Problem Definition
Cairnfield Cement is a privately owned U.S. cement producer with five plants across the Midwest and Great Lakes region. It sells about 5.0 million metric tons of cement a year, mostly to ready-mixed concrete producers, and earns revenue of about $800 million including delivery. Cairnfield has about 780 employees.
The U.S. cement market is flat. In 2025, U.S. plants produced approximately 84 million tons of cement, and apparent consumption was unchanged from 2024 at about 110 million tons. Shipments fell about 2% in the first nine months of 2025 as construction spending softened. Imports supply about a fifth of U.S. demand, and new import terminals keep opening. U.S. plants produced about 69 million tons of clinker (the kiln product that is ground into cement) against clinker capacity of about 100 million tons, so the industry runs at roughly 70% of capacity.
Cairnfield's plants are in the same position. Together they can make 7.5 million tons a year but ship only 5.0 million, so the company runs at about 67% of capacity. Every plant carries large fixed costs (kiln maintenance, staff, quarry operations, environmental compliance) whether it runs full or half empty. The new CEO believes Cairnfield has one plant too many. She has asked your team: Should Cairnfield consolidate its production into fewer plants, and if so, which plant should it close?
Additional InformationAsk for dataInterviewer’s data
If asked, please share that:
- Cairnfield sells on a delivered basis: it pays the freight to the customer's site, and delivered prices are set by the local market
- Cairnfield's average price is about $150 per ton at the plant gate (before freight); the U.S. average mill value is about $160 per ton
- About 75% of Cairnfield's volume goes to ready-mixed concrete producers, who buy from the nearest competitive source
- Cement is heavy and cheap relative to its weight, so freight cost limits how far a plant can profitably ship. Cairnfield's truck freight costs about $0.12 per ton per mile
- Cairnfield has not closed a plant in 25 years; the owners want a plan that pays back within two years
Question 1Structuring
How would you decide whether to consolidate, and which plant to close?
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
Additional InformationAsk for dataInterviewer’s data
- If asked, all five plants have their own limestone quarries with more than 30 years of reserves
Try it first, then checkCheck my answerModel answer
A strong structure would cover four areas:
1. Cost savings from closing a plant
- a) Fixed costs avoided (staff, maintenance, quarry, compliance), less costs that remain (site security, remediation)
- b) Variable cost difference: the receiving plant's variable cost per ton compared with the closing plant's
2. Costs created by closing a plant
- a) Extra freight to serve the closing plant's customers from further away
- b) One-time costs: severance, decommissioning, environmental remediation
3. Network and market effects
- a) Spare capacity at receiving plants; utilization after closure (with room for kiln maintenance shutdowns)
- b) Competitors and import terminals near the closing plant's customers; risk of losing volume
- c) Strategic assets at each site (rail, water access, quarry quality)
4. Decision criteria
- a) Net annual profit impact and payback (the owners require less than two years)
- b) Risk: customer loss, regulatory and community impact, future carbon costs
What the interviewer is looking forInterviewer’s viewInterviewer’s view
A good candidate will compare the cost savings from closing a plant with the costs that result (extra freight, one-time closure costs). A strong candidate will recognize that closure is a network question: the volume from the closed plant must go somewhere, and the receiving plants need spare capacity and must be close enough to the customers. An excellent candidate will add the market side: if delivered costs rise, customers near the closed plant may switch to a competitor or to imports, so some volume may be lost, not just moved.
Push back if the candidate simply says "close the plant with the highest cost per ton" without checking where its customers will be served from.
So What? cascade:
- Level 1: close the plant with the highest cost per ton
- Level 2: the saving is fixed costs avoided plus lower variable cost at the receiving plant, minus extra freight and one-time costs
- Level 3: in a regional product like cement, the plant's location is part of its value. The right plant to close is the one whose customers can be served from elsewhere without losing them to a competitor
Question 2Numeracy
Look at Exhibit 1. What is each plant's cost per ton, and what would Cairnfield save each year by closing the North plant?
