Indian Oil Corporation

This report describes the ERP implementation project in Indian Oil Corporation. The whole project was one of the biggest ERP project in South East Asia. The implementation process is tracked right from its inception and to wher e it stands today. An analysis of the problems faced during this whole process and the steps taken by Indian Oil Corporation to bring it parallel with its business strategies is also discussed. Many Firms today are investing into information technology wit h an objective to improve their business processes. The use of information technology is an indicator that information technology is being used to leverage the company¶s resources and thus create a competitive advantage in the marketplace. Information tech nology solutions to Enterprise Resource Planning (ERP) are a big help to many companies as they help them to improve and standardize their processes, cut down their operating cost and improve decision making capability.

COMPANY AND ITS PRODUCTS:

Indian Oil Corporation is a major diversified, transnational, integrated energy company in India, with national leadership and playing a national role in oil security& public distribution. Indian Oil Corporation Ltd. was formed in 1964 with the merger of Indian Refineries Limited and Indian Oil Company Limited. Indian Oil and its subsidiaries account for 47% petroleum products market share, 40.4% refining capacity and 67% downstream sector pipelines capacity in India. It is India's largest commercial enterprise, with a sales turnover of Rs. 2, 20,779 crore (US $51 billion) and profits of Rs. 7,499 crore (US $1.73 billion) for fiscal 2006. Indian Oil is also the highest ranked Indian company in the prestigious Fortune 'Global 500' listing. It is also the 20th largest petroleum company in the world. The total sales of Indian Oil group for the year 2006-07 is 57.97 million tonnes of petroleum products, which includes 1.63 million tonnes of natural gas and exports of 3.13 million tonnes. The Indian Oil Group of companies owns and operates 10 out of 19 refineries with a total

across the globe. which includes two refineries of subsidiary Chennai Petroleum Corporation Limited and one of Bongaigaon Refinery and Petrochem icals Limited. this is currently compromised by price control due to incomplete pass through in the market. for their pipelines and also introduced the advanced . the company introduced SCADA (Supervisory Cont rol Administration System). Mauritius and the United Arab Emirates (UAE) and is simultaneously looking for new opportunities in the energy markets of Asia and Africa. IOCL shifted to an online transaction processing system for which the software was developed in house.2 million MMTPA (Million Metric Tonnes Per Annum).. The other challenges include y Optimization of the supply chain and logistics forging partnerships and strategic alliances across the entire oil and gas bu siness value chain. y Consolidation of retail and direct consumer business through appropriate product quality assurance. with each refinery getting one machine. Around 1992-93. Indian Oil Technologies Ltd. more accurate reporting SCENARIO BEFORE IMPLEMENTING ERP: In 1983-84. y Enhancing financial profitability. And later in 1988. y y Improve database consistency. is engaged in commercializing the technologies and innovations developed by Indian Oil's R&D Centre. y Eliminate costly performance bottlenecks and other problems caused by customer-developed programs. Indian Oil has set up subsidiaries in Sri Lanka. Enable faster. the company migrated into RDBMS which was primarily targeted at the refineries. CHALLENGES AND OPPORTUNITIES: The major challenge of Indian Oil Corporation was to emerge as the least cost supplier thus delivering products and services to the customer at the lowest cost.refining capacity of 60. A wholly -owned subsidiary. To emerge as a transnational energy major.

