Pakistan cement industry

Pakistan Cement Industry
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Quality Issues, Challenges and Problems
Lack of Quality Innovation and Quality Control Technology Development
The industry lacks innovation due to which there has been insignificant inflow of new and
advanced quality control technology into the industry. It is important for the cement industry
to adopt modern and most advanced technology to improve production efficiency and produce
high-quality cement to meet the local demand and export orders. As there are not enough
machinery to check and meet the specific standards of quality management. So the industry
should also introduce new quality machinery technology for measuring quality levels and for
energy conservation and environmental improvement.
Lack of Funds to Take Up New Quality Projects
A key weakness of the cement industry is that sufficient funds are not easily available that
could be utilized by the industry for setting up quality projects or upgrading the existing units.
The financial institutions in the country are providing limited finance that is not adequate for
new investments.
Lack of Professional Quality Expertise
One disadvantage to the cement industry is lack of professional expertise in quality control
department as well as in others. Due to shortage of professional and experts the industry is
unable to effectively achieve improve quality, production targets, minimize production cost.
Quality Experts will help and enable to improve the quality of product. This will increase the
cost but in result it increases the demand and ultimately the market and market share will rise.
Quality Experts also improve and enhance its marketing and distribution channels.
Quality related Research and Development
There is no institution in the private sector that could undertake quality research &
development in the cement sector to improve the high-quality, productivity, efficiency,

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marketability as well as conducting feasibility for producing new quality products, optimising
cost of production and industry expansion.
High Cost of Quality Tools, Machinery and Instruments.
Due to increased cost of foreign currency quality tools and machinery are of high cost. As this
increases high capital cost. Input such as furnace oil which price is increasing rapidly which
shows negative trend in the economy, electricity, coal, paper bags, mark-up rates etc., the
cost of production of high quality cement has increased over the years.
Industry Quality, Industry Concepts, Dimensions and Definitions
Pakistan Cement Industry is highly focusing on the high quality level cement as to survive in
the market and to keep succession and leading towards profit maximization. PCI is driven by
quality consciousness and efficiency. At PCI quality is assured through systematic and
effective adoption, implementation, monitoring and continuous enhancement of quality control
systems using latest methods of analyses. All stages of the production process right from the
selection of raw materials, processing of materials and the finished product are subjected to
rigorous testing to ensure that each bag of cement is of the highest quality.
As we have studied that there is no organization who can provide all the dimensions at a time
in the same product because we know that it is very impossible to meet all the requirement.
Every product is famous only for one or two dimensions hardly it can reach up to 4 or may be
5 which is not possible. PCI is fulfilling on the requirement of three dimensions that are almost
same by every cement company.
These are as follows:
1- Reliability
2- Durability
3- Performance

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Quality Standards and Certificates and Awards
Quality has the main role in the manufacturing of cement production. So to make high quality
level cement it is necessary to follow some quality standards and parameters. Pakistan
Cement Industry is highly focusing in the quality level cement as it is exporting many countries
in bulk form that contain more than 1,757,442 Metric Tons.
ISO 9002 is the appropriate standard for cement manufacture. This standard comprises 19
sections which are as follows:
1. Contract Review
2. Document & Data Control
3. Purchasing
4. Control of Customer-supplied Materials
5. Product Identification and Traceability
6. Process Control
7. Inspection and Testing
8. Control of Inspection/ Measuring and Test Equipment
9. Inspection and Test Status
10.Control of Non-Conforming Product
11.Corrective and preventative Action
12.Documented procedures
13.Control of Quality Records
14.Internal Quality Audits
15.Training
16.Servicing
17.Handling, Storage and Package Delivering

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18.Statistical Techniques
19.Document where used for process control or product testing
Each section has a specific role in the quality assurance of a cement manufacturing. ISO is
an authentic standard which globally fulfill the requirements. Pakistan Cement Industry also
follows PAKISTAN STANDARDS (PS).
As Pakistan is exporting a bulk amount of cement so it is also following the standards of their
country which are as follows:
 Council for Quality Control and Environment Turkey
 Srilankan Standard Institution & Certificates
 South African Bureau of Standards & Certificates
 Bureau of Indian Standards & Certifications

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Status of Industry
Pakistan Cement industry started to grow since 1990s but from 1997 to 2002 there was
insignificant growth. Majority of cement plants were installed in Pakistan in 1950s and 1960s
and their rated capacity was quite different from their effective capacity.
Total investments in cement industry currently exceed Rs.160 billion, which is likely to go
further up to Rs.200 billion by 2010. Demand of cement enhanced 24 per cent during the
period 2006- 2007, from 12 percent in 2002-2003 and around 8 percent in the 1980s. In1990s,
the demand remained stagnant or went up marginally due to political instability.
Pakistan has around 12 million tons of surplus capacity, which can be exported to earn foreign
exchange of approx. US$ 750 million. There is good scope for export of Pakistani Clinker to
East Africa and UAE, and cement to the Maharashtra State of India.

