Comparative study of Product Logistics for measuring Operating Efficiency “A case study of Bijwasan & Rewari Terminal of IOCL”

The sources of petroleum products and other chemicals are generally concentrated in certain regions. Hence, it becomes necessary to transport those products either in the form of raw material or as refined ones to the various industrial and consumption centers. Transportation is generally carried out through shipping, cross country pipeline, rail and road. Indian Oil Corporation carries crude oil, imported from various producer countries, by tanker for processing at our refineries. Further, crude oil from our own indigenous source in Bombay high is brought through the tankers. Transportation from port location to Refinery and Refinery to the consumption centers are carried out through the cross-country pipelines in addition to road/ rail movement. As on date, Indian Oil Corporation operates 6523 KM long cross-country pipeline. Out of which 4136 KM long pipeline network carries petroleum products. During the year 2000-2001, Indian Oil Corporation Ltd. carried total 38.77 MMT of

petroleum products and crude oil through its cross-country pipeline network. This works out to be approx. 18% of total petroleum products consumed in the country during the year The product after dispatching from the refineries through the product pipeline or railways comes in at the terminals. The terminals after receiving the product, first stores it in the tanks gauge it & check its quality. After this quality check the product is than dispatched for the refilling pumps with the help of tank trucks. Here in this report I have mainly covered the product logistics of Bijwasan terminal in Delhi & Rewari terminal in Haryana of IOCL. I have done a comparative study than given some recommendations on the basis of study. I have also taken some key factors which derive the logistics as a whole, for that purpose I had mad questionnaire and taken the views of the officials here. On the basis of that had given some recommendation


CHAPTER – 1: Introduction of Petroleum Logistics
1.1: 1.2: 1.3: 1.4: 1.5: 1.6: 2.1: 2.2: 2.3: 2.4: 2.5: Introduction components of Logistics management Modes of Transportation characteristics of different modes Comparison between different modes Logistics in Pyramidal Form History Vision Mission Values Objectives

CHAPTER – 2: Introduction of company

CHAPTER – 3: General overview of Bijwasan & Rewari Terminal
3.1: Main departments at the depots 3.2: General working at the terminals 3.3: Procedure for TT filling


3.4: Overview of Bijwasan terminal 3.5: Overview of Rewari terminal

CHAPTER – 4: Identification of problem CHAPTER – 5: Research methodology / design
5.1: 5.2: 5.3: 5.4: 5.5: Data source Sample design Methodology Tools Questionnaire

CHAPTER – 6: Logistical comparison between Bijwasan & Rewari Terminal CHAPTER – 7: Findings
7.1: Findings on the basis of questionnaire 7.2: Findings of the comparative study 7.3: Recommendations

CHAPTER – 8: Conclusion
• •

Abbreviations References

Supply chain management in the petroleum industry contains various challenges, specifically in the logistics area, that are not present in most other industries. These logistical challenges are a major influence on the cost of oil. However, opportunities for cost savings in logistics still do exist. Like all other sectors, petroleum sector too facing a lot of competition and how difficult is it to survive in this competitive world we all know very well. Technological changes, trends, price fluctuation, government & other norms & many other things derive the market these days. It becomes very necessary for every sector to be updated every time. The source of competitive advantage is found firstly in ability of the organization to differentiate its product, in the eyes of the customer, from its competition and secondly by operating at a low cost and hence greater profit.