The idea that a company could have one single. led to inaccurate and delayed decision making for IOCL. There was a delay in capturing and processing business information. which alternatively resulted in technological gap in various areas. Plant Maintenance. Though introduction of these systems helped the company monitor. There was a high need of IT re-engineering and to solve the issue IOCL hired the services of Price Waterhouse Associates (PWA) at a cost of Rs. Sale Distribution. control and administer its activities. Indian Oil Corporation was looking for a system which would integrate its processes and systems to streamline oil exploratio n. The proposed plan consisted of four stages. This resulted in lacking of integration of business functions across the company on -line. which resulted in a lot of time being wasted. production as well as the transportation of crude oil and natural gas and it wanted to get a quick overview of information pertaining to its operations. This complete disintegration of information resulted in time consuming decision -making process. most of the processes were being done manually and were paper based with islands of computerization here and there.42 crores.processing system in its refineries to monitor operations. Due to large scale operations and nationwide offices. completely integrated super system to help it manage every aspect of the business namely Finance and Controlling. IOCL found that operations management had beco me inefficient. Tria l Implementation and Stabilization and . Human Resources. Production Planning. Development Standardization The consultants (PWA) suggested the implementation of SAP/R3 along with the different software associated with oil and gas industry (IS -OIL and CIN). 30. with each branch having separate systems administrators. in turn. which addressed vital functions and debugging. which. Project System and Quality Management. it faced a problem at the national level. The package was supplemented with add -ons integrated into ERP. For Indian Oil Corporation. Material Management. The main objective was to develop and formulate a new IT strategy which would bring together all the different functions of the business throughout the different regions. information integration was of utmost important which enables transparency and quicker decision making. There was no communication between different departments of the organization. Conceptualization and Design. To a big enterprise like Indian Oil Corporation which is having various offices in different parts of India.

security and legislation of ERP Solution (SAP/R3). set forth strategies for various aspects of IT architecture that needed to be closely aligned with the requirements for implementation in the targ et areas.such as distribution planning. 3 LAYER MODEL OF SAP R/3 . THE IMPLEMENTATION PROCESS: Price Water Associates developed a Conceptual Techno logy Plan (CTP) for the IT re-engineering of the project. reliability. which was essentially a Project -oriented Plan. demand forecasting. CTP. compatibility. crude selection and refinery planning. safety. It helped to address the functional and operational requirements including performance.

Manthan projected a benefit of Rs. duly documented with performance indicators and targets. (ii) reduction in transportation expenses (Rs. (iii) saving in banking cash (Rs. The project was called ³Manthan´. Steering committee to oversee all aspects of Manthan.9 crore). A steering committee w as constituted for the evaluation of Manthan.31 crore). IT re -engineering project which would impact all aspects of the functioning of the Company. The benefits from µadd -ons¶ were expected to flow from crude mix optimization (Rs. (iv) reduction in demurrage costs (Rs.115 crore) and yield imp rovement in refineries (Rs.70 crore). was absent for most part of the project. the deployed architecture is maintaining data integrity and critical business management. This benefit was supposed to flow after implementation of the project from (i) inventory optimization (Rs.275 crores (Till date SAP is implemented in 674 locations of IOCL). However the figure has escalated and till date the company has spent above Rs. y For the on-going process of identifying future trends and regulatory conditions relating to IT development initially Company placed heav y reliance on the Consultants. In 2000 the committee was discontinued and another committee called Corporate Management Committee was made responsible to evaluate all aspects of Manthan.The Objective of IOCL was to implement ERP at its 590 sites at an initial cost of Rs.215 crore per annum due to implementation of add-ons. causing delay of two y .100 crore). (viii) reduction in time overrun in project implementation (Rs. (v) discount through accounts payable management (Rs.11 crore) and (ix) reduction in communication expenses (Rs.15 crore). (vii) reduction in accounts receivab le (Rs. ³The deployment complements business continuity (BC) at IOCL with minimal downtime. (vi) reduction in cheque holding time (Rs.147 crore). Today. 30 crore). BARRIERS FOR THE IMPLEMENTATION OF ERP: y Company failed to evolve a long range strategy and plan.33 crore).95. This led to delays in implementation and deficiencies in various processes remaining undetected.12 crore). without giving emphasis on the in -house staff which in turn increased the consultation fee.95 crores.358 crore per annum due to implementation of ERP and Rs.