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
Exhibit 1Cairnfield Plant Data (2025)
| Plant | Year built | Kiln type | Capacity (M tons) | Shipments (M tons) | Variable cost ($/ton) | Fixed cost ($M/year) | Employees |
|---|---|---|---|---|---|---|---|
| North | 1962 | Wet process | 1.0 | 0.55 | 78 | 30 | 160 |
| River | 1998 | Dry, preheater/precalciner | 1.8 | 1.35 | 58 | 38 | 170 |
| Ridge | 2006 | Dry, preheater/precalciner | 2.0 | 1.40 | 55 | 40 | 165 |
| Lake | 1974 | Dry, preheater | 1.2 | 0.70 | 70 | 32 | 140 |
| Valley | 1989 | Dry, preheater | 1.5 | 1.00 | 62 | 34 | 145 |
| Total | 7.5 | 5.0 | 174 | 780 |
Variable cost includes fuel, power, raw materials and plant consumables. Freight to customers is excluded.
Source: Cairnfield Cement case file
Additional InformationAsk for dataInterviewer’s data
Share Exhibit 1 and then, when the candidate asks about moving the volume, the following:
- North's 0.55 million tons would move to the Ridge plant, the closest plant with enough spare capacity
- Of North's $30M fixed costs, $26M can be avoided; $4M remains (site security, water treatment, quarry reclamation)
- Serving North's customers from Ridge adds about 130 miles to the average delivery
- One-time costs: 120 employees would be let go at an average severance cost of $55,000 each (the other 40 transfer to other plants), plus $22M of decommissioning and site remediation
Try it first, then checkCheck my answerModel answer
Step 1: Cost per ton by plant
| Plant | Utilization | Fixed cost per ton | Total cost per ton (before freight) |
|---|---|---|---|
| North | 0.55 / 1.0 = 55% | $30M / 0.55M = $54.5 | $78 + $54.5 = $132.5 |
| River | 1.35 / 1.8 = 75% | $38M / 1.35M = $28.1 | $58 + $28.1 = $86.1 |
| Ridge | 1.40 / 2.0 = 70% | $40M / 1.40M = $28.6 | $55 + $28.6 = $83.6 |
| Lake | 0.70 / 1.2 = 58% | $32M / 0.70M = $45.7 | $70 + $45.7 = $115.7 |
| Valley | 1.00 / 1.5 = 67% | $34M / 1.00M = $34.0 | $62 + $34.0 = $96.0 |
North and Lake are the two high-cost plants, both because they are less efficient and because they are the least utilized.
Step 2: Annual savings from closing North
| Item | Calculation | Annual impact |
|---|---|---|
| Fixed costs avoided | $30M - $4M remaining | +$26.0M |
| Variable cost saving | 0.55M tons x ($78 - $55) | +$12.65M |
| Extra freight | 0.55M tons x 130 miles x $0.12 = 0.55M x $15.60 | -$8.58M |
| Net annual saving | +$30.07M (~$30M) |
Step 3: One-time costs and payback
- Severance: 120 x $55,000 = $6.6M
- Decommissioning and remediation: $22.0M
- Total one-time cost: $28.6M
- Payback: $28.6M / $30.07M = 0.95 years, about 11 months, well within the two-year requirement
Step 4: Capacity check
- Ridge after closure: 1.40 + 0.55 = 1.95M tons of 2.0M capacity = 97.5% utilization
- Company-wide: 5.0M tons / 6.5M capacity = 77%, up from 67%
Key insight: On the numbers alone, closing North pays back in under a year. But Ridge would have almost no spare capacity left for kiln maintenance shutdowns or demand spikes, and the saving assumes that every North customer stays with Cairnfield despite a longer delivery.