In petroleum industry the product differentiation can be made by giving extra services to the customer’s like- providing news papers, tea-coffee, lottery, surprise gifts, dust cleaning at the time of rifling fuel in the automobiles. As far as operating at a low cost is concerned it can be done mainly by controlling the wastage & to have a good hold over logistics. If we talk about competitive success in commercial aspects, it derives from cost advantage or a value advantage, or ideally both. The most profitable competitor in any industry sector tends to be the lowest cost producer or the supplier providing the product with the greatest perceived differentiated values. But situation becomes a bit typical when the selling prices are being regulated by the government. Here other strategies are applied to hold the customers like extra services, quality standards etc. Competitive scenarios pressurize the organization to find new ways to create and deliver value to customers. There is a growing recognition that it is through logistics efficiency & effective management of the supply chain that the twin goal of cost reduction & service enhancement can be achieved. Main constituents of logistics are product handling (including storage & quality control), inventory management & transportation. Being regulated in selling price of the petroleum products by the government, company in petroleum sector need to have product differentiation through perks to the customers and not by price differentiation because that’s not in there hands. To gain a better grasp of the fundamental trade-offs in logistics, I will divide logistics activities into three categories: • • • Production Storage Transportation

The term “Resource” applies to all of the factors of production, including materials (e.g., Iron, fabric, and parts), equipment (e.g., machines or vehicles), energy (e.g., oil, coal, electricity) and labor. PRODUCTION: Fundamental logistics questions are:


(1) When should a resource be produced; and (2) Where should a resource be produced. The “when” question includes the topics of aggregate resource planning, and production scheduling. The “where” question includes the topics of facility location and production allocation. Some of the important production questions are: (a) What outside source should be used to supply a part? (b) Where should a new facility be built? (c) When should a facility produce different items, taking into account: • • • • Seasonal demand patterns? Demand uncertainty? Cost of operating single, double, triple shifts? Labor costs?

(d) When should a firm use two or more sources for a part?

INVENTORY: Fundamental logistics questions are
(1) When should a resource (material, machine or labor) be put in inventory and taken out of inventory; and (2) Where should a resource be stored. The “when” question includes the general topics of economic-order-quantity models, safety stock models and seasonal models, and specialized topics of fleet management, and personnel planning. The “where” questions includes the topic of inventory echelons. Some of the important inventory questions are: (a) How much does it cost to store resources in inventory? (b) How much “safety stock” should be carried in inventory to prevent against running out of a resource?


(c) How much inventory should be carried in order to smooth out seasonal variations in demand? (d) Where should replacement parts be stored in multi-echelon inventory system?

TRANSPORTATION: Fundamental logistics are:
(1) Where should resources be moved to, and by what mode and route; (2) When should resources be moved. The “where” question includes the topics of terminal location, vehicle routing, and shortest path methods and network flow allocation. The “when” question includes the topic of distribution rules. Some of the important questions are: (a) When should shipment be sent through terminals, and when should shipment be sent direct? (b) Which, and how many, terminals should shipments be sent through? (c) What are the best vehicle routes? (d) When should a vehicle be dispatched over a route?


Management actions Planning
Inputs into logistics Natural resources (land, facilities & equipments Human resources Financial resources Information resources Suppliers Logistics management Raw Material In-process Inventory Finished Goods



Output of logistics Marketing orientation (Competiti ve advantage) Time & place utility Efficient movement to Customer


• Customer Service • Distribution

Logistics activities

• Plant and warehouse site selection • Procurement • Packaging • Return goods handling • Salvage and scrap disposal • Traffic and transportation • Warehousing and storage

Proprietary asset

• Demand forecasting communications • Inventory control • Material handling • Order Processing

• Parts and service


The simplest way to describe logistics is to say that it is all about ways and means of meeting the demand for materials i.e. satisfying the customer with what he wants, when


he wants, where he wants etc. Logistics is, in itself, a system; it is a network of related activities with the purpose of managing the orderly flow of material and personnel within the logistics channel. It includes outbound, inbound, internal and external movements and returns of material for environmental purposes. The logistics concentrate on dynamic processes, related to the flow of materials and the relationship between the materials and their use at different facilities. The most wide spread definition from council of Logistics Management says that “Logistics is the part of the supply chain process and plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers requirements.”

