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PROJECT

REPORT
SUPPLY CHAIN MANAGEMENT

Bharat Petroleum Corporation Limited


Sandhya Vidhyasagar (ePGP-02-065)
Tushar Govalkar (ePGP-02-086)
Sumeet Pai (ePGP-02-081)

INDIAN INSTITUTE OF MANAGEMENT - Kozhikode

CONFIDENTIAL
All material and references in this report is, unless otherwise stated, the property of BPCL. Copyright and other intellectual property laws protect these materials.
Reproduction or retransmission of the materials, in whole or in part, in any manner is unauthorized without the prior written consent. This report has been solely
created for the supply chain management project to be submitted at IIM-K.

July 2010
Table of Contents
EXECUTIVE SUMMARY ........................................................................................................................ 3
1. COMPANY INTRODUCTION ............................................................................................................. 3
2. THE PLANNED APPROACH .............................................................................................................. 4
3. TECHNOLOGICAL EDGE .................................................................................................................. 4
3.1 BENEFITS OF THE ERP PROJECTS:- ................................................................................................. 5
4. SUPPLY CHAIN MANAGEMENT IN BHARAT PETROLEUM CORPORATION LIMITED . 6
5. SUPPLY CHAIN OVERVIEW:- .......................................................................................................... 7
6. SUPPLY CHAIN MASTER DATA:- .................................................................................................... 8
7. SUPPLY CHAIN LINK ......................................................................................................................... 8
7.1 EXPLORATION:- ................................................................................................................................. 8
7.2 REFINING:- ......................................................................................................................................... 8
7.2.1 Bharat Petroleum’s Mumbai Refinery ........................................................................................................9
7.2.2 Kochi Refinery.............................................................................................................................................9
7.2.3 Numaligarh Refinery Limited ......................................................................................................................9
7.2.4 Bina Refinery...............................................................................................................................................9
7.3 MARKETING:- .................................................................................................................................... 9
8. SUPPLY CHAIN MANAGEMENT IN LPG SBU -SOUTHERN REGION .................................. 10
9 TYPES OF PRODUCTS AND PACKAGES:- .................................................................................... 10
10. SUPPLY CHAIN STRATEGIES ...................................................................................................... 10
10.1 DEMAND PLANNING:- .................................................................................................................... 10
10.2 PROCUREMENT & OUTSOURCING STRATEGIES:- ....................................................................... 13
10.2.1 Industry Logistics Plan:- ......................................................................................................................... 13
10.2.2 Hospitality ............................................................................................................................................... 16
10.3 TRANSPORTATION OF BULK LPG :- ............................................................................................ 16
10.3.1 Transportation Planning /Vehicle Scheduling ........................................................................................ 21
10.3.2 Transportation Planning – Inbound Process .......................................................................................... 22
10.4 SUPPLY NETWORK PLANNING (CROSS PLANT PLANNING) ........................................................ 23
10.5 HEURISTICS.................................................................................................................................... 23
10.5.1 Optimizer: ............................................................................................................................................... 24

11. INVENTORY MANAGEMENT ....................................................................................................... 26


12. BENEFITS OF IMPLEMENTATION OF SCM IN SR LPG SBU:-............................................. 26
13. MAJOR MILESTONES TILL DATE .............................................................................................. 26
13.1 KPIS EVOLVED IN SUPPLY CHAIN OPERATION REFERENCE (SCOR) ....................................... 27
REFERENCES .......................................................................................................................................... 28

IIM Kozhikode Bharat Petroleum Corporation Ltd.


Executive Summary
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.
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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. Technological Edge
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 customer-receivables, 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 real-time accurate
information on key performance indicators at all Bharat Petroleum locations. This enables the
management to take strategic and business decisions, thus ensuring value-added services, better
customer satisfaction and enhanced shareholder value.
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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 company’s 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.

SAP Net Weaver BI was being deployed which integrates data from across the enterprise and beyond. It
provides employees with the tools they need to retrieve vital facts and figures and transform them into
valuable business insight – fast.

BPCL has commenced the implementation of Governance, Risk and Compliance (GRC) solution of SAP,
which is an essential step in providing system based controls and risk mitigation mechanism while
handling business processes. The “Access control” component of the GRC solution was implemented in
the LPG.

The launch of the business application centric SAP based portal (myPortal) was done in April2009. The
Employee Self Service application for management staff was commissioned by migrating processes
relating to employee claims and reimbursements to the ‘myPortal’ platform. In the coming days,
myPortal would become the major application portal aggregating information from different SAP and
non-SAP systems.

A number of initiatives aimed at achieving process improvements were completed. These include the
roll out of the Planned Delivery Program solution in the retail locations of the northern and southern
regions and implementation of B2B solution for transactions with IOCL.

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.

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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.

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5. Supply Chain Overview:-

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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.

