bpcl supply chain mgt project
DESCRIPTION
BPCL Supply chain management ProjectTRANSCRIPT
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SUPPLY CHAIN MANAGEMENT
BHARAT PETROLEUM CORPORATION
LIMITED- BHARATGAS
Submitted By:
Benson Benny 359
Deepti Sharma 361
Gaurav Patni 362
Naveen Jain 390
Om Prakash 397
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TABLE OF CONTENTS
Topics Page
no.
Industry Overview 3
Major Market Players in India 4
Company Background- BPCL 5
Factors Affecting Indian Oil and Gas Sector 6
Growth Drivers for the Oil and Gas Sector 6
Supply Chain Drivers 7
Supply Chain Management BPCL 10
Supply Chain Link 12
Supply Chain Management in LPG SBU -Southern Region 16
Demand Planning 16
Procurement and Outsourcing Strategies 18
Supply Network Planning 21
Inventory Management 25
Benefits of implementation of SCM in LPG SBU SR 26
KPIs evolved in Supply Chain Operation Reference (SCOR) 26
References 27
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Industry Overview
The oil and gas sector in India is a critical component of the countrys economy, accounting
for 15 per cent of the countrys gross domestic product (GDP). Economic growth is directly
linked with energy demand, and a conservative estimate of 7 per cent growth is expected to
double Indias per capita energy. The oil and gas sector consists of three segmentsupstream,
midstream and downstream. The upstream segment primarily comprises companies that are
engaged in exploration and production activities, while the midstream segment comprises of
players in storage and transportation, and the downstream segment comprises of players that
are engaged in refining, processing and marketing of petroleum products. A countrys
economic growth is closely correlated to the energy demand. Consequently, the demand for
oil and gas, which is one of the main sources of meeting energy requirements, is expected to
increase further. The value of the Indian oil and gas sector is forecasted to grow from US$
117,562.9 million in 2012 (estimated) to US$ 139,814.7 million by 2015. The Indian
government is looking forward to promoting a plan for the sustainable development of the oil
and gas sector, and investments in research and development (R&D) activities in alternative
fuels segment so as to prevent the depletion of the countrys natural reserves.
Major Players
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Public sector corporations dominate the Indian exploration and production sector. In terms of
the percentage share in total production Oil and Natural Gas Corporation (ONGC) accounts for
the highest share. The second major player in the sector is also a public sector undertaking
Oil India Limited (OIL). Both of these undertakings account for about more than 70% of the
total market. The remaining share of the pie is cluttered with various private players in the
market.
The key players in the oil and gas industry in India are Oil India Ltd., Oil and Natural Gas
Commission, Indian Oil Corporation, Hindustan Petroleum Corporation Ltd., Bharat Petroleum
Corporation Ltd., Gas Authority of India Ltd., Reliance Industries Ltd., Essar Oil, Adani Gas,
Petronet LNG, Cairn Energy, Shell, British Gas and BP.
BPCL- Company Background
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Bharat Petroleum Corporation Limited (BPCL) is an Indian state-controlled
oil and gas company headquartered in Mumbai, Maharashtra. BPCL has been ranked 229th in
the Fortune Global 500 rankings of the world's biggest corporations for the year 2013. Bharat
Petroleum Corporation Ltd was incorporated on November 3, 1952 as a private limited
company with the name Burmah Shell Refineries Ltd. Bharat Petroleum Corporation Limited
(BPCL) is an energy company.
BPCL operates in two segments: downstream petroleum, which is engaged in refining and
marketing of petroleum products, and exploration and production of hydrocarbons (E&P). The
Companys refinery units include Mumbai Refinery, Kochi Refinery, Numaligarh Refinery and
Bina Refinery. The Companys products include gases, which includes poly-propelene feed
stock, natural gas, liquefied petroleum gas (LPG) and bharat metal cutting gas; fuels, which
includes marine fuels, white oils and black oils; solvents and special products; bitumen;
lubricants, and sulphur. Its marketing infrastructure includes installations, depots, retail
outlets, aviation service stations and LPG distributors.
