SCM Assignment 21NOV
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Transcript of SCM Assignment 21NOV
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Supply ChainManagementBharat Petroleum Corporation
Limited(BPCL)
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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
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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. Thefunction-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
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2. The Planned ApproachIncreasing 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 itselfattuned 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 ambitiousSAP 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 continuousimprovement 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
Over the past decade, BPCL has seen the business go from strength to strength. And it is oncourse 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
supportfrom 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.
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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
LimitedBPCL 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 ofProject DESTINY to align initiatives; moving towards customers with newtechnologies 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. Thecrude 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 differentbusiness 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 senseof passion for the company goal.
Short-term versus long term implications of decisions need to be balanced, from a strategicperspective.
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5. Supply Chain Overview:-
6. Supply Chain Master Data:-
7. Supply Chain LinkExploration Production Refining Marketing Consumer
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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 Refineriescurrently 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 RefineryKochi 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 LimitedNumaligarh 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 RefineryBharat Oman Refineries Limited (BORL), a company promoted by Bharat Petroleum
Corporation Limited (BPCL) and Oman Oil Company Limited (OOCL), is setting up a 6MMTPA 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 :
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 throughoutthe 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 chainbulk, 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 Strategies10.1 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 freeconnections etc)
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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 majorchanges 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.
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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 TMTLPG Bulk 35.6
LPG 5 KG FILLED 0.06
LPG 14.2 Kg Filled 761.33
LPG 19 Kg Filled C 90.6
19KG BMCG 1.82LPG 35 Kg Filled C 2.28
35Kg BMCG 0.53
LPG 47.5 Kg Filled 0.43
Total 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 planport wise Total availability at each supply source Linkage to bottling plants & customersqty & mode
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Rail loading slate
10.3.2 Transportation PlanningInbound Process
Purchase orders, Stock Transport orders, Inbound Deliveries and Shipment documents can beused 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.
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11. Inventory ManagementThe 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 distributorend.
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 safetyof the plant, staff and surrounding property/population
.
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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 includingtransportation
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 infrastructurejetties etc.
References
1. http://www.bharatpetroleum.com/
2. Designing and Managing the Supply Chain Simchi Levi, Kaminsky, Ravi Shankar