Logistics is responsible for all the movement that takes place within the organization whether it is inbound logistics of incoming, raw materials or movement within the company or the physical distribution of finished goods, logistics encompasses all of these. Typical logistics framework mainly consists of Physical Supply, Internal Operations and Physical Distribution of Goods and Services. To put it more simply, the material supply logistics starts from the base level of “generation of the demand”, through the “process of purchase” and “supply of material from the vendor” right through to “final acceptance” and “payments to the supplier” and “issue to the indenter” and has to be considered as a “one whole activity” with each stage having an impact on price/cost of material supply. The logistics network required to supply petroleum products from the refineries to the end-users is a complex system of pipelines, ships, railways and trucks. Often several methods of transportation are utilized to move petroleum products from the refineries, ports and large terminals to tremendously disperse markets all across the globe. The long


distances and variety of transportation modes used can pose challenges for the refiners who must maintain strict product specifications. Degradation or contamination of product in transit can result in costly re-processing at the delivery point if the integrity of the distribution system is not carefully monitored. This is increasingly important as environmental regulations result in cleaner and more stringent product characteristics.

Modes of Trasportation









Fig 1.2 – flow chart showing the modes of transportation
In order to transport material from one place to another Logistics Managers are using Rail, Road, Air, Marine & Pipe Line as the modes of Transportation. Logistics expert needs to understand these modes based on priorities, product type, lead time etc. to decide the appropriate mode of Transportation.


Rail: Mostly each and every refinery, terminal and depot maintain there own gentry to
handle petroleum product through railways. Different wagons are used for black oil (furnace oil) & white oil (petrol, diesel, naphtha etc) & they do have different gentry. This mode of transportation is used to transport product from refineries to terminal & depots.

Road: Used by suppliers to deliver goods in a cost effective manner and best suited for
short distances. Many transport companies have expertise for fast delivery. Tank trucks are being used to transport the products from terminals to the refilling stations.

Air: Used mostly for delivery of high value and low volume goods from distant
suppliers, usually not connected by any other mode of Transportation. It is also suitable for emergent item to be imported for some specific requirement like – additives for petrol, diesel, and kerosene are being import. Planes are also used to fulfill the emergency requirements in the hilly areas. 10

Marine: This mode is ideal for transportation of heavy and bulky goods and suitable
for products with long lead times. Used for delivery of crude from distant places. It is a cheap distance. source of transportation for coastal areas with long

Pipe Line: This mode of transportation is being used by oil sector companies for mass
movement of Petroleum products including gases. Due to quite low operating cost it is one of the preferred modes of transportation. There are some multi product pipelines which are being operated in India with the help of intermediate management.


Characteristics of different modes of transportation Air
• • • • • • • Substantial fixed costs Variable costs depend highly on distance traveled Rapidly growing segment of transportation industry Lightweight, small items [Products: Perishable and time sensitive goods: Flowers, Quick, reliable, expensive Often combined with trucking operations Used for transporting products in hilly areas at the time of emergency.

produce, electronics, mail, emergency shipments, documents, etc.]

• • • Low cost, high-volume [Products: Heavy industry, minerals, chemicals, agricultural products, autos, etc.] Improving flexibility Suites when bulk is to be transported to long distances. • • High fixed costs, low variable costs High volumes result in lower per unit (variable) costs

• • • Lower fixed costs (don’t need to own or maintain roads) Higher unit costs than rail due to lower capacity per truck Terminal expenses and line-haul expenses


• • •

Most used mode Flexible, small loads [Products: Medium and light manufacturing, food, clothing, Trucks can go door-to-door as opposed to planes and trains.

all retail goods]

• • • • • • • • High terminal (port) costs and high equipment costs (both fixed) Very low unit costs One of oldest means of transport Low-cost, high-volume, slow Bulky, heavy and/or large items (Products: Nonperishable bulk cargo - Liquids, Standardized shipping containers improve service Combined with trucking & rail for complete systems International trade

minerals, grain, petroleum, lumber, etc )]

