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Distribution strategy

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Transportation strategy

■ Gazakh Cement Plant delivers finished goods with four methods:

– Rail transport (50%)

– Truck transport (50%)

■ Via Clients’ vehicles (50% of truck)

■ Via Gazakh Cement Plant’s vehicles (30% of truck)

■ Via Delivery companies’ vehicles (20% of truck)

■ Despite its far distance from Baku, the cement stock in Pirshagi, Baku allows the company to compete with Holcim and Norm in the largest cement consuming city of Azerbaijan

■ The delivery of cement to potential customers will be performed on a daily basis. Using rail transport to deliver cement to potential clients substantially reduces the costs

■ Rail delivery

– The company delivers cement via railway to 3 locations:

■ To North- Khudat station- to distributors- 624 km

■ To South- Liman station- to distributors- 510 km

■ To East- Pirshagi station- own cement stock- 500 km

– Cost per ton per km is AZN0.0344

■ Truck delivery:

– When Gazakh Cement Plant delivers cement via its own vehicles, all transport costs are borne by clients

■ Per ton/km revenue from clients for delivery is AZN0.3666

■ Per ton/km cost of delivery is AZN0.2393

■ Margin from truck delivery will decrease in future, when GCP pushes clients to use Plant’s vehicles for delivery. Thus, to decrease delivery costs to clients, GCP will charge a revenue just covering cost of delivery

– When Clients use own vehicles to deliver, no cost/revenue incurred for the delivery


■ Truck delivery (cont’d):

■ Gazakh Cement Plant disregards delivery of cement via Clients’ vehicles because of:

– Clients’ vehicles mostly have no GPS tracking systems

– Clients’ vehicles cannot be used for promotional activities

– Clients may abuse location discount options offered by the Plant, by promising to deliver cement to a region with higher discount, but deliver it to a region with a lower discount

– Client’s vehicles do not generate profit for the company

– In future the Plant plans to prioritize delivery of cement via own vehicles. In case of clients’ dissatisfaction, transport costs can be reduced in order not to lose clients to competitors

– When own vehicles of the plant do not meet delivery plans, the Company benefits from the services of delivery companies. For this purpose, the company pays the money received from clients for the delivery to transporting companies


Project description


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