Word association: When you hear cement, what do you think? Heavy, traditional, old world, boring. Now, put a cement company in Mexico. Whatever's in your mind, it's probably not the picture of nimble, new economy innovation.
That's where you'd be wrong. Cemex, a 96-year-old cement manufacturer based in Monterrey, the business capital of Mexico, is using a global network and a focus on emerging markets to revamp one of the oldest of old-line industries. At the heart of Cemex's success is an IT system that manages production, personnel, and delivery in 33 countries. The business has reached $7 billion in annual revenue by selling its product in places as far flung as Venezuela, Costa Rica, and Egypt, making it the third-largest – but most profitable – cement manufacturer in the world. Credit goes to the company's CEO and head geek Lorenzo Zambrano. "We're early adopters of leading-edge technology," he says.
Cement is a commodity business. There's little difference among competing products, so Zambrano focuses on the manufacturing and delivery processes.
As a plant manager in the early 1980s, he had programmers create automated reports to track operations. After taking the helm in 1985, he developed an IT department and linked the company sites by satellite. In 1991, Zambrano discovered email and began pestering his managers – why were their kilns too cool? why were sales so low? – based on details he was gathering over the network. Pretty soon, his managers were checking their email religiously.
Today, technology affects the entire Cemex supply chain. By equipping mixer trucks with computers and GPS receivers, the firm reduced the delivery time to construction sites from three hours to 30 minutes – even in traffic-choked Mexico City. Cemex also sells dry, bagged cement through thousands of small distributors, most of which are online, allowing Zambrano to track their needs and do a little ecommerce. Cemex now sells more than 20 percent of its cement over the Net.
Heavy, traditional, old world, boring. Now, put a cement company in Mexico. Whatever's in your mind, it's probably not the picture of nimble, new economy innovation.
That's where you'd be wrong. Cemex, a 96-year-old cement manufacturer based in Monterrey, the business capital of Mexico, is using a global network and a focus on emerging markets to revamp one of the oldest of old-line industries. At the heart of Cemex's success is an IT system that manages production, personnel, and delivery in 33 countries. The business has reached $7 billion in annual revenue by selling its product in places as far flung as Venezuela, Costa Rica, and Egypt, making it the third-largest – but most profitable – cement manufacturer in the world. Credit goes to the company's CEO and head geek Lorenzo Zambrano. "We're early adopters of leading-edge technology," he says.
Cement is a commodity business. There's little difference among competing products, so Zambrano focuses on the manufacturing and delivery processes.
As a plant manager in the early 1980s, he had programmers create automated reports to track operations. After taking the helm in 1985, he developed an IT department and linked the company sites by satellite. In 1991, Zambrano discovered email and began pestering his managers – why were their kilns too cool? why were sales so low? – based on details he was gathering over the network. Pretty soon, his managers were checking their email religiously.
Today, technology affects the entire Cemex supply chain. By equipping mixer trucks with computers and GPS receivers, the firm reduced the delivery time to construction sites from three hours to 30 minutes – even in traffic-choked Mexico City. Cemex also sells dry, bagged cement through thousands of small distributors, most of which are online, allowing Zambrano to track their needs and do a little ecommerce. Cemex now sells more than 20 percent of its cement over the Net.
The global network has affected more than just efficiency. It empowers employees. "Freedom of information really changes the culture," Zambrano says. With data at their fingertips, special teams are able to search out the best practices in every corner of the organization: Cemex's system of tracking costs was developed by managers in Venezuela; its concrete formula was discovered when the company first acquired its Spanish subsidiary.
Keeping operations in sync requires standardization. Every office uses the same software and hardware. A Mexican executive can fly to Indonesia, plug in his laptop, and know the system will work the way it does back home. Soon everything will be Web-based, with each executive having a personalized portal. Cemex's IT operation has been so successful that the company spun it off in 2000 as an ebusiness consultancy, Neoris, which now has clients all over Latin America.
Zambrano admits that good timing has played a part in the firm's success. Cemex didn't expand abroad until 1992, well after its competitors. This turned out to be a stroke of luck. Because its rivals, Switzerland's Holcim and France's Lafarge, were already global when the IT revolution took off, they had trouble unifying their diverse corporate cultures and systems. Cemex, on the other hand, has been able to fully incorporate its new acquisitions within months.
Cemex has also benefited from its concentration on developing countries. Since financing is hard to come by in such markets, customers tend to buy cement in small quantities, which makes for a more profitable business. (Mayybe too profitable. Cement can cost more in Mexico than anywhere in the world – prompting a price-fixing complaint against Cemex and two competitors in 1998. Mexico's antitrust agency investigated but found insufficient evidence to proceed.)
Of course, emerging markets have their drawbacks, like the high cost of borrowing money and an apparent stigma on Wall Street. Most analysts agree that given Cemex's financial performance, its stock price has been too low. The company attempted to address this by acquiring US manufacturer Southdown in 2000. Now it can borrow cheaply through its American subsidiary to help reduce the heavy debt that it built up in the mid-1990s. This has helped buoy the business's market cap, which hit an all-time high of $9.3 billion in April. More than ever, investors seem to want to get a piece of the rock. —Gideon Lichfield
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