Page 76 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes

Caselet Dalmia Cements Planning to Double Capacity

— by G Naga Shridhar
almia Cements Bharat Ltd (DCBL) will be doubling its production capacity to
12 million tones by the end of 2009 fiscal year commissioning three Greenfield
Dprojects.
"The work in three projects coming up at Kadapa (Andhra Pradesh), Ariyalur (Tamil
Nadu) and Cuttack (Orissa) is progressing well. These projects will help increase our
capacity from current 5.5 million tones to 12 million tones,"Mr Puneet Dalmia, Director,
Dalmia Cements Bharat Ltd told Business Line. The Kadapa plant (2.25 million tones) and
Cuttack plant (2.25 million tones) would commence production in September 2008 while
the Ariyalur project would go on line by March 2009. The company has invested over $500
million in these projects, he said.
In view of the huge demand in the domestic market, the additional capacity would be
utilised to cater to markets in Tamil Nadu, Karnataka, Kerala, Orissa, Western Region and
Jharkhand. "We are already supplying to these markets and the additional capacity will
also go there," Mr Dalmia said.
Though DCBL, which ranks seventh among the top cement companies in India, is exporting
oil well cement (used in drilling process) to the Gulf region, the focus is only on domestic
markets, he added.
Domestic Capacity
On the demand-supply gap in the market, Mr Dalmia said building domestic capacity is
the only solution. "Though there is a talk on cement imports from Pakistan, I feel cement
is a local business in the long term and the capacity should be built within the country. I
am bullish on a long term view. Next 10 years, the market would be at ease," he said.

The capex pipeline in the country would facilitate additional capacity generation of
100 million tones in next two to four years and the surplus capacity would be visible in
next 18 months, he added.
The Tiruchy-based company is expecting to clock a turnover of 1,200 crore this year.
"By the end of 2009-10, we will be crossing 2,000 crore," Mr Dalmia said.
Source: thehindubusinessline.com

What Kind

What kind of capacity are you going to add? This brings us back to our assessment of alternatives
or the trade-offs. Type of capacity can be separated into a technological or engineering question
and an economy of scale or business question.
The economy of scale question is a direct link between demand, capacity, and process selection.
There is an optimal capacity at which the cost of producing the product is minimized. When
demand exists for a product, one or more firms will supply the capacity as long as the price
customers are willing to pay is sufficient to cover costs and provide a reasonable profit. A firm
would like to bring down its costs to create an entry barrier and preempt competition.

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