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7.2.1 Bharat Petroleum’s 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
Company’s 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.

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8. Supply Chain Management in LPG SBU -Southern Region

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:

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 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.

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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.

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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 TMT

LPG Bulk 35.6

LPG 5 KG FILLED CY 0.06

LPG 14.2 Kg Filled 761.33

LPG 19 Kg Filled C 90.6

19KG BMCG 1.82

LPG 35 Kg Filled C 2.28

35Kg BMCG 0.53

LPG 47.5 Kg Filled 0.43

Total 892.65

The above demand numbers are picked up the HQ team for tabling the same in the Industry Logistics
Plan meeting which is conducted every month by 28th wherein the supply – demand scenario for the
next month is formulated.

10.2 Procurement & Outsourcing Strategies:-

10.2.1 Industry Logistics Plan:-


The ILP forms a major component of the downstream oil industry. ILP originates at the refineries and
terminates the final delivery point – the customer’s .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
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 Plan of supplies through pipelines

An example of ILP for LPG SBU- SR is given below:-

SOURCE KRL MRPL MLIF VIZ EIPL(ViZ) TUTICOR BPCR URAN RATNA CPCL TOTAL

PLANT MODE QTY QTY QTY QTY QTY QTY QTY QTY QTY QTY QTY

AUTO/NDNE/BULK
CUSTOMER 4000 1750 0 300 0 0 3500 0 600 10150

COIMBATORE RAIL 1500 0 7700 0 9200

TUTICORIN ROAD 0 0 0 2200 2200

G'POONDI ROAD 0 0 2750 2400 5150

TANJORE ROAD 2000 0 0 0 2000

TRIVANDRUM ROAD 2000 0 0 2000

MANGALORE ROAD 3400 0 3400

DHARWAD ROAD 0 1000 2100 3100

KURNOOL ROAD 1950 0 1950

C'PALLI ROAD 3000 500

PLT 350 1500 0 5350

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KHURDA ROAD 1000 1700

RAIL 700 700

ENN BOTTLING ROAD 850 850

BPCL
VIJAYAWADA PLT 300 2500 2800

IOC SHIMOGA ROAD 0 0

IOC, BANGALORE ROAD 0 400 400

BANGALORE(BPC) ROAD 1450 2650 4100

CALTEX,CHENNAI ROAD 0

CALTEX, MADURAI ROAD 600 600

SURYA PETROLM ROAD 500 500

KOCHI P/L 5000 5000

HOC P/L 1500 1500

TOTAL 16500 6600 16450 3500 4000 2800 3000 3500 2600 3000 62650

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10.2.2 Hospitality

HOSPITALITY
TO BE GIVEN

ex-OUR PLANT TO QTY TO QTY

COIMBATORE HPC 0 IBP 0

TUTICORIN HPC 0 IBP 0

TRIVANDRUM HPC 200

MANGALORE IOC 500

Once the ILP numbers are fixed, the SNP – through the Supply Network program, orders are created in
the system for execution during the entire month. Similarly, orders are created in the system for daily
execution of loads to the distributors.
The following are the supply sources with the quantities where the orders are created in line with the
ILP

 Kochi refineries – 22 TMT


 Mangalore LPG import facility – 22 TMT
 MRPL – 10 TMT
 Tuticorin import terminal - 8 TMT
 CPCL – 3 TMT
 Vizag refineries -3 TMT
 EIPL/VSPL – 12 TMT

10.3 Transportation of Bulk LPG :-

There are three types of movement namely transportation through rail, road and pipeline. The
cheapest mode is by rail for long distances. The freight charges for rail movements are decided by Indian
railways and that for pipeline are decided by GAIL.

For road movements, the oil industry finalizes rate contract with bulk LPG fleet owners. Currently, BPCL
SR LPG has a fleet of about 750 bulk LPG tank trucks.

The bulk movements are planned din the ILP in such a way that the most economical movements are
undertaken.
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BPCL SR moves about 12 TMT by rail to Coimbatore and Cherlapally plants in a month. By pipeline about
18 TMT is transported to Cherlapally, Vijayawada & Mangalore plants and the balance movement is
made by TTs. Source bottling is done Kochi refinery, for which no transportation cost is incurred.

