How CFOs can Transform Cost Management and Enhance Efficiency

Om Prakash, CFO, RAK Ceramics (India), in an exclusive interview with Industry Outlook shares his views on the steady growth in the ceramics industry, the impact of technology adoption on cost management, and the role of CFOs in leveraging financial data and analytics and more. He has over 20 years of experience managing business strategy, financial operations and accounting functions at RAK Ceramics.

Given the steady growth in the ceramics industry driven by urbanization, infrastructure development, and increased construction activities, alongside the expanding use of ceramics, how do you, as a CFO, perceive the current industry landscape?

The ceramics industry has been growing 8 to 10% over the last few years. As per several reports, the industry is anticipated to grow continuously for eight to ten years with an average rate of eight to ten percent. Moreover, there are reasons for continuous growth as the industry is into construction, wherein the kind of population and urbanization is taking place with the support of government policy in terms of infrastructure development and initiatives, which includes focusing on housing. Hence, there are many opportunities for the industry to thrive, driven by technological advancement and the growth in disposable income of the middle class, which contribute to development and sustainability in the long run.

Moreover, though the ceramic industry is capital intensive, there are not many entry barriers; the market is very dynamic and competitive, with approximately 800 players in Morbi, where they have cost-effective production. Success lies on innovation and producing quality products to differentiate in the market, providing better service, and creating a better consumer pool.

What impact does technology adoption, such as automation and digital tools, have on cost management and efficiency in the ceramics industry, and how are CFOs leading these initiatives?

By utilizing advanced technology and latest equipment and stringent quality norms, quality products can be produced in the production processes with less wastage than by using manual intervention. Technology has advantages such as waste reduction, data monitoring, and appropriate extensions. Technology can be utilized for the preventive maintenance of the machines, wherein planning and scheduling can be initiated with reminders for several sections of the plant. Besides, technology has significantly improved the production process as the latest technology has a good insulation system and heat recovery system, reducing fuel costs.

Looking ahead, what future trends and developments do you foresee in cost management and efficiency within the ceramics industry, and what strategic roles will CFOs play in shaping these trends?

First and foremost, we should invest in innovation, which is only possible with technology. Thus, it is essential to adopt technology swiftly wherever possible, for example, on the shop floor or in the maintenance space associated with data analytics and data review. In addition, there needs to be a significant focus on sustainability as every member of society is responsible for nature, and it is imperative to work on sustainability initiatives. Some technologies help to reprocess the broken tiles so that the organization can save in terms of raw materials and reduce power consumption, contributing to sustainability goals. Furthermore, the water treatment plan can be used in the polishing department so that water can be recycled and used again.

Considering key challenges like volatile raw material prices and high energy costs faced by CFOs in the ceramics industry, how are these challenges being addressed when implementing cost management strategies?

As we are all aware, the prices of raw materials vary with time. Earlier, dependence on raw material imports was high but in the current scenario, we are trying to source them domestically. We are a company affiliated to a parent organization in UAE and as such we are privileged to benefit from a global supply policy that enables us to bargain for better prices. A large number of our vendors operate at a global level, including with us, through global sourcing contracts. As a result of the long-term contracts and the size of our orders, we can negotiate better prices.

In terms of costs such as energy, it is mainly market-dependent. To remain viable, particularly as much of our product portfolio and manufacturing facilities are located in Gujarat, we rely mainly on natural gas in our manufacturing processes. We are also looking at ways of using renewable energy sources and other fuels to cut down on expenses of operation. However, these are capital-intensive and we intend to invest in them with a view of optimizing the cost.