eWorld 2011 Awards

Nomination By
Indian Oil Corporation Limited
Corporate Information Systems Department
Corporate Business Technology Centre
Plot no 83, Sector 18, Institutional Area,
Gurgaon 122001, Haryana

Contact Details

S Ramasamy
Executive Director (IS)

ramasamyS@iocl.co.in
Mobile : 9811590265
Landline : 0124-2451312

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
Page 1 of 16
1. Name of the Project

“Automated B2B process Integration between ERP Systems of Oil

Marketing Companies for exchanging ‘Petroleum Products’ for
Process Excellence”.

A Project initiated and pioneered by Indian Oil Corporation is perhaps

the largest fully automated B2B implementation in the country doing
business transactions worth Rs. 16000 Crores on secured
communication network.

2. Brief description of the Project

A Project initiated and pioneered by Indian Oil Corporation is perhaps

the largest fully automated B2B implementation in the country doing
business transactions worth Rs. 16000 Crores on secured
communication network.

With the single/common technical framework based on low cost open source
standards (Perhaps the first one in India to use Clustering Concept on Linux
Platform), IOCL has implemented Automated B2B process Integration
between ERP Systems of Oil Marketing Companies for Exchanging
“Petroleum Products” with Operational Efficiency.

OIL Exchanges (Purchase and selling of Petroleum products between Oil

Companies) are a very regular and an essential feature of operation of Oil
Marketing companies. The cost of manual settlement / reconciliation of huge
volume of Oil products between the Oil companies across India to the tune
of lacs of KL run into millions of US Dollars and settlement time of months
resulting in huge loss of interest cost to all companies, which is very
significant.

The said project is an attempt wherein participating organizations are

attempting to integrate and automate their processes and systems by
exchanging electronic documents using standards like Electronic Document
Interchange (EDI) between them. All the involved companies are already
using SAP’s ERP software and solutions, and hence they are in a better
position to leverage the investment in Information Technology.

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
Page 2 of 16
The project has been built on the Robust, Secure, Redundant application
architecture and internet gateway in an OPEN technological platform using
x86_64 / Linux platform. For process integration, SAP XI software has been
used instead of available third party middleware solutions.

The entire solution right from Business Process Design, Technical Solution
Design, SAP Process Integration implementation was done by a team of in-
house consultants comprising of business process and technical experts.

The project has been awarded National e-Governance award by Govt.

of India, SAP ACE award by SAP AG Germany, various awards from
reputed Indian Consulting, IT Institutions & Magazines.

Why was the project Started

Oil Exchanges are done throughout the length and breadth of the country to
optimize supply of petroleum products in regions where one organization
does not have its own source of supply.

Oil exchanges (purchase and selling of petroleum products between oil

companies) are a regular feature of the operations of oil marketing
companies. The cost of this manual process of settlement / reconciliation of
a large volume of petroleum products, runs into millions of US dollars, and a
settlement time of several months.

At the end of every month, a settlement is carried out based on paper based
joint certificates with each participating company which involves
reconciliation of total products sold / purchased from each other and
consequently financial settlement for arriving at the amount
payable/receivable.

The collection of Joint Certificates is a long drawn process as it involves

collecting the physical document from all locations involved in ‘Exchanges’,
therefore the settlement / reconciliation of exchanges is carried out only
once in a month. If there is any dispute related to reconciliation of Joint
Certificates, then both the involved parties go back to trace all the related
documents for the transaction in dispute in support of their claims.

At times, it takes well over a couple of months to arrive at a amicable

conclusion. During the period in which the dispute is resolved, a large
amount of capital is withheld from the creditor thereby causing financial tight
spots to the owing organization.
Nomination for eWorld 2011 Awards
Indian Oil Corporation Limited
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A critical analysis of the settlement process brings to the fore the
nuances of the settlement process. Settlement / reconciliation is
primarily an offline activity and suffers from the following drawbacks:

• Reconciliation takes place at a central location of an organization;

hence paper documents need to be sent to central location
• Due to constraints in collecting documents (Joint Certificates) from all
over the country, it is not feasible to carry out actual settlement
frequently, hence it is carried out only once in a month
• The reconciliation of Joint Certificates of the transactions being an
offline activity, is slow and error prone
• Dispute settlement is long drawn process wherein the concerned
parties trace back all the documents emanating from a transaction in
support of their claim. This further delays the settlement process
• As a result of these delays, which are inherent in the current method
of offline settlement, large financial amount is left unrealized from other
OMCs resulting in financial losses by the way of interest earned on this
capital

Objective

In this age of e-Commerce, it is all the more pertinent to review and come up
with a solution which not only automates this process, but reduces the time
taken for reconciliation, thereby enabling prudent financial management.

