According to the Ready Mixed Concrete Industry Data Report, published by the National Ready Mixed Concrete Association (NRMCA), Silver Springs, Md., 1995 pretax profit was a mere $2.44 per yard. So how can producers increase margins?
A place to start is by focusing on a company's largest cost component: Raw materials. In 1995, material costs accounted for 52 percent of the average price of a cubic yard of ready-mixed concrete sold in the United States. The cost of portland cement, fly ash, and other admixtures in a typical cubic yard of ready-mixed concrete was $18.25, about 60 percent of the average selling price of ready-mixed concrete. In 1995, the typical producer replenished total inventory 24 times, or about every 15 days. Concrete producers need to be aware of these payment lags as they negotiate material prices and terms. Producers should pass along anticipated working capital interest charges or supplier credit costs to customers who pay late.
Other tips for controlling material costs include:
- Document all incoming raw material deliveries daily.
- Conduct physical inventories monthly and reconcile them with computer-generated perpetual inventories.
- Regularly check aggregate gradations and mix yields. Random yield checks will help production managers detect batching equipment deficiencies.
- Annually review your commonly used mix designs with a local testing laboratory or a cement or admixture supplier's technical service department to determine optimum use of admixtures and supplementary cementing materials.
- Review the mix designs on customer shipments daily. Confirm that performance-specified mixes with the lowest material costs are assigned to the correct project and customer.
- Compare current month-ending material purchase quantities to last year's totals. Compare cement usage against mix design produced.
- Use a control chart to graph cylinder-break test reports and pay close attention to design vs. actual strengths. When actual strengths are higher than needed, based on standard deviation, you're giving away cement.
KEYWORDS: aggregates, mix design, purchasing