Supply Chain Management

Bharat Petroleum Corporation Limited(BPCL)

INDEX

Industry Introduction:1. Company Introduction 2. The Planned Approach 3. Information Technological (IT) 4. Supply Chain Management in BPCL 5. Supply Chain Overview:6. Supply Chain Master Data:7. Supply Chain Link 8. Supply Chain Management in LPG SBU: 9 Types of Products and Packages 10. Supply Chain Strategies 11. Inventory Management 12. Benefits of implementation of SCM in LPG SBU

Industry Introduction:India's oil and petrochemical giant Bharat Petroleum is progressing fast on its roadmap to emerge as the country's most profitable downstream player, seeking to double volumes and quadruple profits over the next three years. As a step towards achieving this goal, LPG (Liquefied Petroleum Gases) SBU of BPCL, decided to go ahead and implement the SCM. Accordingly, LPG SBU launched the SCM project namely Project Aryabhatta , which emphasized on two major initiatives implementation of end-to end planning system and LPG cylinder inventory optimization , which includes connectivity to distributors and tracking secondary sales and other related data. The solution being implemented is SCM 5.0, advanced planning & Optimization solution by SAP. The solution is integrated to SAP R/3 (execution system) and BIW (Reporting and analysis system) using SAP standard interfaces. The solution modules include Demand Planning (DP), supply network planning (SNP) and Transport planning and Vehicle Scheduling (TPVS). SCM solution is an End to end solution handling all processes of planning like bulk & packed together, Procurement of LPG cylinders, DPRs, Valves etc. This project report gives an insight towards the supply chain management in BPCL as a whole and also elaborates on the three modules of SCM solution taking into account Southern LPG distribution network as an example.

1. Company Introduction:Burmah Shell Refineries Limited was incorporated as a private limited company under the Indian Companies Act on 3rd November 1952. On 24th January 1976, the Burmah Shell Group of Companies was taken over by the Government of India to form Bharat Refineries Limited. On 1st August 1977, it was renamed Bharat Petroleum Corporation Limited. The core strength of Bharat Petroleum Corporation Limited has always been the ardent pursuit of qualitative excellence for maximization of customer satisfaction. Thus Bharat Petroleum, the erstwhile Burmah Shell, has today become one of the most formidable names in the petroleum industry. Bharat Petroleum produces a diverse range of products, from petrochemicals and solvents to aircraft fuel and specialty lubricants and markets them through its wide network of Petrol Stations, Kerosene Dealers, LPG Distributors, Lube Shoppes, besides supplying fuel directly to hundreds of industries, and several international and domestic airlines. In 1996, Bharat Petroleum went through a process of visioning, involving people at all levels, which evolved a shared vision and a set of shared values. Based on this, the company restructured itself, in a proactive move to adapt to the emerging competitive scenario. The function-based structure was carefully dismantled and replaced with a process-based one. This made the company more responsive to its customer needs. Bharat Petroleum realized that, in the long run, success can only come with a total reorientation and change in approach with the customer as the focal point. Today, Bharat Petroleum is restructured into a Corporate Centre, Strategic Business Units (SBUs) and Shared Services and Entities. The organizational design comprising of five customers facing SBUs, viz. Aviation, Industrial and Commercial, LPG, Lubricants and Retail and one asset based SBU, viz. Refinery, is based on the philosophy of greater customer focus

2. The Planned Approach

Increasing globalization, new products and services, and innovative marketing have resulted in a very market savvy consumer. The production-based success philosophy of marketers has now been replaced by a customer-oriented philosophy. Bharat Petroleum has taken cognizance of this situation well in time and has been taking radical steps to keep itself attuned to the changing times, realizing that the future belongs to those who listen and adapt to their customers.