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About 100 percent increase in the prices of imported coal, from around US$ 40 per ton, few
years back, to US$ 80 per ton, has greatly affected profitability of cement industry. Also, about
30 percent fuel cost affected cost of production.
Cement manufacturers should give due consideration to demand and supply parity of cement
before embarking upon further expansions in cement production capacity. As there is urgent
need for installing “bulk loading facilities” at ports in order to facilitate the cement industry to
export in large quantity. Presently, only one company has arranged a limited bulk handling
facility. Bulk handling facilities at the ports be provided on priority basis to facilitate the industry
to export around 10 million tons of cement to India, Middle East and African countries to earn
substantial foreign exchange.
Cement industry has advantage due to domestic availability of raw materials in huge quantity
and as such it does not have to import it from other countries.
Availability of loans is important to develop and maintain the plants. Because of little profit,
industry is still carrying older loans. Pak Land cement was role model for cement companies
in 1980s but it collapsed in 1990s because of non-availability of loans to maintain plants.
Industry suffered badly during 1996-2001.
Cement Industry made decision to go for expansion at right time. Otherwise, price would have
been increased more than Rs.500 per bag.
Taxes on Cement in Pakistan are the highest than most of the countries i.e. about 30 percent,
as compared to 10 percent in Indonesia, Philippines, Egypt, 7 percent in Thailand and zero
percent in Iran and Malaysia. As such, rationalization of taxes on cement in Pakistan should
be considered. Excise Duty on cement may be reduced by at least half, to bring the taxes on
cement at least to the level of India, if not to the level of other countries.
Government should reduce excise duty and other taxes on cement, as promised by it few
years back. Total cement production has gone up from 9 million tons to present 44 million
tons but the excise duty has been unchanged.
Royalty rate on cement, in different regions, varies considerably i.e. Rs.1 per ton in Islamabad,
Rs.50 per ton in Balouchistan and Rs.15 per ton in Punjab/Sindh.

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Port Qasim did not give an encouraging response when it was suggested by the industry to
provide ‘bulk facility’ for availing emerging export opportunities.
There is misconception about huge profits earned by cement sector. About 75% cost in
cement industry is fully verifiable and nothing is hidden. Manifold increase in prices of
electricity and fuel has impacted profits of cement industry. Majority of companies have
ploughed back their profits because of economies of scale.
A small cement plant consumes around 500 tons of coal. However, local coal supplied is
inferior in quality and unsuitable for cement plants.
Quality Management System
A Quality Management System process is an element of an organizational QMS. The ISO
9001: standard requires organizations seeking compliance or certification to define the
processes which form the QMS and the sequence and interaction of these processes.
Following are some examples of processes that includes:
 Order Processing
 Production planning
 Measurement of product/ service/ process compliant with specified requirements
including statistical techniques such as Statistical Process Control and
Measurements
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2009-2010 2010-2011 2011-2012 2012-2014
Industry Stnanding PositioninMarket
Profit Loss

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 Systems Analysis
 Calibration
 Internal Audit
 Corrective Action
 Preventive Action
ISO 9001 requires that the performance of these processes be measured, analyzed and
continually improved, and the results of this form an input into the management review
process.
Among the guiding principles, Pakistan Cement Industry has adopted Total Quality
Management (TQM) concept as a core policy to bring about cultural changes in the
Organization. PCI is committed to produce consistently high quality clinker and cement in
conformity with relevant National / International specifications by strictly adhering to the
Quality Management System (PS / ISO 9001 : 2008) with continual improvement in its
effectiveness with a view to provide customer satisfaction.
With the onset of globalization and liberalization of Pakistan economy, "Quality" has become
a buzzword in cement industry. Utmost emphasis is placed at PCI on maintaining strict Quality
Control at each stage of the manufacturing process to ensure delivery of the best quality
cement to the customer all the time. For effective implementation of the quality policy, State
of the Art equipment procured from world renowned machinery manufacturer’s viz., LOSCHE,
ABL, LNVT, Shenck, Siemens and ABB have been installed.
Philosophy and Approaches
There are several elements and approaches to a quality system, and each organization is
going to have a unique system. Similarly Pakistan Cement Industry is progressing the most
important elements of a quality system include participative management, quality system
design, customers, purchasing, quality education and quality training, statistics, auditing, and
technology.