What the interviewer is looking forInterviewer’s viewInterviewer’s view
The candidate should first compute cost per ton by plant (variable plus fixed spread over shipments) and see that North and Lake stand out. Then they should build the saving from closing North step by step. A strong candidate will separate annual savings from one-time costs and calculate the payback. An excellent candidate will note that the 0.55 million tons fit into Ridge's 0.60 million tons of spare capacity, but only just: Ridge would then run at 97.5%.
If the candidate is stuck, prompt: "Which costs disappear when North closes, and which new costs appear?"
Question 3Judgement & Insights
The operations team argues that Lake should close instead. Using Exhibit 2, compare the two options. Which would you close?
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
Exhibit 2Market Context for North and Lake
| North | Lake | |
|---|---|---|
| Main market | Inland metro area and surrounding counties | Port city and lakeshore counties |
| Cairnfield market share | ~45% | ~25% |
| Nearest competitor plant | ~60 miles from main market | ~150 miles |
| Import terminals within 100 miles | None | Two (cement shipped in by water) |
| Transport access | Truck only | Truck, rail and deepwater dock |
| Fuel use per ton of clinker (vs. Cairnfield's best kiln) | ~40% higher (wet process) | ~15% higher |
| Expected capital spend in next 5 years to stay compliant | ~$45M | ~$20M |
Sources: Cairnfield internal data. Wet-process kilns evaporate water from the raw material slurry, which is why they use much more fuel.
Source: Cairnfield Cement case file
Additional InformationAsk for dataInterviewer’s data
Share Exhibit 2 and the following:
- If Lake closes, its 0.70M tons would be split equally between River (0.35M) and Valley (0.35M). The average delivery distance to Lake's customers would rise by about 180 miles
- Of Lake's $32M fixed costs, $28M can be avoided
- Lake has a deepwater dock. If the kiln closes, Cairnfield can keep the dock and silos running as a distribution terminal at no extra fixed cost (already included in the $4M that remains)
- If North's customers are served from Ridge, Cairnfield expects to lose about 30% of North's volume to a competitor whose plant is 60 miles from North's main market. At that point, Cairnfield's contribution on each ton delivered from Ridge would be about $67 ($150 price - $55 variable cost - about $27.60 freight, made up of about $12 of freight to North's customers today plus the $15.60 extra)
Try it first, then checkCheck my answerModel answer
1. Closing Lake
| Item | Calculation | Annual impact |
|---|---|---|
| Fixed costs avoided | $32M - $4M | +$28.0M |
| Variable cost saving | 0.35M x ($70 - $58) + 0.35M x ($70 - $62) = $4.2M + $2.8M | +$7.0M |
| Extra freight | 0.70M x 180 miles x $0.12 = 0.70M x $21.60 | -$15.12M |
| Net annual saving | +$19.88M (~$20M) |
2. Closing North, adjusted for customer loss
- Volume lost: 30% x 0.55M = 0.165M tons
- Contribution lost: 0.165M x $67.40 (= $150 - $55 - $12 current freight - $15.60 extra freight) = $11.12M
- Adjusted net saving: $30.07M - $11.12M = $18.95M (~$19M)
3. Beyond annual savings
| Factor | Favors closing |
|---|---|
| Annual saving (after customer loss) | Roughly equal (~$19M vs. ~$20M) |
| Capital avoided over five years | North ($45M vs. $20M) |
| Fuel efficiency and future carbon costs | North (wet kiln uses ~40% more fuel) |
| Market position | Lake is more exposed to imports; North has 45% share to defend |
| Strategic assets | Keep Lake: its dock, rail and water access matter as imports grow |
| Room for customer loss to be reduced | North: a rail-served terminal could cut the extra freight |
Recommendation for this question: close North. Once the $45M of avoided capital spending is included, North is clearly the better closure. The risk to manage is the 30% customer loss, which Cairnfield can reduce by keeping a presence near North's market.
Why not close both? Capacity would fall to 7.5 - 1.0 - 1.2 = 5.3M tons against 5.0M tons of shipments, or about 94% utilization, which leaves no room for kiln shutdowns or demand recovery.