3. Information Technological(IT)
Bharat Petroleum has always been on the forefront of harnessing technology initiatives for BPCL has been on forefront in harnessing technology. Maximizing efficiency and achieving greater customer satisfaction. Bharat Petroleum is the first Public Sector Oil Company to implement Enterprise wide Resource Planning (ERP) solutions - SAP. The implementation project known as ENTRANS (Enterprise wide Transformation) has been awarded the 'SAP Star Implementation Award', with Bharat Petroleum having the distinction of executing the largest and the most ambitious SAP project in India. The challenge of SAP implementation was to ensure that all the integrated elements (of the complex multi-modular integrated solutions that impact the entire workflow of the organization) work seamlessly across the length and breadth of the country, including the remote locations. Providing online connectivity in these remote locations, given the full-fledged IT network infrastructure, was in itself a daunting task. Bharat Petroleum is reaping the benefits of the integrated system in many areas of its operations. The early gains of implementation are in the areas of tracking customerreceivables, monitoring credit-management, inventory management, besides easing the operations in a large number of areas. Furthermore, Bharat Petroleum has also set up one of the biggest 'Centre of Excellence' in Asia to provide online support to the end users and also work towards continuous improvement in business processes and handle product upgrades and new generation products. With SAP as the IT backbone, Bharat Petroleum plans to take advantage of the Internet based capabilities along the entire value chain with a Customer Relationship Management solution. A large data warehouse project has also been implemented, which facilitates access to realtime accurate information on key performance indicators at all Bharat Petroleum locations. This enables the management to take strategic and business decisions, thus ensuring valueadded services, better customer satisfaction and enhanced shareholder value Over the past decade, BPCL has seen the business go from strength to strength. And it is on course for more growth in the years to come. Underpinning the companys success is a strong, stable, and state-of-the-art IT infrastructure based on SAP software. Their motivation is to streamline business processes by giving employees access to some of the most up-to-date technology on the market. SAP for O&G solutions provide industry specific support from the extraction of raw materials to refining to selling finished goods. SAP for O&G helps BPCL manage the entire downstream hydrocarbon value chain from the refining of crude oil through to the transportation, distribution, and sales of petroleum products.

3.1 Benefits of the ERP Projects: Complete visibility and transparency of the entire supply chain Planning tool being integrated with execution system the adherence and execution of plan is monitored and visible Inventory optimization across LPG supply network. smooth production planning and execution Proactive logistics with transportation planning Procurement requirement planning and execution for raw materials, packing materials with timely call offs.

4. Supply Chain Management in Bharat Petroleum Corporation Limited

BPCL is involved in a global supply-chain that includes domestic and international transportation, ordering and inventory visibility and control, materials handling, import/export facilitation and information technology. Thus, the industry offers a classic model for implementing supply-chain management techniques. In a supply-chain, a company is linked to its upstream suppliers and downstream distributors as materials, information, and capital flow through the supply-chain. Supply Chain Management in BPCL is a part of Project ARYABHATTA which is a component of Project DESTINY to align initiatives; moving towards customers with new technologies and enhancing skills of people. The Supply Chain department was developed in November 2006 with the strategic intent of maximizing benefit for the overall corporation, improving dynamic capability and becoming more competitive in the total business process chain. A transparent platform with total visibility, it is an integrated package of SAP R3 and BIW. Given its objectives, the SCM has to work through four fundamental sets of complexities which are as follows: It operates in a global context both at the supply side, and at the marketing end. The crude selection and supply is the international arm of the business, and the supply chain needs to drive decisions on exports imports versus domestic sales of different products. The SCM inherently operates as a matrix organization, working across different business units that could have conflicting goals or are used to more vertical ways of working. The SCM needs to drive value creation for the entire corporation, by creating a sense of passion for the company goal. Short-term versus long term implications of decisions need to be balanced, from a strategic perspective.

5. Supply Chain Overview:-

6. Supply Chain Master Data:-

7. Supply Chain Link

Exploration Production Refining Marketing Consumer

7.1 Exploration:BPCL entered the upstream sector in 2003 with the aspirations of reasonable supply security of crude, hedging of price risks, to become a vertically integrated oil company and to add to BPCLs bottom line. Till date, the company has acquired participating interests in 26 exploration blocks; in consortium with other companies. Of the blocks, 9 blocks are in India, 2 in Australia and UK, 1 each in Mozambique and East Timor and 10 in Brazil. BPRLs total acreage holding is around 86,000 sq.km of which about 73,000 sq.km is offshore acreage.