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Mainly Pakistan Cement Industry follows the quality management principles which is the key
ingredient toward success. Moreover it also follows the Six Sigma principle which are very
important to understand the method to measure and improve high-quality and high-volume
production processes. Its overall goal was to produce high quality product by meeting the
required standards and parameters. It also measure and eliminate waste by attempting to
achieve near perfect results. The term six sigma refers to a statistical measure with no more
than 3.4 defects per million.
Six sigma is a statistically oriented approach to process improvement that uses a variety of
tools, including statistical process control (SPC), total quality management (TQM), and design
of experiments (DOE). It can be coordinated with other major initiatives and systems, such as
new product development, materials requirement planning (MRP), and just-in-time (JIT)
inventory control.
The following is a brief description of the steps involved in the six sigma process:
1. Break down business process flow into individual steps.
2. Define what defects there are.
3. Measure the number of defects.
4. Probe for the root cause.
5. Implement changes to improve.
6. Re measure.
7. Take a long-term view of goals.
These are some principles that are gently applied in PCI that leads the PCI and meet the
demand of customers. Following law, rules and principles leads anyone to the virtue of
success. There are some examples in the PCI that succeeded in bulk production as well as
quality level production. Kohat Cement was having a market share of Rs.25 in 2002-2003 but
know she become the leading company and have a market share of Rs.191 which is a very

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good effort. This was only done by obeying the laws and working on required levels and
principles.
Cost and Rewards of Quality
The quality movement and quality systems have had many different names or terms of
reference in the past few decades, and might look like a short-lived business management
trend at first glance. With ever increasing competition and consumer expectations,
professionals and business managers cannot ignore quality issues and expect to maintain or
improve their competitive position. Quality systems, time and again, have been responsible
for substantial increases in the bottom line of businesses in every industry and have given
organizations the boost they need to meet overall goals and objectives.
Every Cement Company aims to get maximum profit with minimum cost. Unfortunately every
organization is unable to perform such a healthy task. Quality Assurance, Quality Control and
Quality Management all they need a huge finance to cover these operations. PCI is working
on the Quality Performance and Conformance as well. There is an average estimate that PCI
spent Rs.288, 000,000 annually just on quality assurance. This includes buildings,
equipment’s, machinery, employees, utilities and other running assets.
After progressing and meeting the desired quality standards ISO and Pakistan Standards
have given certificate and awards on this achievement. Moreover the organization also get
awards on the maximum production of cement.
Quality Training & Institutes
Pakistan Cement Industry is driven by quality consciousness and efficiency. At PCI quality is
assured through systematic and effective adoption, implementation, monitoring and
continuous enhancement of quality control systems using latest methods of analyses. All
stages of the production process right from the selection of raw materials, processing of
materials and the finished product are subjected to rigorous testing to ensure that each bag
of cement is of the highest quality.

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All staff is highly qualified and well trained with highest level of technical competence in their
respective fields in order to achieve an efficient and smooth production process which is
necessary for ensuring quality.
Apart from the usual quality control equipment, PCI’s laboratories are equipped with state-of-
the-art technologies such as X-ray Fluorescent, Analyzers and Diffractometers which were
introduced in Pakistan for the first time by Bestway Cement. By virtue of this equipment, the
Company has been able to consistently produce better quality cement than is currently
available in the country. Later on almost all of the companies adopted the same method for
production.
The cement produced by PCI conforms to the product specification defined under Pakistani,
Indian, British, European and American Standards.
Organizations employ well qualified and experienced staff to ensure that required standards
of job performance are met. At the same time, they realize that for the work force to perform
at their optimum level regular training and up gradation of their knowledge and skills are
essential.
The Quality Training Department achieves this goal through carefully thought out and
elaborate training programs. These programs cover a wide spectrum of training and
development needs of the entire work force starting from basic communication skills to
development of best operational techniques, practices and managerial skills. The Training
Department’s role is to plan, organize, coordinate and conduct both in-house and out sourced
courses, seminars and workshops. Besides utilizing the most experienced officers of the
company’s, the services of well-known experts and trainers in the relevant disciplines are
utilized for conducting various courses. The organizations also sends staff for relevant
training courses to various reputed training organizations like Pakistan Institute of
Management and Sciences (PIMS), National Productivity Organization (NPO), National
University of Science & Technology (NUST) etc. Staff is actively encouraged to also pursue
professional development and career enhancement independently.