y Data recovery was also a major problem. For effective Benchmarking of the performance: y y The entire processes were documented and optimized. by benchmarking performance with predefined performance indicators. It is also expected to support communication and SAP R/3 services during natural and man -made disasters. y Specialist training was delivered to all the staffs so that acceptance becomes high. y Business process reengineering program was used to counter the cross functional problems of SAP R/3.and a half years and denial of expected benefits of Rs. especially during natural and manmade disasters.358 crore per annum as described before. Demonstration within the departments was also carried out. y After commencement of implementation of ERP there was no effective system in position to regularly monitor. . Processes were monitored and corrections were made in the areas that they were weak y SAP also implemented a two-tier recovery architecture. which aids faster and consistent database recovery. y Management decided to reduce SAP implementation from duly identified 590 sites to 429 sites due to non -availability of Leased Line Links and other technical problems. responsibilities and accountability practices were clearly assigned and judged. STEPS TAKEN FOR MITIGATION OF PROJECT: y Long term strategy was formed under the Corporate Management Committee which was constituted for the evaluation of the project. Duties. y Traditional segregation of departments was broken down in order to integrate the ERP system.

Company appointed M/s Price Waterhouse Associates (PWA) to the IT re-engineering project study.The version of SAP R/3 was further upgraded to 4.In September. As per the decisions the implementation processes was extended to its 674 locations connecting 5000 concurrent users to a common IT platform for online.In the first half a basic framework was set for the project to chalk out a plan and cost of implementing the system and a management committee was formed. totalling to 429 sites. the project study was completed in 29 months and recommended SAP R/3 with add on solutions to oil and gas. Initial implementation of the ERP solution happened at 2000 -2001. 2004 .In January 2005.6c. another 90 locations were added into the system. The basic steps taken from the initial till date is discussed below. Another 137 locations w ere added into the system.By August 2003. 2000 . SAP offered upgraded version of the existing system and also gave online support services. By September.The implementation went live on August 2001. The committee decided to extend the implementation to another 161 existing locations and 84 upcoming locations. . 2002 . 2001 . 2003 . Thus. thus totalling to 106 locations. the company has linked a total of 16 locations on the new system.TIMESCALES: The implementation process started in the last half of 2000 and continues to be improved up till date.In April. concurrent business transactions. 1999 . 2005 . 2006 . Pipelines and Research and Development) ERP had been implemented. 1997 .By March 2004. By April 2004 in three out of four divisions (Refineries. the number of implemented locations was totalled to 292.Disaster Recovery Plan was installed to safe arrange SAP R/3 in early 2002.

POST ERP IMPLEMENTATION SCENARIO IN INDIAN OIL CORPORATION: The benefits of ERP are listed below.In August 2007.2007 . the Corporation has been honoured with the ³SAP First Ace of locations. The Business Continuity Centre set up for SAP Disaster Management has achieved the distinct status of service level at par with international standards. Indian Oil has also achieved the distinction of being the first public sector company to achieve the ISO/IEC 20000 certification in Information Technology. Tangible Benefits y y y y y y y y y y y y Inventory Reduction Personnel Reduction Productivity Improvement Order Management Improvement Financial Cycle Improvement Information Technology Cost Redu ction Procurement Cost Reduction Cash Management Improvement Revenue/Profit Increase Transportation/Logistics Cost Reduction Maintenance reductions On-Time Delivery Improvements Intangible Benefits y y y y y y Information Visibility New/Improved Processes Customer Responsiveness Cost Reductions Integration Standardization .

The report analyses how Indian Oil Corporation's strategy to be a low cost supplier and how the implementation helped them to be in that position.y y y y y Flexibility Globalization Supply/Demand Chain Business Performance Dismantling Inefficient Legacy Systems CONCLUSION: The report highlights the importance of Enterprise Resource Planning (ERP) syst em and how it helps the firm to improve their Operational efficiency. Timescales are also provided to understand the year by year updates of the implementation process. A successful ERP system helps a firm to achieve cost efficiency and thus leading to competitive advantage. It also gives a brief about the problems company faced while implementing the process and steps they adopted to overcome that. .

13 Group: 2 .ASSIGNMENT: ENTERPRISE RESOURCE PLANNING Submitted by: Md.. Danish Roll no.

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