Public Sector Oil companies transact business worth thousands of crores

every year. A prudent financial management directly benefits the
government in terms of easing out requirements for working capital by
speedy settlement of outstanding amount amongst the PSU oil companies.
A step towards prudent financial management benefits not only the
government but also the society as well.

Hence it was envisaged at IOCL to create a common framework and lay the
foundation for PSU Oil companies to trigger such e-Commerce collaborative
initiatives.

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
Page 4 of 16
 Indian Oil Corporation took the initiative and pioneered a project that
aimed at automating the B2B oil exchange process by interconnecting
ERP systems deployed across the oil companies with the aim to
leverage on investment made in ERP systems to exchange electronic
documents through industry standards such as Electronic Document
Interchange between ERP systems.

Like SAP core services in the area of Sales & distribution, Finance, logistics,
B2B application is also handled in the same SAP system in a secured
redundant network & internet environment across same communication
network consisting of 300+ VSATs, MPLS VPN, radio and ISDN network.

The central B2B service being available and accessible to all concerned
employees across India has resulted in no manual errors, productivity and
efficiency enhancements, no paper movements because all papers moves
electronic within SAP systems.

Target Group

A B2B process effectively happens between the business partners of a

trading company. For Oil Exchange the target groups for IOCL are BPCL,
ONGC, HPCL, GAIL, OIL and other major Public and Private customers.

The innovative technological framework deployed as a part of this project

enables us to attempt B2B process integration with nearly all types of our
business partners. Using the same framework IOCL has implemented
the e-collections with SBI, HDFC, BNP Paribas which account for
nearly 74% of total IOCL collections from their customers.

Geographical reach

Oil Exchanges are done throughout the length and breadth of the country to
optimize supply of petroleum products in regions where one organization
does not have its own source of supply.

These facilities includes Oil Terminal, Oil Depots, Refineries Installation,

Port terminals, Aviation fuel stations and LPG bottling plant across the
country

3. Project became operational

Nomination for eWorld 2011 Awards
Indian Oil Corporation Limited
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 The Phase I consisted of B2B implementation between IOCL and BPCL at
120 locations. All 120 locations where BPCL sells the product to IOCL and
facilities where IOCL sells the product to BPCL were covered under B2B
implementation for Oil Exchange by Mar 2009.

B2B implementation in Phase II, which is the Extension of Phase I has

already been started with ONGC and HPCL. B2B Crude Oil exchange with
ONGC has already been completed at Cauvery Basin and Koyali, whereas
at Hazira, Bombay, Ramagundam, Guwahati and Manali is under
implementation. B2B implementation for Oil Exchange has already been
completed with HPCL at most of the locations.

4. How is the project innovative

The hallmark of this project has been innovativeness, process improvement,

cost savings and operational excellence.

A. The following salient features of this project undoubtedly make it

stand out above the rest.

 Wide geographical coverage across India

 Business worth Rs 16000 Crores / year on B2B
 Highly Available open source heartbeat cluster
 Zero data loss through Oracle Data Guard
 Secured Communication Network
 Redundant internet gateway
 Use of Digital certificates
 Use of Low Cost Open Source x86_64 hardware & LINUX software in
Mission Critical environment
 Project done totally by in-house expertise
 Standardization of Process Exchange software across industry
 Huge savings : manpower efforts and costs
 Use of same technological framework for applications like e-
payments and e-collection

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
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 B. Guaranteeing High Application Availability with best of the breed
technologies

1. High Availability Open Source Heartbeat Cluster

To guarantee high application availability of the order of 99.99% we

have implemented a High Availability Heartbeat cluster on Linux
platform for our B2B solution. The cluster ensures high availability of
SAP XI application in the eventuality of any hardware failure. The
services running on the failed node is automatically started on the
other node within a matter of few seconds.