A typical rail loading plan is given below:-

No.
Grand of total
SOURCE PLANT BPC HPC IOC Total rakes rakes

BPCLREF BHITONI 2300 2300 2

CHERLAPALLY 1150 1150 1

BPCLREF Total 3450 3450 3 7

HAZIRA BHOPAL 950 1300 4400 6650 7

DEVANGUNTHI 3450 3450 3

KHAPRI 1850 1850 2

TIKRIKALAN(INDUSTRIAL) 950 950 1

BAHADURGARH-ND 1900 1900 2

LALRU + (ND) 2850 2850 3

KHAPRI(RAIPUR)-ND 50 50

HAZIRA Total 3800 5100 8800 17700 18 38

J'NGR BAHADURGARH 4600 4600 4

BHOPAL 3450 3450 3

LALRU 8050 8050 7

TIKRIKALAN 10350 10350 9

J'NGR Total 8050 4600 13800 26450 23 57

KANDLA BHOPAL 1150 1150 1 2

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KANDLA Total 1150 1150 1

MLIF COIMBATORE 8050 8050 7

DEVANGUNTHI 14700 14700 14

HAZARWADI 4600 4600 4

MLIF Total 8050 4600 14700 27350 25 62

MRPL DEVANGUNTHI(NDNE) 1400 1400

MRPL Total 1400 1400

URAN BHITONI 1100 1100 1

HAZARWADI 600 600 1

KHAPRI 400 400 1

CH'PALLI - AUTO 1100 1100 1

HAZARWADI-ND 500 500

KHAPRI-ND 700 700

URAN Total 1100 3300 4400 4 9

VIJAIPUR BAHADURGARH 1400 500 1900 2

BHITONI 500 1400 1900 2

BHOPAL 2200 2200 3

KANPUR 6650 6650 7

LALRU 2850 2850 3

TIKRIKALAN 3800 3800 4

BHOPAL ( NDNE) 650 650

VIJAIPUR Total 2850 1900 15200 19950 21 43

VISAKH RAIPUR-ND 600 600

VISAKH Total 600 600

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VISAKH(IMP/COASTAL) KHURDA 500 500 4

KHURDA RD. 4300 4300

RAIPUR 200 3500 500 4200 4

VISAKH(IMP/COASTAL)
Total 700 7800 500 9000 8 21

Grand Total 28000 27900 55550 111450 103 240

A typical pipeline transportation plan is given below:-

VIZAG -
SECUNDERABAD PIPE
MODE LINE

Sum of JUL'10

SOURCE PLANT BPC HPC IOC Grand Total

VISAKH CHERLAPALLY 3690 3690

CHERLAPALLY (ND) 800 800

CH'PALLI 500 500

CH'PALLI (NDNE) 800 800

KONDAPALLI 4000 4000

VIJAYWADA (ND) 400 400

VIJAYWADA (NDNE) 500 500

CHERLAPALLY 400 400

CH'PALLI - ND 2000 2000

KONDAPALLI - ND 1000 1000

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THIIMMAPUR 1000 1000

VISAKH Total 1600 7500 5990 15090

VISAKH(IMP/COASTAL) CHERLAPALLY 8500 9510 18010

CH'PALLI 10446 10446

CH'PALLI FOR
KURNOOL 160 160

KONDAPALLI 7000 7000

VIJAYWADA 4000 8600 12600

KONDAPALLI-G'PUNDI 5000 5000

ENNORE(VIA VIJ) 1000 1000

THIIMMAPUR 2500 2500

VISAKH(IMP/COASTAL)
Total 12660 22446 21610 56716

Grand Total 14260 29946 27600 71806

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In line with the increase in demand, BPC undertakes augmentation of tanks and facilities also. The
current tankages at its SR plants are as under:

STATE LPG PLANT TANKAGE(MT)

TN COIMBATORE 3300

TN TUTICORIN 900

TN CHENNAI 900

TN TANJAVUR 450

KERALA TRIANDRUM 1100

KERLA KOCHI REFINERY 8000

KAR MANGALORE 1150

KAR DHARWAD 450

KAR SOLUR (BPCL, B'LORE) 900

AP KURNOOL 375

AP HYDERABAD 1725

AP VIJAYAWADA 450

Once the bulk reaches and bottling is carried out, the packed LPG moves to the distributor end by
packed cylinder transporting trucks.
For each bottling plant, separate contracts are entered into with the packed fleet owners by BPCL for a
period of 2 years which can be extended for another one year. Currently there are about 800 packed
trucks are plying in SR contract.

10.3.1 Transportation Planning /Vehicle Scheduling


Transport planning & vehicle scheduling of SCM helps in planning loads in line with the demand
plan/PDP as well as ensures equal earning to the transporters. This is to take care of creation of
shipments based on the availability of vehicles and users run vehicle scheduling optimizers once in every
3-4 hours.

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The target of the transportation planning process is to optimize the inbound or outbound transportation
demand between a Plant and different other locations such suppliers and customers. The Optimization
covers the own fleet as well as transportation service provider based on least cost, business share and or
priority.

Sales orders, Outbound Deliveries and Shipments can be used to create transportation demand in TPVS.
TPVS Planning process using sales order data will create planned delivery and shipment documents in
the R/3 System TPVS Planning process does not make any changes to the sales documents that are in
the R/3 system.

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.

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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.