What the interviewer is looking forInterviewer’s viewInterviewer’s view
This question tests whether the candidate can combine a calculation with market judgment. A good candidate will calculate Lake's net saving (about $20M) and adjust North's saving for the customers it would lose (to about $19M). A strong candidate will see that the two options are almost equal on annual savings, so the decision depends on other factors. An excellent candidate will notice that North's weaknesses are permanent (inefficient wet kiln, $45M of required capital spending) while its customer-loss risk can be reduced, whereas closing Lake would give up a dock that competitors and importers would value.
So What? cascade:
- Level 1: closing Lake saves about $20M a year; closing North saves about $30M before customer losses
- Level 2: after the expected 30% volume loss, closing North saves about $19M, almost the same as Lake. Annual savings alone do not decide the choice
- Level 3: close North, because its cost problem is structural and its capital needs are large, then protect its market with a terminal or rail link from Ridge so the 30% loss does not happen. Keep Lake's dock, which is a strategic asset in a market where imports are growing
Question 4Creativity
Beyond closing North, what else could Cairnfield do to lower its cost per ton or protect its volume?
Hint · Creativity
Brainstorm in buckets (e.g. internal vs external, short vs long term) so ideas stay structured and you can see gaps.
Additional InformationAsk for dataInterviewer’s data
Share if the candidate asks about energy or product mix:
- Cairnfield's kilns burn about 1.2 thousand cubic feet (Mcf) of natural gas per ton of cement; the rest of the heat comes from coal, petroleum coke and waste fuels
- The U.S. industrial natural gas price rose from about $4.07 per Mcf in 2024 to about $5.23 in 2025
- About 40% of Cairnfield's shipments are portland-limestone cement (Type IL), which replaces some clinker with ground limestone. Across the U.S., blended cements were about 63% of shipments in 2025, and about 95% of those were Type IL
- Cairnfield estimates that each ton switched from ordinary portland cement to Type IL saves about $4 of variable cost, because it needs less clinker
Try it first, then checkCheck my answerModel answer
Quick sizing
- Gas price increase: 5.0M tons x 1.2 Mcf x ($5.23 - $4.07) = 5.0M x 1.2 x $1.16 = ~$7.0M a year of extra cost
- Type IL switch: move the remaining 60% of volume: 5.0M x 60% x $4 = ~$12M a year of savings, and less clinker needed per ton frees kiln capacity at Ridge
1. Energy
- Increase use of alternative fuels (tires, waste-derived fuels, biomass) to reduce gas and coal purchases
- Hedge or lock in gas supply contracts
- Waste heat recovery for power at the larger kilns
2. Product mix
- Shift to Type IL, which U.S. customers have widely accepted and which has about a 10% lower carbon footprint
- Use more supplementary materials (slag, fly ash) where available
3. Logistics and network
- Convert the North site into a rail-served distribution terminal supplied from Ridge, to cut the extra freight and keep North's customers
- Use Lake's dock for barge shipments to other lakeshore markets, or to bring in slag or clinker when kilns are down
4. Commercial
- Longer supply contracts with North's largest ready-mix customers before the closure is announced
- Price by delivered zone so that distant customers pay closer to the real cost of serving them
What the interviewer is looking forInterviewer’s viewInterviewer’s view
Look for structured brainstorming (for example: energy, product mix, logistics, commercial). A strong candidate will quantify one or two ideas with the data provided. An excellent candidate will connect ideas to the consolidation decision, for example by seeing that a rail-served terminal near North protects the market share that the closure puts at risk.
So What? cascade:
- Level 1: a list of cost ideas
- Level 2: two ideas can be sized quickly: higher gas prices cost Cairnfield about $7M a year, and moving the remaining ordinary cement to Type IL could save about $12M a year
- Level 3: the best ideas also support the closure. Type IL stretches clinker capacity, which gives Ridge more room, and a terminal at North keeps customers who would otherwise go to the competitor
Question 5Synthesis
The CEO needs a recommendation for the owners next week. What do you say?
