BCG-004

BUILDING THE NEXT SIAM

Answer Keys
Case Context

QUESTION TEXT

Siam Portland is one of the biggest cement manufacturers in Thailand, a fast-growing market thanks to the huge projected infrastructure development in
the coming years. The production of cement can be divided into multiple steps with a tangible byproduct at the end of each step. There are active markets
for each of these byproducts. The exhibit below shows the extended cement production value chain.

Exhibit BCG04.1. Process End - product

Extended cement production value chain

Limestone mining Clinker burning Cement grinding Concrete mixing

Limestone Clinker Cement Concrete

Most cement manufacturers own exclusive access licenses to key raw material mines like limestone or clay with reserve enough for decades of production.
However, last month, an assessment of Siam's limestone mine reserve came out showing a significantly less-than-expected lifespan, threatening its long-
term operation plan. As this is rather serious news, Siam has approached BCG for some advice to navigate through this problem.
Case Context

EXPLANATION

It is important to take note of the key details of the case context. This helps you keep a focus on the objectives of the case and avoid deviating from the
hypotheses in mind.

For this case, the case context should be summarized as follows:

- Client: Siam Portland
- Situation: Limestone mine runs out soon
- Objective: Continue production in the long-term
Question 1 of 7

QUESTION TEXT

Let's think about how to approach this problem. Which three pieces of information would be most useful in helping Siam Cement to narrow down its
potential options to deal with the expiring limestone mine lifetime?

Select the fewest number of options that would adequately answer the question.

A. Siam's limestone reserve measured by kilo tons

B. List of all Thailand limestone mines with location, ownership, and reserve volume
C. Research result on whether it is possible to produce cement without raw material
D. Different methods to lengthen the lifetime of the current limestone mine
E. Historic and projected cement demand in the closeby region
F. Potential buyers for a sell-off of the current plant
G. Feasibility of linking and shifting production to another limestone mine
H. Full description of the current technology used in the whole value chain
I. Limestone usage rate of the current Siam cement production
J. An end-to-end evaluation on Siam's financial health
Question 1 of 7

EXPLANATION

This is a Structuring/Information question, multiple-select multiple-choice answer format.

To answer this question, we follow a 2-step process:

• Step 1: Structure the problem, using options as suggestions

• Step 2: Rule out options that do not fit within the structure / comes with wrong measurements / covered by other options

Applying these steps to this question:

• Step 1: Looking at the options, we can draw this issue tree/table:

(1) Lengthen lifetime of the current mine

Establish production on a new mine

(2) (2.1) Feasibility

(2.2) Execution

• Step 2: (Continued on next page)

Question 1 of 7

EXPLANATION (continued)

• Step 2: Analyzing the given options, we have the following table:

Option Correct Wrong type Explanation

A No Too granular This option only covers a part of (1) - lengthen lifetime, which is already covered by option D.

B Yes n/a This option covers a big part of (2.2) - Execution - establish new.

This option practically adds no value to the analysis because it is almost certainly impossible to produce any good without raw
C No Other
material.

D Yes n/a This option neatly covers (1) - lengthen lifetime.

E No Irrelevant This option does not cover any part of the issue tree as we only focus on our own production in this study.

This option falls under (2.2) - Execution - establish new. But it provides information that the team probably doesn't need. It is not
F No Too granular
even concluded that we need to sell-off the whole current plant.

G Yes n/a This option covers (2.1) - Feasibility of establishing new.

This option only covers a part of (1) - lengthen lifetime, which is already covered by option D. Technology is just one of many factors
H No Too granular
to consider to "lenthen lifetime" of the current plant.
This option only covers a part of (1) - lengthen lifetime, which is already covered by option D. Current limestone usage rate is just
I No Too granular
one of many factors to consider to "lenthen lifetime" of the current plant.

J No Irrelevant This option does not cover any part of the issue tree as we only focus on our own production in this study.

CORRECT ANSWER(S): B, D, G
Question 2 of 7

QUESTION TEXT

Transportation cost is usually a top concern for every cement company, taking up a higher portion of a company's cost than that of other industries. Cement
is often referred to as a heavy product because between a cement company and a manufacturer of another commodity with similar revenue, the cement
company always has the higher logistic cost. As a result, cement is a very local industry.