7.2 Refining:BPCL is a proud owner of multiple refinery units.

7.2.1 Bharat Petroleums Mumbai Refinery

(BPMR) is one of the most versatile Refineries in India and excels in all aspects like quality, technology, fuel & loss, human relations, safety, environmental friendliness and operating cost. With successful implementation of various projects and de-bottlenecking, our Refineries currently process about 12 Million Metric Tons of crude oil per annum. BPMR has processed 61 different types of crude in five decades of its operations, making it one of the most flexible Refineries in the country.

7.2.2 Kochi Refinery

Kochi Refinery, a unit of Bharat Petroleum Corporation Limited, embarked on its journey in 1966 with a capacity of 50,000 barrels per day. Formerly known as Cochin Refineries Limited and renamed as Kochi Refineries Limited, the refinery was originally established in collaboration with Phillips Petroleum Corporation, USA. Today it is a frontline entity as the unit of the Fortune 500 Company, BPCL.

7.2.3 Numaligarh Refinery Limited

Numaligarh Refinery Limited is a public sector oil company set up in the year 1993, with its 3 MMT refinery situated in Numaligarh, Assam. The Refinery is one of the most technologically advanced and environment friendly refineries in the country. BPCL is the major share holder with 61.65% of the Companys paid up equity capital; the other shareholders being the Government of Assam with 12.35% and Oil India Limited with 26 %. Though majority of the Refinery products are marketed through BPCL and other oil companies, NRL markets a small amount of its products through its own network of retail outlets aptly named Energy Stations.

7.2.4 Bina Refinery

Bharat Oman Refineries Limited (BORL), a company promoted by Bharat Petroleum Corporation Limited (BPCL) and Oman Oil Company Limited (OOCL), is setting up a 6 MMTPA grass root refinery at Bina, district Sagar, Madhya Pradesh along with crude supply system consisting of a Single Point Mooring system (SPM), Crude Oil Storage Terminal (COT) at Vadinar, District Jamnagar, Gujarat and 935 Km long cross country crude pipeline from Vadinar to Bina.

7.3 Marketing:BPCL offers many products and services that have been designed to meet the need gaps of its customers for fueling automotives, skies, industries and homes.

8. Supply Chain Management in LPG SBU :

The LPG-SCM were formed which is a perfect blend of experienced members from LPG and ERP competency centre with long years of Business experience and process expertise. BPCL has a customer population of about 2.2 crores for LPG, who are scattered throughout the length & breadth of the country. The demand is met through the distributor net work. In Southern Region, the customer population is about 85 lakhs and there are about 90 distributors in Kerala, Tamil Nadu, Karnataka and Andhra Pradesh. Through SCM, it is ensured that the demand of the customer is met totally in time. Supply chain management in LPG business optimizes the entire supply chain bulk, bottling, packed movements and hospitality with a specific focus on significant savings on transportation cost of LPG.

9 Types of Products and Packages: Bulk LPG 5 kg cylinder 14.2 kg cylinder 19 kg cylinder 35 kg cylinder 47.5 kg cylinder Bharat Metal Cutting Gas BMCG 19 kg BMCG 35 kg BMCG 47.5 kg Auto LPG

10. Supply Chain Strategies

10.1 Demand Planning:BPCL, southern region has an average LPG demand of 80 TMT per month. There are various types of demands for LPG as under: Refill demand of existing customers New connection for domestic , commercial establishments Additional requirement of existing customers- like double bottle connection or increased requirement for commercial customers Mass new connections under various Govt. schemes( Deepam connections , TN free connections etc)

Some other factors also do affect LPG demand such as seasonal variations, festival seasons, etc. The demand planning is extremely essential and the demand estimate projections need to be accurate and be based on last year sales/expected sales growth / new customer /distributor addition / any new business /per capita consumption /system projection etc. Any major changes in the demand estimate vs. actual may have an impact on the Supply network planning / Transport planning and vehicle scheduling. Effect from April 2008, the demand projections are being captured in the SCM solution at the distributor level.