2. Zero data loss through Oracle Data Guard

To guarantee zero data loss in case of a disaster, we have

implemented a DR solution using Oracle Data Guard. Through
Oracle Data Guard we have automated the replication of the state
of our application to our DR site on a real time basis. In the
eventuality of any disaster, we can switch over to our backup SAP
XI solution within few minutes with zero data loss.

3. Redundant data communication infrastructure

Internet leased lines play a vital role in B2B processes. To

guarantee high application availability end-to-end, all
communication equipments right from routers, firewalls, internet
communication leased lines, load balancers etc. etc. have been
deployed in a high availability setup. All this adds up in ensuring
high application availability.

C. State of the art IT infrastructure Security framework for ensuring

B2B Processes safety

1. Deployment of a 3 Tier safety framework

Since B2B processes need to open up access of our systems to our

B2B partners, a comprehensive security framework has been
deployed to protect IT infrastructure from all possible threats. A
highly redundant secured network comprising of various security
zones namely – Internet Zone, Secure Server zone (Inner DMZ
Zone and Highly Secure Server zone) , Administrators zone has
been implemented.

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
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 2. State of the art of Network Security deployment

Intrusion Detection and Prevention systems, Application firewalls,

Load balancers have been deployed to ensure security and
confidentiality of our application and data. Advanced Anti-Virus
solutions have been deployed to protect applications from Malwares
and spywares.

3. Use of Digital Certificates for B2B Applications

All B2B transactions are configured to be carried out using HTTP(S)

protocol which employs digital certificates for authentication. HTTPS
guarantees that data communicated between our partners is secure
and not tampered with. Over and above this, we have employed a 3
factor authentication mechanism to verify the authenticity of our B2B
partners.

D. Instituting a framework for challenging Business Process Change

Management across organization boundary

Managing change in an organization is always a challenge. Managing

change across organizations is even more daunting. The B2B process
integration has provided a unique opportunity for us at IOCL to foster a
new change management framework with all participating organizations.
IOCL has been played a key role in spearheading change management
initiatives as a consequence of B2B process integration. Be it
convincing the top management or selling the solution to the end user,
we have attempted the change management exercise in unison with our
partners. This project is an excellent example of team work and
coordination between culturally disparate organizations bond together
with a desire to strive for customer delight.

5. Achievements of the project

Goals Realized

Before B2B implementation After B2B implementation

Redundant data entry Eliminated
5-10 minutes per Tank Truck challan Reduced to 2 minutes
20 minutes per Rail rake Reduced to 2 minutes

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
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For 72 wagons in a rake, parameters ( All pre defined in system)
like Temp, Density and Wagon no is
to be entered manually
Cost of Incorrect data entry Completely reconciled data
Time for Reconciliation of Joint Reconciled data exchanged daily, no
Certificates (1 month) disputes
At the time of receipt of material, the Fully Automated, No manual
PO for the particular plant and Post intervention
Goods Issue (PGI) are entered
manually in SAP
Productivity enhancement

• Reduction in time of preparation of bills from 15 minutes to a couple

of minutes
• Elimination of data-entry errors during the manual keying-in of data
resulting in data-accuracy by 100%
• Error-free quantity reconciliation at the source – the plants
• Elimination of paper-based joint certificate exchange process by a
Electronic process involving open protocols
• Error free quantity and reconciled data flow between the
organizations thereby accruing operational and financial benefits
• Streamlined supply chain performance thereby benefitting all the
parties involved

Cost Reduction & Prudent Financial Management

IOCL engages with its customers like BPCL in exchanges worth Billions of
US dollars per year. The Company replaced its manual process of
reconciliation of exchanges which used to take more than a month (now it is
on daily basis) to complete and blocked a huge amount of capital, resulting
in prudent financial management.
• Achievement of quicker and transparent inter-company settlements
by reducing the time of business transactions from one month to a
few days leading to saving in interest costs to all participating
companies

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
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 • Reduction in the cost of exchanges in terms of human efforts by as
much as 95%
• Better control over placement and operating cost
• Better planning of exchanges
• Deployed more economical option of using open source software

Low Total Cost Of Ownership (TCO)