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
Additional InformationAsk for dataInterviewer’s data
- Remind the candidate if needed: closing North saves
$30M before customer losses ($19M after), costs $28.6M once, and avoids ~$45M of capital spending over five years
Try it first, then checkCheck my answerModel answer
Recommendation: consolidate by closing the North plant within 12 months, keep a distribution presence in North's market, and keep Lake open.
1. Why North
- Highest cost per ton (about $132.5 vs. $83.6 at Ridge) and an inefficient wet kiln
- Net annual saving of about $30M, or about $19M if 30% of its customers are lost; payback of about 11 months on $28.6M of one-time costs
- Avoids about $45M of compliance capital spending over five years
2. How to protect the saving
- Build a rail-served terminal at the North site, supplied from Ridge, and sign longer contracts with North's biggest ready-mix customers before announcing the closure
- Every percentage point of North volume kept is worth about $0.37M a year (0.0055M tons x $67.40)
3. What not to do
- Do not close Lake now: its saving is similar, but its dock and water access become more valuable as imports grow
- Do not close both plants: utilization would reach about 94%, too tight for kiln maintenance
4. Network-wide cost actions
- Move the remaining ~60% of volume to Type IL (about $12M a year) and increase alternative fuels to offset the ~$7M a year hit from higher gas prices
Risks and next steps
- Ridge would run at about 97.5%: confirm the maintenance schedule and use Type IL to free clinker capacity
- Plan the workforce transition with the 160 North employees and the local community early
- Review Lake again in two to three years, once demand, imports and the terminal model are clearer
What the interviewer is looking forInterviewer’s viewInterviewer’s view
A good candidate gives a clear answer with the main numbers. A strong candidate includes the customer-retention plan, since that decides whether the saving is $30M or $19M. An excellent candidate sequences the plan and names the risks and the triggers for a second consolidation step later.
So What? cascade:
- Level 1: close North
- Level 2: close North, because it saves about $19-30M a year, pays back within about a year, and avoids $45M of capital spending
- Level 3: close North and protect its market, keep Lake and its dock, and use Type IL and energy measures to lower the whole network's cost
Data Sources
Company figures (Cairnfield's plants, costs, freight rates, customer-loss estimate, employees) are fictional estimates set against the benchmarks below. Market figures are rounded for interview math.
| Fact used in the case | Publisher, title, year | URL |
|---|---|---|
| U.S. cement production ~84M tons (2025); clinker ~69M tons vs. clinker capacity ~100M tons; 97 plants in 34 states and Puerto Rico; apparent consumption ~110M tons, flat; shipments down ~2.1% in first 9 months of 2025; imports ~23M tons, net import reliance ~21%; average mill value ~$160/ton; 70-75% of sales to ready-mix producers | U.S. Geological Survey, "Mineral Commodity Summaries 2026: Cement", 2026 | https://pubs.usgs.gov/periodicals/mcs2026/mcs2026-cement.pdf |
| Blended cement ~63% of shipments in first 9 months of 2025, ~95% of blended shipments Type IL; new import terminals announced; plants repurposed as terminals / grinding facilities | U.S. Geological Survey, "Mineral Commodity Summaries 2026: Cement", 2026 | https://pubs.usgs.gov/periodicals/mcs2026/mcs2026-cement.pdf |
| Switching to portland-limestone cement cuts carbon footprint ~10% | American Cement Association, "Sustainability", 2026 | https://www.cement.org/sustainability/ |
| U.S. industrial natural gas price ~$4.07/Mcf (2024) and ~$5.23/Mcf (2025) | U.S. Energy Information Administration, "Natural Gas Industrial Price", 2026 | https://www.eia.gov/dnav/ng/hist/n3035us3a.htm |
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