Strategically located plants can outplay more efficient plants with disadvantaged locations. Having a strategically located limestone mine reasonably near a
big consumption hub Bangkok, Siam Cement has been able to compete as well as any other players.

Based on the information above, which of the following correctly explains why cement is a “heavy product”?
Please select one most plausible statement.

A. Cement is physically heavier than other commodities such as rubber

B. In most cement companies, transportation cost is usually higher than production cost
C. A typical construction project needs a lot more cement compared to other commodities such as steel
D. Cement’s weight per dollar value is high compared with other commodities such as aluminum
E. A fully loaded truck of cement is heavier than that of other commodities such as carbon fiber
F. A ton of cement is heavier than that of other commodities such as gold
Question 2 of 7

EXPLANATION

This is a rather unique question type and it does not fall into any category. While it is necessary to train the known types, it is possible that the actual Casey
will throw at you twists and turns. So be flexible and ready.

For this particular question, a correct answer option must: (1) be proven based on the information provided and (2) explain why cement is a "heavy
product".

We can examine all options as follow:

Option Correct Explanation

A No This option talks about "weight" per an unspecified reference unit. Even if it is true, it is not based on the information provided.

This option is not proven based on the information provided. We only know transportation cost is high in cement companies. We
B No
don't know if cement transportation cost is higher than it's production cost.
This option talks about "demand" which has little logical linkage with "heavy". This option is also not based on the information
C No
provided.
This option talks about "weight" per "dollar value". It is plausible based on the information provided. It also explains why cement is
D Yes
a "heavy product".
This option talks about "weight" per "transportation unit". Even though the statement itself can be true, it is not based on the
E No
information provided.
This option is wrong in any sense as a ton of something is just as heavy as a ton of anything else. It therefore adds no explanation
F No
value.

CORRECT ANSWER(S): D
Question 3 of 7

QUESTION TEXT

The team is exploring options to restructure and relocate Siam's production hubs. First, it needs to evaluate the current structure.

The following data on production volume of all byproducts in the value chain is gathered.
Notice that the numbers shown are the total volume for the years 2016 - 2021, not on per year basis.

Exhibit BCG04.2.
Siam Cement average flow of production volume, 2016-2021, thousand ton
Limestone Clinker Cement Concrete

Produced 10,036 5,011 5,123 13,789

Bought in,
0 0 0 0
from external source
Sold out,
0 703 119 13,789
to external source
Annual inventory
0 310 0 0
increase

Suppose that the sole purpose is to save on transportation costs and transportation cost per unit (weight) per mile (distance) is the same for all four by-
products of the production value chain.

Which of the following plant-location structures would be most desirable in terms of saving transportation costs?
Please select one choice that is the most desirable.

A. Place an integrated clinker-cement plant close to the limestone mine and a concrete mixing facility close to Bangkok, a big construction hub
B. Place an integrated clinker-cement-concrete plant close to Bangkok, where most constructions happen
C. Place a clinker plant close to the limestone mine and an integrated cement-concrete plant close to Bangkok, where the final end-product is highly
demanded
D. Place a fully integrated clinker-cement-concrete plant close to the limestone mine, making it one big and efficient production hub
Question 3 of 7

EXPLANATION

Even though this looks like a Critical/Logical Reasoning question, there is a strong emphasis on math. So we would approach it like a Quantitative problem.

Transportation cost = transportation cost per unit per mile * volume * distance.

We know that transportation cost per unit per mile is the same for all four by-products.

We also know that the total distance from the limestone mining to the final consumption destination is the same for all four plant allocation strategies.

So if the sole purpose is to save on transportation costs, the most desirable plant allocation should minimize the volume of limestone, clinker, cement, or
concrete to travel.

From the data provided in the table, we can calculate the Volume of input material to be used in the very next step as follows.