During the fiscal year ended March 31, 2012 (fiscal 2012), it produced crude throughput at
26.72 million metric tons. During fiscal 2012, its subsidiary acquired participating interests
(PI) in two onland blocks under the NELP IX Bid round. The company has lined up investments
of Rs 50,000 crore ($11 billion) to expand their capacities in refining, retail and upstream
projects over the next five years.
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.
FACTORS AFFECTING THE INDIAN OIL AND GAS SECTOR
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1. Dominated by state controlled enterprises: The sector is primarily dominated by state
controlled enterprises, with only a few foreign players. The primary reason for this could be
the countrys regulatory framework, where ventures involving foreign players take longer to
get the required approvals. Further, the participation of foreign players has been limited
during the nine rounds of bidding for exploration rights through the NELP, while the
participation of state owned players has been high.
2. Subsidies on Oil and Gas products: Eliminating subsidies on oil and gas products is proving
to be a major challenge for the government, due to political pressure. These subsidies have
led to large scale under recoveries in the Indian oil and gas sector.
3. Environmental issues: Offshore mining of oil and gas and deep water exploration poses
significant threats to the environment in terms of potential threats of water contamination.
Further particulate emissions of refineries and production plants could have an adverse
impact on the environment as well.
GROWTH DRIVERS TO OIL AND GAS INDUSTRY
1. Growing Demand: India is the fourth largest energy consumer. The ever rising population
and economic growth is fuelling the demand manifold. Apart from this, the growing
industrialization calls for increased consumption of energy. Few industries that use natural
gas are pulp and paper, metals, chemicals, glass, plastic and food processing.
2. Policy Support: To cope up with the high demand, the Indian government has adopted
policies such as allowing 100 per cent foreign direct investment (FDI) in many segments of the
oil and gas sector such as refineries, pipelines, petroleum products, natural gas and
infrastructure related to the marketing of petroleum products. Policies such as NELP (New
Exploration Licensing Policy) and CBM (Coal Bed Methane) have been introduced which offer
huge potential in terms of sustainability.
3. Increased Investments: Investments worth USD 75 billion is expected across the oil
and gas value chain under the 12th plan. (2012-2017). Since April 2000, FDI worth USD
5.4billion has been invested in Indias petroleum and oil and natural gas sectors.
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4. Abundant Raw Material: The nation has a large coal, crude and natural gas reserves. Oil
reserves amounted to 5.6 billion barrels in FY 2012.
5. Availability of skilled labor: The country has abundant labor available at competitive
wages.
Supply Chain Drivers
1. Facility: The facilities refer to the actual physical locations in the supply chain
network where the products are stored, assembled, manufactured or fabricated. The
two major facilities could be a production site or storage sites also known as
warehouses. Keeping this in mind, the BPCL has following major refineries.
Kochi:- Established in 1966 with a capacity of 50,000 barrels per day. Mumbai: -Currently processes about 12 Million Metric Tons of crude oil per
annum
Numaligarh: - A 3 MMT refinery situated in Numaligarh, Assam. The Refinery is one of the most technologically advanced and environment friendly refineries
in the country.
Bina: - 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.
ROLE OF FACILITY DECISIONS IN A COMPETETIVE STRATEGY
EFFICIENCY PRIORITY- (Is when there are giant units that aim for economies for scale).
RESPONSIVENESS PRIORITY- large number of smaller facilities.2. Inventory: - Inventory encompasses all the raw materials, work in process, and
finished goods within a supply chain. Changing inventory policies can dramatically
alter the supply chains efficiency & responsiveness.
There are three basic decisions to make regarding the creation and holding of
inventory:
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Cycle Inventory: This is the amount of inventory needed to satisfy demand for the product in the period between purchases of the product.
Safety Inventory: inventory that is held as a buffer against uncertainty. If demand forecasting could be done with perfect accuracy, then the only inventory that
would be needed would be cycle inventory.
Seasonal Inventory: This is inventory that is built up in anticipation of predictable increases in demand that occur at certain times of the year.