10.5 Heuristics
Heuristic processing groups all existing demands for a given product at a location into a total demand for
the period. The Heuristic run then uses the lot-sizing procedure and quota arrangements for each source
to determine the valid sources of supply and the quantities to be procured. The demands are then
passed through the supply chain to calculate a plan. However, this plan is not necessarily feasible. To
create a feasible plan, the planner uses capacity leveling.

The Heuristic performs the following functions:

 Plan supply to meet demand


 Integrate purchasing, production, and distribution in one consistent model
 Model the entire supply network
 Synchronize activities and plan the flow of material through the entire supply chain

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10.5.1 Optimizer:

The optimizer uses linear programming to consider all relevant factors simultaneously. The optimizer
compares alternative solutions using costs that would be incurred. It determines the most cost-effective
solution based on the constraints and objective function defined in the system.

Penalty costs are used to prioritize demands. If a product brings high sales revenues, you set high
penalty costs. If a product has no penalty costs, you cannot meet the demand for this product.

Control costs are used to select procurement alternatives. You can determine the procurement costs
from the SAP R/3 system using purchasing information records, scheduling agreements, and contracts.

The optimization run results in an optimal solution for the objective function (minimum costs or
maximum profit), taking into account constraints for transportation, production, storage, and handling.
The result of the optimization run might be that due dates are violated or that safety stocks are not
replenished.

Due dates and safety stocks are considered to be soft constraints. Violation of soft constraints also
incurs costs, which means that the optimizer only determines a solution that would violate these
constraints, if no other cost-effective solution was available.

BPCL incur about 700 crores per annum towards LPG freight charges. The optimizer for logistics as well
as production capacities is expected bring about 5% to 10% savings per annum once implemented in
total as the packed transportation rates and bulk transportation rates as well as the employee costs /
fixed costs etc have got lot of dynamics with respect to the location, other competitors and the overall
industrial growth.

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IIM Kozhikode Bharat Petroleum Corporation Ltd.


The deployment Heuristic calculates a replenishment plan for a product at a delivery location. If the
available quantities are not sufficient to meet the demand, the system determines the distribution plan
based on fair-share rules. If supply exceeds demand, the system uses push rules to determine the
distribution plan.

Fair-share rules and push rules are defined in the deployment profile. Deployment optimization has an
integrated view over the receipt situation of all delivery locations and the demand situation of the
receiving locations. The deployment optimization run calculates a replenishment plan for a product in all
locations within the network. If the available quantities are not sufficient to fulfill the demand or supply
exceeds demand, the system uses minimum cost flow optimization to determine an optimum
distribution plan for the entire network at once.

Master data is made available in the SCM system. Beginning every month, forecast reorganization is
done to delete the existing forecasts and to generate the new ones. Planning is done in monthly buckets
annually, 4 months for raw material planning and within 30 days horizon with daily buckets for FG/SFG
planning.

A location heuristics is run

 To propagate customer demands to a staging godown.


 To propagate requirements to bottling plants.
 To fulfill the requirements.
 Deployment and TLB executed for daily products, monthly products and BMCG to create VMI
Sales orders and these orders are sent to SAP ECC system for execution.

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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 January’09 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 SR 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.

13. Major Milestones till date


 Project preparation- complete
 Blue print – complete
 Pre SCOR with key role-holders held to evolve KPIs
 SCOR workshop for LPG council completed and KPI
 SCM licensing with SAP completed
 ‘As Is’ processes Mapped for demand planning, Supply planning and Transportation planning
and vehicle scheduling
 Demand planning process shared with LPG Council in recent meet and process cleared for
implementation
 Upgrading current system to version SCM
 Go live- April 2008 - demand planning

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13.1 KPIs evolved in Supply Chain Operation Reference (SCOR)

Demand fulfillment at the


distributor -product level.
KPI for Sales Officer and (+/- 5 % variance)
Demand
the Territory Manager
Weighted average Forecast
accuracy at all levels

KPI for HQ / Regional Bulk availability at Source


Supply
Logistics locations
Plan Vs Actual dispatches
KPI for Regional Logistics
from Source

Inventory norms for product


in transit
Bulk T/L Vehicle
performance
Weekly production Dispatch
KPI for Plant
plan adherence

Equipment inventory norms


Territory Managers for cylinder, DPR and SC
valves

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IIM Kozhikode Bharat Petroleum Corporation Ltd.


Transportation Cash outflow a/c Packed
KPI for LPG Bottling Plant
planning transportation

Vehicle performance:
Availability of Packed TT Vs
placement

KPI for HQ / regional Bulk procurement cost, bulk


Costs
Logistics placement cost.

KPI for LPG Bottling Plant Plant Operating cost

On time delivery for LPG


Procurement KPI for CLEM equipments

Cylinder circulation factor

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

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