Siam Cement Volume Flow, thousand tons

Limestone Clinker Cement Concrete

Production 10,036 5,011 5,123 13,789
Buy in
0 0 0 0
(from external sources)
Sell out
0 703 119 13,789
(from external sources)

Inventory increase 0 310 0 0

Volume used in next

~ 10,000 ~ 4,000 ~ 5,000 13,789
step

Equal volume produced plus volume buy in and minus This is volume to sold
non-used volume (sell out and inventory increase) to the market
Question 3 of 7

EXPLANATION (Continued)

We then can evaluate each option as follows:

Options Correct Explanation

With this option A, Siam Cement has to transport approximately 5,000 thousand tons of cement in a long distance from clinker-
A No
cement plant to concrete plant. This is not optimal for transportation cost.
With this option B, Siam Cement has to transport approximately 10,000 thousand tons of limestone in a long distance from
B No
limestone mine to clinker-cement-concrete plant. This is not optimal for transportation cost.
With this option C, Siam Cement has to transport approximately 4,000 thousand tons of clinker in a long distance from clinker plant
C Yes
to cement-concrete plant. This yields the lowest transportation volume.
With this option D, Siam Cement has to transport 13,789 thousand tons of concrete in a long distance from the plant to the market
D No
in Bangkok. This is not optimal for transportation cost.
Question 4 of 7

QUESTION TEXT

Besides restructuring plant locations, what are some of the levers Siam can apply to further lower its logistic cost?
Question 4 of 7

EXPLANATION

This is an Intuition/Insights question with a Free-form answer format.

To answer this question, try to list out possible ideas on scratch paper, then group them into MECE categories before transferring them onto the message
box.

An answer to this question should be 3-5 lines long, containing:

- List of possible ideas, grouped into MECE categories, in bullet list forms
- Evaluations of each idea (feasibility, relevance, etc.)

A sample answer could be as follows:

Potential ideas include:

1. Explore new and more efficient shipping methods, e.g: boats, train
2. Ship in bulk, cutting as many middlemen as possible
3. Cut container cost, as the weight and volume per dollar value of cement, is high and therefore a big amount of cement bags is being used

Additional Tips:
- Even though this answer may seem short and doesn't sound like an actual answer pitch you would say in a real case interview, this is exactly how you
would put your answer for these long-text or free-form textbox questions in the BCG Casey.
- Their official guideline emphasizes being brief over and over again.
Question 5 of 7

QUESTION TEXT

In the event that Siam need to sell off its current plants, the more optimized they are, the better deal Siam can get.
Optimization can be done in various forms such as better raw material usage factors, better resource usage, better suppliers' prices, etc.
The BCG team is analyzing all production metrics of Siam. The following table on production cost breakdown was provided.

Exhibit BCG04.3.
Cost breakdown of Siam clinker and cement in 2022, million USD
Clinker Cement

Raw materials Raw materials

27 120
(limestone) (clinker)

Electricity 15 Electricity 20
Fuel 11 Labor 6
Coal 96 Plant overhead 30
Financing
Others 1 24
expense
Total 150 Total 200

Assuming that the clinker factor (the usage rate of clinker to make cement) stays the same.
If Siam Cement can lower Electricity cost per kWh consumed by 10%, Fuel cost per ton of gallon burned by 20%, and Coal cost per ton burned by 5%, by
what percentage would the total Cement Production cost be reduced?

For example, if Siam can cut Cement costs by $20 million, then the Total Cement cost is reduced by 10%.
(The answer should be rounded to the nearest first decimal point, with the percentage sign omitted; for example, if your answer is "12.3456%", write "12.3")
Question 5 of 7

EXPLANATION

This is a Quantitative question, with a Numbers-only answer format.

For this particular question, notice that the cost reduction of Electricity, Fuel, and Coal affect both Clinker and Cement. Also, notice that Clinker itself is one
big cost component of Cement production cost.