In our case, BPCL majorly is into highly inflammable products. The transportation of
the petroleum products requires huge amount of safety measures and cost. BPCL has
introduced demand planning and execution by using SAP and BIW. This enables them
to keep the inventory holding cost to the minimum without compromising on the
business opportunity or loss of business at any stage.
3. Transportation: - Transportation entails moving inventory from point to point in the
supply chain. Transportation can take the form of many combinations of modes &
routes, each with its own performance characteristics. There are six basic modes of
transport that a company can choose from:
Shipments: These involve handling of procedures like import custom clearance, documents handling both in case of exports and exports
Road Transport Rail Transport Supplies through pipelines
4. Information: - Information is used for the following purpose in a supply chain.
a) Coordinating daily activities related to the functioning of other supply chain
drivers: facility, inventory & transportation.
b) Forecasting & planning to anticipate& meet future demands. Available information
is used to make tactical forecasts to guide the setting of monthly & quarterly
production schedules & time table
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c) Enabling technologies: many technologies exist to share & analyze information in
the supply chain. Managers must decide which technologies to use & how to
integrate these technologies into their companies like internet, ERP, RFID.
5. Pricing: - Pricing determines how much a firm will charge for goods & services that it
makes available in the supply chain. Pricing affects the behavior of the buyer of the
good or services, thus affecting supply chain performance, for example, if a
transportation company varies its charges based on the lead time provided by the
customers, it s very likely that customers who value efficiency will order early &
customers who value responsiveness will be willing to wait & order just before they
need a product transported.
6. Sourcing: - Sourcing is the set of business processes required to purchase goods &
services. Managers must first decide which tasks will be outsourced & those that will
be performed within the firm. Since, BPCL is vertically integrated with exploration
activities running at more than 26 sites in India and abroad, the sourcing of crude oil
which is the major raw input is easily available to it.
The decisions related to the distribution, transportation and order levels are taken
keeping in mind many inter linked factors. For example, a distribution plan will be
framed by arriving at the costs, time and scope involved in transportation of inventory
from the facility to the distributor/ warehousing location. A facility is mapped to a
specific region/ area for supply of its products. Similarly, one distributor may procure
from one or more facilities. The capacity of a facility has to be compared with demand
shooting from the various locations and how they may be fulfilled by incurring the
minimum possible cost. Since, cost is an important factor that affects the pricing
decisions of a BPCL, the market prices are also an important driver in determining the
supply chain.
SUPPLY CHAIN DRIVERS
RESPONSIVENESS
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1. FACILITY
2. INVENTORY
3. TRANSPORTATION
4. SOURCING
5. PRICING
6. INFORMATION EFFICIENCY
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 that uses SAP 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.
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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.
Supply Chain Overview
Supply Chain Link
Exploration Production Refining Marketing Consumer
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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 around 73,000 sq.km is offshore acreage.
Refining
BPCL is a proud owner of multiple refinery units.
Bharat Petroleums Mumbai Refinery
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(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.
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.
Numaligarh Refinery Limited
Numaligarh Refinery Limited is a public sector oil company set up in the year 1993, with its 3
MMT refinery situated in Numaligarh, Assam. The Refinery is one of the most technologically
advanced and environment friendly refineries in the country. BPCL is the major share holder
with 61.65% of the Companys paid up equity capital; the other shareholders being the
Government of Assam with 12.35% and Oil India Limited with 26 %. Though majority of the
Refinery products are marketed through BPCL and other oil companies, NRL markets a small
amount of its products through its own network of retail outlets aptly named Energy
Stations.
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.
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MARKETING
BPCL's preferred mode of purchase of the spot cargoes would be through short notice
tenders, which would be invited from panel of suppliers who have signed MSPA
(Matched sale-purchase agreement) with BPCL.
Bharat petroleum was the Indias first implementer of the SAP SCM application. SAP
SCM helped them to switch from executing our production based on available supply
to executing it based on actual demand. It also further reduced the High logistics
costs and eliminate the manual spreadsheet based planning processes. Applications
production planning functionality helps in optimizing monthly and daily production
schedules; that means we can make the most of available equipment, material, and
transportation resources.
