIQUIDS.
SHOPFLOOR DISCIPLINE TO AVOID HANDLING LOSSES. MINIMUM RETENTION. TO REUSE THE RM POWDER DUST & WASHING SOLVENTS. AUTOMATION .

CAPACITY UTILISATION

FACTORS IMPACTING FREIGHT COST

RM SOURCING VS PRODUCTION CENTRES.

PRODUCTION CENTRES VS SALES OUTLETS.

FACTORS IMPACTING SELLING & DISTRIBUTION COST

ADVERTISEMENT COST. SALES PROMOTION COST. GODOWN RENT. PAYMENT PERFORMANCE DISCOUNT.

FACTORS IMPACTING FIXED COST

MANPOWER COST. INFORMATION TECHNOLOGY COST. INTEREST COST.

OVERHEAD COST.

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.

Thank you