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A comprehensive and well organized training program is also in place for fresh graduates
from Engineering Universities and apprentices to provide them with intensive on-the-job
training. This program was initially started to train high quality engineers for employment within
the organization. In cognizance of the dire need of skilled engineers and acute shortage of
training opportunities for fresh engineers and technicians in the country, PCI decided to
expand its training program and it currently imparts training on a regular basis to a large
number of engineers and technicians who, after completion of their training move on to
successfully pursue careers with other organizations within and outside Pakistan.
PCI views this as an essential component of its social responsibility. A major contribution for
quality assurance was made by the Bestway Cement Company.
Future of Industry

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In the future therefore, it is expected that the cement industry will follow trends of economic
growth within the country. This means that as GDP rises, the demand will grow in direct
proportion to the development expenditure allocation by the government of Pakistan.
However, in order to be competitive the cement industry requires controlled or regulated costs
for the factor of production as well as lower discount rates so as to reduce debt-equity ratios
for the industry which have gone up to as much as 114%. Additionally because of the
oligopolistic structure of the market and the cement manufacturers past evidence of collusion,
control measures need to be put in place to enable increased completion which will not only
bring further efficiencies in production but also seek to establish a relatively level playing field
for smaller players.
CONCLUSION:
From the analysis conducted in this report, we can accept both hypotheses established earlier
that is:
 The cement industry follows an oligopolistic market structure which is determined by
the yearly average and financial data.
 The cement industry will follow economic trend of the country as it is based on the
evaluation of GDP trends, expansion cycles corresponding to cement demand.
 Industry is progressing steadily with more scope for future growth. All indicators i.e.
production, demand, exports and investments are showing rising trends.
 Industry is capable to export to new markets but non-availability of bulk-handling facility
at Ports, hampers them to seize the emerging export potentials.
 Industry’s biggest challenge is that despite constant increase in demand of cement,
the per capital consumption is much lower than in other cement producing countries.
 Industry needs a long-term vision and strategy to achieve sustained growth, meet
future challenges and seize emerging export opportunities.
 Industry has to pay high taxes and duties, which increases its cost of production. The
Government should consider rationalizing the taxes on cement Industry.

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 Industry should give special focus on minimizing the production cost in order to
increase their profit margin and become competitive in international export markets.
Management Accountants can offer their expertise to help the industry in this regard.
There are some Conflicting Issues for the PCI by which PCI moves towards declining. These
are as follows:
 Issue of Sale Price of Cement
The Cement manufacturers are of the view that price per bag of cement in Pakistan is
much lower than in other countries and as such it should be enhanced. The price is
low due to two main factors i.e. fierce competition and undue government pressure to
keep the prices low. The Government, on the other hand, says that it do not exert any
pressure on it, rather the cement companies increase the prices without justification
and form cartels, which need to be discouraged. There is another conflicting opinion
on this issue that the cement companies do not pass on the benefit to consumers, even
if they get any tax concession from the government.
 Issue of Low Profitability of Cement Companies
It was indicated by the stakeholders that the profit margin of majority of the cement
companies has declined. However, there was no consensus on the specific reason(s)
for this decline. The Industry felt that the profit decline was due to exorbitant increase
in electricity and fuel prices. The government side indicated that the profit before
depreciation of some cement companies had improved due to capital investment.
There is a general impression, as hinted by industry representatives, that the cement
sector conceals its huge profits by showing high production cost.
 Issue of High Production Cost
This issue also needs thorough analysis as participants expressed different opinions
on it. The industry indicated that input cost has increased manifold and about 75
percent cost is fully verifiable and nothing is hidden. On the other hand, it was informed
by a government representative that the cost of raw material has not increased during

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the last few years. Moreover, it was suggested by another participant that a
benchmarking study on costing of cement be carried out.
 Issue of Expansion in Cement Industry
There are much differences in views of the management of the industry for making
investments for further expansion. The cement companies, with aggressive approach,
are opting for expansion whereas other industries feel that demand and supply parity
of cement should be considered before going for further expansion. This conflicting
situation provides a research area to find out as to whether expansion should be made
or not to benefit the industry?

Pakistan cement industry

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