With SAP SCM, BPCL does not lose on sales to the competition because they do a much
better job of meeting demand. It also leads to lesser complaints about missing
shipments and lost sales opportunity.
Distribution Location
The Corporation meets its LPG customers' needs through its huge infrastructure and
dedicated team of people. Bharatgas has a all India network of over 2200 +
Distributors and counting LPG Territory Offices to meet the needs of customers
promptly.
The Distributors provide home delivery service of LPG refills as and when the
customers book their refills. Mechanic services are also provided to customers during
the office hours on all working days. Mechanic service is free for any leakage
complaint pertaining to the cylinder and pressure regulator provided to the customer
by the Bharatgas Distributor.
CONSUMER
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Bharatgas from Bharat Petroleum has dominated the LP Gas market in India for over
three decades. Today over 25 million homes in India, wake up each morning to enjoy
the cup that cheers prepared on Bharatgas. Similarly, hundreds of commercial and
industrial establishments start their day, confident and secure, having entrusted their
LP Gas needs to Bharat Petroleum.
A pioneer in more ways than one, Bharatgas has brought many innovative offerings to
the customers. To name a few:
Easy access to customers through various modes including online access
Home delivery of cylinders
Value added services to customers by venturing into allied business to meet
consumers household needs
LP Gas supplies through pipeline to mega residential complexes
An innovative solution to reach LP Gas supplies to rural and remote areas
through the Rural Marketing Vehicle
Revolutionizing the metal cutting & brazing industry with the new product
Bharat Metal Cutting Gas.
Supply Chain Management in LPG SBU -Southern Region
In order to explain the supply chain management of Bharatgas, we have specifically studied
the distribution by Bharatgas in the 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
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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.
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
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 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.
Procurement & Outsourcing Strategies
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 customers. A model
is generated in mathematical terms which depict the following:-
ILP gives the overall supply demand position for the country for all the oil industries. Supply sources Indigenous availability of LPG Import plan port wise Total availability at each supply source
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Linkage to bottling plants & customers quantity & mode Rail loading slate Plan of supplies through pipelines
Hospitality
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.
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.
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. 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.
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.
Transportation Planning /Vehicle Scheduling
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Transportation plans & 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.
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.
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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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. (Advanced
Planner and Optimizer- Supply Network Panning).
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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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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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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
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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.
Inventory Management
The inventory of an LPG SBU relates itself to the bulk LPG, cylinders and associated
equipments. The inventory management is a part of SCM and it is followed up through SAP
R/3 and BW on a daily basis from the transportation of bulk to the stock at the distributor
end. Project WIN was launched in January09 which has identified specific high impact areas
across businesses and devised metrics for improving existing processes and practices. It has
built greater sensitivity in the company to costs, inventory, receivables, etc and has
successfully transformed and infused competitive cost structures.
Benefits of implementation of SCM in SR LPG SBU
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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.
KPIs evolved in Supply Chain Operation Reference (SCOR)
Demand KPI for Sales Officer and the Territory Manager
Demand fulfillment at the distributor -product level. (+/- 5 % variance)
Weighted average Forecastaccuracy at all levels
Supply KPI for HQ / Regional Logistics Bulk availability at Source locations
KPI for Regional Logistics Plan Vs Actual dispatches from Source
Inventory norms for product in transit
Bulk T/L Vehicle performance
KPI for Plant Weekly production Dispatch plan adherence
Territory Managers Equipment inventory norms for cylinder, DPR and SC valves
Transportation Planning
KPI for LPG Bottling Plant Cash outflow a/c Packed transportation
Vehicle performance: Availability of Packed TT Vs placement
Costs KPI for HQ / regional Logistics Bulk procurement cost, bulk placement cost.
KPI for LPG Bottling Plant Plant Operating cost
Procurement KPI for CLEM On time delivery for LPG equipments
Cylinder circulation factor
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References:
Book on Supply Chain Management: Strategy, Planning and Operations by Sunil Chopra
www.researchgate.net
www.bharatpetroleum.in/ www.ibef.org website for India Brand Equity Foundation
www.iimb.ernet.in/publications/review/.
https://www.wikipedia.org