To answer this question, here is our methodology:

1 - Calculate the new Clinker production cost ($141.5 million)
2 - Calculate Clinker production cost reduction as a percentage of the original (5.67%)
3 - Calculate new Cement production cost, given the Clinker cost and Electricity cost reduction percentage ($191.2 million)
4 - Calculate the final answer (4.4%)

Detailed calculations of the above methodology are presented in the tables below:
Siam Clinker Production Cost Siam Cement Production Cost
2022, million USD 2022, million USD
Original Cost % Reduction New Cost Original Cost % Reduction New Cost 1) New Cost = Original Cost *
RM 27 27
(1 - % Reduction)
RM 120 5.67% 113.2
Electricity 15 10% 13.5 Electricity 20 10% 18 2) Total = Sum of Costs in the above
Fuel 11 20% 8.8 Labor 6 6 columns
Coal 96 5% 91.2 Plant OH 30 30
3) Total % Reduction = (Total Original
Other 1 1 Finance 24 24 Cost - Total New Cost) / Total Original
Total 150 5.67% 141.5 Total 200 4.4% 191.2 Cost * 100%

= (150 - 141.5) / 150 * 100% = (200 - 191.2) / 200 * 100% Note: Data in grey is the given data
Question 6 of 7

QUESTION TEXT

Price optimization is big in the cement industry because there is not really a "market price". Each geographic area is an independent market of its own.
Even different plants of the same companies have different price schemes. Moreover, the price elasticity of cement is often unpredictable as most
customers are institutions and businesses and their response to price change is not immediate due to their own complicated supply chain and operations.

The relation between Concrete Price and Sales Volume in Siam Portland in 2022 was shown in the exhibit below.

Exhibit BCG04.4.
Siam's concrete price - Sales Volume Comparison, 2022

Monthly Sales Volume - Concrete Average Wholesale Price

Thousand tons USD per ton

2500 32

30
2000
28
1500 26

1000 24

22
500
20

0 18
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sales volume Price

Question 6 of 7

QUESTION TEXT (continued)

Which of the following can be concluded based on the information from the above Exhibit?
Please select all that apply.

A. A higher cement price will result in lower cement sales volume (in tons)
B. The market consumption began to drop at the beginning of summer 2022
C. Concrete revenue of Siam in 2022 benefited from its price increase program
D. More than 50% of Siam's concrete volume sold in 2022 is from the first four months of 2022
Question 6 of 7

EXPLANATION

This is a Critical/Logical Reasoning question with Multiple-Select answer format.

To answer this question, we grade each option on the True (T) - Inconclusive (N) - False (F) spectrum.
Then, if the question calls for a specified degree of certainty (with qualifiers such as "must be", "always", "surely"), we grade each T / F option based on its
degree of certainty.

Analyzing the given options, we have the following table:

Option Correct Wrong type Explanation

The table shows only data on Siam's own concrete sales and price. Therefore, we cannot make any conclusions on the overall
A No Inconclusive
market cement sales and price as in the statement of option A.
The table shows only data on Siam's own concrete sales and price. Therefore, we cannot make any conclusions on the market
B No Inconclusive
condition as in the statement of option B.

C No Likely False From April to December, the increase in price cannot compensate for the decrease in sale volume.

D Yes True The Concrete sales volume in the first four months is indeed more than 50% of the total sales in 2022

Additional Tips: You do not have to calculate exact numbers to conclude D. Notice that the average of the first four columns is higher than twice of the
average of the last eight columns.
Question 7 of 7

QUESTION TEXT

Please summarize your key findings and recommendations for the case in 3-4 lines maximum.
Question 7 of 7

EXPLANATION

This is a Summary / Pitching question, with Free-form answer format.

The official BCG guideline recommends you to use a maximum of 3-4 lines. The suggested structure of the answer is:

1st sentence: Case objective.

2nd sentence: Insights.
3rd sentence: Actions.
Notice that this is a little different from a typical pitch in a real case interview, where you are expect you spend much more volume on the action part.

Sample Answer:

We were asked how to respond to the news of Siam's limestone reserve at lower level. Based on our analysis, Siam has an intergrated clinker-cement plant
near Bangkok and clinker is the cheapeast byproduct to ship. In short-term, Siam should optimize production operation to maximize the limestone lifespan.
In long-term, we propose Siam to source another limestone mine, build a limestone-clinker facility there, and use the current facility for cement grinding.