• Use of low cost open source hardware and software for mission
critical applications in high availability environment using clusters, by
breaking monopoly of vendors with proprietary, costly but well proven
and trusted hardware and software platforms
• The project “B2B process integration for carrying out ‘Exchanges’ with
Oil Marketing companies thru in-house expertise has created a low
cost, secured, successful common framework and laid the foundation
for public sector OIL Companies to trigger more such e-commerce
initiatives with ONGC, GAIL and OIL
• With B2B process integration, both the partners have been able to
save millions and have enhanced supply chain efficiency and the
product availability
• Mitigation planning for the following Business & Technical Risks and
Challenges

Process Improvement / Quality Improvement / Reduction in Lead Times

• Elimination of paper-based Joint Certificate exchange process by a

Electronic process involving open protocols
• Reduction in time of preparation of bills from 15 minutes to a couple
of minutes
• Elimination of data-entry errors during the manual keying-in of data
resulting in data-accuracy by 100%
• Error free quantity and reconciled data flow between the
organizations thereby accruing operational and financial benefits
• Streamlined supply chain performance thereby benefitting all the
parties involved

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
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 • Minimized inventory levels
• Reduced cost of exchanges by as much as 95%

To summarize, the following is the list of activities which have been

eliminated in the new B2B fully automated system:

• Elimination of paper-based Joint Certificate exchange process by

a Electronic process involving open protocols
• Reduction in time of preparation of bills from 15 minutes to a
couple of minutes
• Elimination of data-entry errors during the manual keying-in of
data resulting in data-accuracy by 99%
• Error free quantity and reconciled data flow between the
organizations thereby accruing operational and financial benefits
• Streamlined supply chain performance thereby benefitting all the
parties involved
• Minimized inventory levels
• Reduced cost of exchanges by as much as 95%

6. Challenges

Business Challenges:

• Convincing IOCL and BPCL management and operations to adopt

B2B process for Win-Win approach for both the companies
• Change mgmt for operations staff of both the companies
demonstrating and convincing them about the quantum of reduction
in manual work, error free data, no data duplicacy and ease of
operating the automated system

Process Challenges:

• Ensuring full accounting of correct quantities

• Preventing delays in signing of JCs
Nomination for eWorld 2011 Awards
Indian Oil Corporation Limited
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 • Preventing mismatch between Signed JCs and system quantity
• Monitoring the SAP pricing procedure
• Control over use of correct valuation type
• Ensuring that rates are updated in time

Technical Challenges:

• Convincing BPCL to migrate to Standard SAP XI software rather than

using third party tools for convenience and faster implementations
• Selection of Open Standards technologies to avoid monopoly of
vendors
• High Availability for mission critical application
• Continuous follow-up with LINUX vendor for mitigation of software
bugs for implementing HA solutions and clustered environment.
• Uniform Middleware software across two SAP system
• Configuration in SAP for ALE/IDOC, output types, etc.
• Requirement of a sub-system e.g. XI/BC etc.
• Non-Availability of Standard IDOCs – GR, Oil data, etc.
• Configuration of sub system - Listener/port/RFC destination, talking
to SAP system, writing code for services, etc.
• Hardening/Securing the sub-system in the network
• Installation of certificates for secure transactions
• Common protocol for Security and Control over transactions
• Scaling performance for handling full volume of transactions
• Contingency/Alternate plan

How the challenges were Overcomed

IOCL CIO played a vital role in planning and negotiating with IOCL and
BPCL top management to agree on implementing inter-company B2B
collaborative exchanges on SAP systems.

This gave an opportunity to leverage IOCL’s existing investment on SAP

business software and in-house SAP functional and technical expertise and
Nomination for eWorld 2011 Awards
Indian Oil Corporation Limited
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successfully convinced BPCL top management to implement the common
platform using SAP PI software for B2B exchanges.

Benefit analysis in terms of financial benefits, efficiency enhancements,

transparency as well as secured transactions were presented to both the
company’s management in terms of Risk Analysis and mitigation planning
as ERP was getting extended beyond the company territory and SAP
system of IOCL and BPCL.

We leveraged our investment in SAP ERP and our understanding of SAP XI

(Process Integration) platform to create a process woven around this
platform, and thereby automated the process of exchanging Sales
documents, namely Invoice between the two organizations.

