Cost Reduction Strategies of Diesel & Motor Engineering PLC

Cost factor is crucial for determining the success or failure of any organization. If the particular organization follows a suitable approach in reducing the cost; it will definitely be able to get a Competitive Advantage in this highly competitive business environment.

Cost reduction could be resulted in significant product cost saving, manufacturing cost saving, and life cycle cost saving when companies are interested in cutting cost. When concerning about the cost factor of any organization; it can be categorized as Material Cost, Labour Cost and Overhead Cost. The basic objective of this assignment is to examine the cost reduction strategies followed or to be followed by a selected organization (i.e. Diesel & Motor Engineering PLC) under the above mentioned cost elements. Also it is expected to examine the degree of successfulness of each cost reduction strategy and its consequences.

The duration of year 2007- 2009 was considered regarding this particular study.  Interviews with relevant personnel and the Annual Report of the Company were used as the data collection method.

When conducting the study; it is identified that the resource personnel were not permitted to reveal certain sensitive information. So the researcher had to depend on the published information; basically the Annual Report of the Company

As a cost reduction strategy; the Company maintains an Environment Management System (EMS) in an efficient, effective manner. The environmental impacts of the business operations and the initiatives taken to safeguard and enhance the environment are regarded as vital for sustainable growth and development.

The Company’s EMS measures the impact of its operations on key environmental indicators thereby allowing them to initiate measures to minimise adverse effects. It also assists in integrating energy saving processes and technologies within the Company and the reduction of wastage. The EMS is guided by the Triple ‘R’ concept: Reduce, Re-use and Re-cycle. Dimo’s EMS has obtained ISO 14001 certification in 2005.
Within the scope of initiatives to nurture and safeguard the physical environment, the Company concentrates on six strategic areas of focus - Energy and Fuel management, Water management, Noise Emission control, Air Emission control, Waste management and Paper management. These initiatives are well documented and monitored.

·         Recycling

The Company espouses the concept of recycling, as a saving of valuable resources.
Company has a Buy Back scheme for tyres where they are used in the commercial venture of tyre re-retreading. During the year under review, it has re-built 5115 tyres in this manner. In another effort to mitigate environmental consequences from old tyres, they accept tyres sold by them after their economical use and pass them on to manufacturers who use the old tyres in their manufacturing process.

·         Energy & Fuel Management

The Company has also installed a new kerosene oil recycling mechanism in one of the workshops where kerosene used on a single occasion is recycled and reused. The departments were able to trim their kerosene usage by about 28.7% per month as a consequence of this measure. The used kerosene is disposed of in an environmentally friendly manner, through a sub-contracted service

·         Fresh Air Validation System

The Sri Lankan Environmental Authority evaluates and sets key parameters concerning Fresh Air Quality and effects on the environment bi-annually.

The Company’s results in respect of such environmental effect are always below the levels set by the Environmental Authorities. Dimo has taken extra precautions to minimise emissions. This year, the Company implemented a Fresh Air Validation System, in Units Repair section of Head Office which has enabled them to reduce the temperature level, CO2 level and Humidity level in the workshop area.

·         Managing Water

The Company’s policy on water management is driven by efforts to both reduce the use of water and to treat and re-use the resource wherever this is possible which finally result in reducing the cost of the Company. The National water supply system remains the Company’s main source of water, while ground water is used in significant quantities in the workshop at Siyambalape. The Table below depicts water consumption and reuse levels achieved during the year in review.

·         Emissions, Effluents and waste

Dimo follows a strict ethic which commits the Company to pursue reduction of ambient air emissions at every stage and in every aspect of its operations.

Installed exhaust extractors at all workshops ensure that emissions such as carbon dioxide and diesel fumes are captured and processed before release to the environment, within legally permissible limits. Ozone depleting emissions such as gas from air conditioning units are recycled in special machines to avoid any leakage into the atmosphere. All Company vehicles are subjected to regular and stringent emission tests to ensure they comply with emission regulations promulgated under the National Environment Act. The passenger car workshop in Colombo is equipped with exhaust gas and dust extractors to deal with gas emissions as well as harmful dust that emanates during cleaning of air filters and brake assemblies.
The Company’s paint booths are all equipped with filtration systems to prevent release of toxic fumes and particles into the atmosphere.
The Siyambalape workshop complex is also equipped with dust extractor filtration.