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REPORT
SUPPLY CHAIN MANAGEMENT
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
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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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.
4
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.
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.
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.
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:-
(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.
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’.
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.
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.
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
BPCL, southern region has an average LPG demand of 80 TMT per month.
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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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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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Below is the tabulation of the sales during the financial year 2009-10 for SR LPG, BPCL:-
PRODUCT TMT
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.
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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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
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BPCL
VIJAYAWADA PLT 300 2500 2800
CALTEX,CHENNAI ROAD 0
TOTAL 16500 6600 16450 3500 4000 2800 3000 3500 2600 3000 62650
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HOSPITALITY
TO BE GIVEN
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
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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No.
Grand of total
SOURCE PLANT BPC HPC IOC Total rakes rakes
KHAPRI(RAIPUR)-ND 50 50
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18
VISAKH(IMP/COASTAL)
Total 700 7800 500 9000 8 21
VIZAG -
SECUNDERABAD PIPE
MODE LINE
Sum of JUL'10
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CH'PALLI FOR
KURNOOL 160 160
VISAKH(IMP/COASTAL)
Total 12660 22446 21610 56716
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TN COIMBATORE 3300
TN TUTICORIN 900
TN CHENNAI 900
TN TANJAVUR 450
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.
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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.
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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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.
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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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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.
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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.
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Vehicle performance:
Availability of Packed TT Vs
placement
References
1. http://www.bharatpetroleum.com/
2. Designing and Managing the Supply Chain – Simchi – Levi, Kaminsky, Ravi Shankar
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