To run B2B application, the highly available and secured technological

architecture has been provided:
 Robust three system landscape, secure, redundant application
architecture, redundant internet gateway in an OPEN
technological platform using x86_64 / Linux platform
 Heartbeat Open software solutions for clustering
 Apache & SAP Web dispatcher for high availability of internet &
proxy
 Firewalls and Digital Certificates for secured transactions
 Use of SAP XI process integration software

B2B processes are inherently loosely coupled. SAP ERP users are
accustomed to immediate response from the system. Training the users to
adapt to this process was relatively easy when the benefits became
apparent to them.

Internet communication links are critical for B2B transactions to flow through.
In the initial stages we faced a lot of hic-cups because of the internet link
outages. Immediately thereafter, both IOCL and BPCL provisioned for
Internet leased lines from multiple vendors to reduce the impact of link
failure of one vendor on the business process. Technologies such as DNS
load balancing have been deployed to ensure uninterrupted process flow.

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
Page 13 of 16
 With these efforts, we have been able to achieve near real time B2B process
response, which is a delight for the end-users

7. How can project serve as a model that can be replicated or adopted by

others

This project has been envisaged with the objective of creating and
establishing a common mission critical technological framework for
document exchange for B2B applications.

B2B process offers excellent opportunities for the partners to automate their
business processes and replace paper document flow with electronic
documents and much more. The obvious benefits are business at much
greater speeds between the companies, which eventually benefits the
customers.

After the success of B2B project with BPCL and technological mission
critical secured framework in place, this concept is being replicated with
ONGC and HPCL. Later, the plans are there to complete Oil Exchange with
OIL and other Private and Public companies.

The technological framework put in place as a part of this project enables us

to attempt B2B process integration with nearly all types of our business
partners. Using the same framework IOCL has implemented the e-
collections with SBI, HDFC, BNP Paribas which account for nearly 74% of
total IOCL collections.

The replication / adoption for B2B extension shall not require any additional
cost. The One time project cost which in fact is very low has been shown
below :

Project Cost

Activity
Total cost of Project
Cost of hardware
Total cost of software that was
used for this project
Amount
Rs 50 Lacs (Approximately)
Rs 45 Lacs
Nil, SAP XI (Process Exchange)
Software is in-built component of SAP
Net weaver Technology deployed for
SAP ERP systems.

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
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 Other software components used are
free downloadable from internet.

Total cost of consultancy Nil,

charges Complete In-house implementation
Total cost of services and Rs 5 Lacs
manpower
Recurring cost of project Nil

8. Elaborate on scalability of the project initiatives

The B2B Oil Exchanges application is highly mission critical and the
application requires movement of secured electronic documents between
two SAP systems outside the boundaries of two companies.

To run B2B application, the highly available and secured technological

architecture has been provided:
 Robust three system landscape, secure, redundant application
architecture, redundant internet gateway in an OPEN
technological platform using x86_64 / Linux platform
 Heartbeat Open software solutions for clustering
 Apache & SAP Web dispatcher for high availability of internet &
proxy
 Firewalls and Digital Certificates for secured transactions
 Use of SAP XI process integration software

The project was conceived with the long term objective of putting in place a
B2B technological framework between the participating PSU’s, which initially
would enable electronic transactions between themselves, and eventually
between all their business partners namely suppliers, vendors and bankers
etc. etc.

We at IOCL intend to leverage the in-place robust & secured Process

Integration technological framework for implementing e-payments and e-
Nomination for eWorld 2011 Awards
Indian Oil Corporation Limited
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collections across the country with all our banks. Also in the offing are many
projects which will implement new processes and applications aimed at
achieving true customer delight.

The experience gained in implementing a project of this nature is highly

valued in the industry. IOCL is currently offering its consultancy to M/s
Ceylon Petroleum Storage and Tanking Limited (CPSTL) of Sri Lanka for
their SAP ERP implementation. Expertise now available with IOCL for
implementation of XI software for B2B applications will generate revenue for
IOCL.

The technological infrastructure is deployed at the Corporate Data Centre at

Gurgaon which in connected to all the locations of the Indian Oil Corporation
via a captive network of VSATs, MPLS links, Radio links etc.

Any location of IOCL can directly make use of this facility from across the
country.

The technological framework put in place as a part of this project enables us

to attempt B2B process integration with nearly all types of our business
partners. Using the same framework IOCL has implemented the e-
collections with SBI, HDFC, BNP Paribas which account for nearly 74% of
total IOCL collections.

Nomination for eWorld 2011 Awards

Indian Oil Corporation Limited
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