Management Information Systems and Concepts

CASE ANALYSIS

Cemex: Incorporating IT into a Cement
Company’s Strategy

Founded in 1906, Cemex is one of Mexico’s few truly multinational companies. It is the largest cement company in the Americas and one of the three largest cement companies in the world, with revenues of $3.7 billion and close to 51 million metric tons of production. Cemex and its subsidiaries engage in the production, distribution, marketing, and sale of cement, ready-mix concrete, and related materials. Its strategy includes focusing on cement and concrete products, diversifying globally to cushion against volatility in local markets, developing efficient production and distribution processes, using IT to increase flexibility, improve customer satisfaction, and reduce bureaucracy and excess staffing, and providing training and education for employees. Its state-of-the-art Tepeaca facility supplies one fifth of the Mexican market and may be the lowest-cost cement producer in the world, with operating costs of $25 per ton, roughly $10 lower than the industry average, and emissions far lower than legal requirements. In 1992 Cemex purchased Spain’s two largest cement companies, reviewed their operations thoroughly, invested in facilities, and reduced the workforce dramatically, such as by consolidating 19 offices into one. With continued diversification in the 1990s, Cemex has operations in 22 countries. It is also Latin America’s biggest corporate debtor, with over $4 billion in debt.

Although it was a laggard in IT usage through the 1980s, Cemex is now widely recognized as a company that uses IT extensively and views IT as an integral part of its long-term strategy. Lorenzo Zambrano, a Stanford MBA whose family owned a third of the stock, became its CEO at age 41 in 1985. In 1987 he hired an information system director and gave him the mandate of developing Cemex’s then primitive IT capabilities. Within a year, dispersed operations were being linked via satellite. In one case, a cement plant in a town with only 20 telephones used a satellite dish to transmit voice and data, thus bypassing Mexico’s chaotic phone system. By
1998, managers could use the satellite-based communications network to monitor operations and market conditions all over the world and to

Case Study: Cemex

communicate using voice, video, Lotus Notes, and other technologies.

Application areas that demonstrate the importance of IT include management information and control of operations. Cemex managers can immediately link to any of the 18 plants in Mexico and immediately access the status of each cement kiln, recent production data, and even the deployment of trucks dispatched by different cement and concrete distribution centers. Financial statements are available two days after the end of the fiscal month, an endeavor that used to take a whole month and took 50 days for a facility in
Venezuela acquired in 1995. Eliminating these lengthy delays in evaluating production, costs, and sales volume helps in running a lean, low-cost operation by making it possible for management to take action quickly instead of waiting almost two months to just receive the data in some cases.

Use of IT in controlling operations occurs at many points. Cemex’s ready-mix delivery trucks are equipped with dashboard computers that allow tracking suing global positioning satellite technology. A central dispatcher in a region constantly reroutes the trucks as customers cancel, delay, or speed up orders. This system generated a
30% decrease in the number of trucks and also increased customer satisfaction because it allows customers at chaotic construction sites to change their orders with just 15 minutes’ notice instead of the six hours previously required. Information systems also track process and production information, such as the chemical composition of cement being produced, the reasons for kiln problems, and the delivery routes of trucks. To help workers use information effectively. Cemex provides monthly training and began a program to give workers the equivalent of high school or college degrees.

QUESTIONS:

1. Based on the case, identify what seem to be some of the Cemex’s business and IT maxims.
2. What issues related to centralization and decentralization seem to apply in this case?
3. Which international issues apply to this case.

Source:

Information Systems, A Management Perspective (3rd edition) by
Steven Alter, page 418-419.