Through the Supply Chain Management package which is based on SAP R/3, processing of monthly demand is being done. The demand from each distributor is collected by the sales officers. The same is analyzed and then with corrections, if any, it is fed into the integrated planning module that contains representation of supply, production and distribution facilities by 22nd of every month, which would form the basis for the next month. In addition, major bulk customers demand and auto LPG demand is also uploaded. The demand is uploaded on a daily basis called PDP, (planned delivery programme). The production and the Supply & Distribution(S&D) structure form the basis on which the optimized plan for the entire organization is generated. This corporate plan is communicated to the distribution module and the production planning modules to generate the operational plans.

The demand of LPG normally registers a growth to the tune of 8%. Below is the tabulation of the sales during the financial year 2009-10 for SR LPG, BPCL:PRODUCT
LPG Bulk LPG 5 KG FILLED LPG 14.2 Kg Filled LPG 19 Kg Filled C 19KG BMCG LPG 35 Kg Filled C 35Kg BMCG LPG 47.5 Kg Filled Total

TMT
35.6 0.06 761.33 90.6 1.82 2.28 0.53 0.43 892.65

10.2 Procurement & Outsourcing Strategies:10.2.1 Industry Logistics Plan:The ILP forms a major component of the downstream oil indust*ry. ILP originates at the refineries and terminates the final delivery point the customers .A model is generated in mathematical terms which depict the following: ILP gives the overall supply demand position for the country for all the oil industries. Supply sources Indigenous availability of LPG Import plan port wise Total availability at each supply source Linkage to bottling plants & customers qty & mode

 Rail loading slate

10.3.2 Transportation Planning Inbound Process

Purchase orders, Stock Transport orders, Inbound Deliveries and Shipment documents can be used to plan inbound transportation demand. When Purchase orders / Stock Transport Orders are provided to TPVS for planning, TPVS will create the inbound delivery and inbound shipment document data for the R/3 system. Transportation demands from Supply Network Planning can also be created in TPVS for planning.

10.4 Supply Network Planning (Cross Plant Planning)

Cross-Plant Production ensures that medium to long-term planned independent requirements and sales orders are covered by means of receipt elements such as stock transfers, planned orders and purchase requisitions. It is based, for example, on the requirements you have determined in Demand Planning for distribution centers and determines how these requirements are met by distribution centers, production plants and suppliers in your network. Cross-Plant Planning is carried out using the component APO-SNP.

11. Inventory Management

The inventory of an LPG SBU relates itself to the bulk LPG, cylinders and associated equipments. The inventory management is a part of SCM and it is followed up through SAP R/3 and BW on a daily basis from the transportation of bulk to the stock at the distributor end. Project WIN was launched in January09 which has identified specific high impact areas across businesses and devised metrics for improving existing processes and practices. It has built greater sensitivity in the company to costs, inventory, receivables, etc and has successfully transformed and infused competitive cost structures. The Project Win team in Phase 1 undertook identification and seizing of Opportunities for Rs 1200 Crores of Profit and Rs 2800 Crores of cash across 6 major initiatives. Phase 2 and 3 largely involved introducing improvements, Syndication, Implementation and Institutionalizing of identified opportunities like Inventory Turnaround Ratio for Cylinders, Product/Crude Inventory management etc. It also ensures bulk and packed LPG stock levels should be maintained within the permissible limits prescribed by the CCOE to ensure safety of the plant, staff and surrounding property/population .

12. Benefits of implementation of SCM in LPG SBU: Reduction in cylinder transportation cost by re- alignment of markets between plants Change of bulk supply sources while determining the rescue supplies and shutdown of refineries etc. Capacity optimization of bottling plants with respect to overall cost including transportation Decision making on Relocation of LPG bottling plants. Decision making on Construction of bottling plants at strategic locations Decision making to put up huge investments on infrastructure jetties etc.

References
1. http://www.bharatpetroleum.com/ 2. Designing and Managing the Supply Chain Simchi Levi, Kaminsky, Ravi Shankar