• • • • • • • Highest proportion of fixed cost of any mode due to pipeline ownership and Primarily for oil & refined oil products Slurry lines carry coal or kaolin High capital investment Low operating costs Can cross difficult terrain Highly reliable; Low product losses maintenance and extremely low variable costs

Table 1.3

- Comparison between modes of transportation

Factors 1) Cost


Less costlier than airways

Least costliest

Less costlier than marine

Huge infrastruct ural investment but cheap in long run Bulk load long distances, availability of infrastruct ure is a constraint

2)Suitabili ty

Small loads Bulk & emergency cases where

load Suits loads shorter

for Medium & medium distance

& location small product delivered is near a port

load with a with

has to be distances

3) Safety

Lesser safe Lesser than Least safe than pipeline air transportat

Lesser than marine


4) Time

ion More than more than more than Most pipeline airways marine Least intensive mode

time Fastest

consuming Requires than marine Most intensive Mode of

5)capital intensive

Less capital Requires intensive than pipelines as compared

less capital capital

less capital capital

6)Operatio Highest nal cost
operational cost

to airways Low as Low compared to airways to railways

transport transport as Low as Lowest compared to marine operational cost



It refers to the logistics mission of customer service, which is a driving force behind the total logistics system. It includes

It integrates logistics system with marketing that determines • • • • Logistics service required for products &/ or competitive advantage. Service expectations of customer and there response. Infrastructure requirements. Corporate vision towards service goals This can be seen in the figure below


Customer Service Network Design Order Processing

Transportation Inventory Management

Storage & Warehousing

Material Handling

Protective Packaging

Procurement Information Forecasting

Fig 1.4 - Components of logistics in pyramidal structure

These helps in smooth functioning of the total logistics system, including logistics network design, order processing, transportation & inventory management. It includes

• • • • Number, size & location of facility network for logistics operations. Relationships among the facilities at various locations. Infrastructure of each facility centre & There cost and customer service capabilities.


• • • • • •

Fleet management Transportation cost & tariff Modes of transportation and coordination between them Required, availability & regularity of transportation service Transit insurance & claim processing Time, speed & intact delivery.

• • • • • Stocking policies for raw material, work in progress & finished goods Replenishment policy (just in time & push or pull strategies) Inventory cost Product mix & stocking points Number, locations & size of stocking points

• • • • Order receive & recording Order inventory interface procedures Dispatch scheduling Ordering and back order systems

These components facilitates smooth functioning of generic & primary components, it includes

• • Infrastructure facilities Operational mechanism


• Up to date recording of goods stock position • Protecting & preserving the physical attribute of goods • Proper loading and unloading system

• • • • Safe, smooth & speedy placing & positioning of goods to facilitate there Material handling equipments selection & replacement policies Material handling equipments operating cost Storage & retrieval frequency of goods movement and storage

• • • Protection from loss & damage Design of package required for handling and storage Packaging cost

• • • • • Vendor selection & management Quality specification Supply schedule Vendor company relationship Procurement cost

• • • • Information required for the logistics system Source of data and its reliability DBMS for processing, analysis & storage Information cost


Computer infrastructure

• • • • • • • Administration Block Lubes Department Labs Control Room Loading Bay Sales & Distribution Health & Safety

Terminals are that part of supply chain which acts as a mediator between the refinery and the refilling pumps. The entire product is dispatched from refinery and transported to the terminals with the help of pipelines. Many of the quality checks had been done at the refinery itself but for maintaining the standard & to give the best value to the customer for the money they are spending, these quality checks are performed again. After the product passes all the quality parameters it is than transferred to the storage tanks for gauging and then the engineer intimate the refinery that we had received this much of product with its specifications. For transporting the product from terminals to the refilling pumps, the pump owners send their requirement/indent with a draft filled with the amount of the product, which is given at the Sales & Distribution Dept. (S&D Dept.). Here a slip known as FAN is


generated after placing the indent. This fan is given to a T/T driver along with a magnetic card in which information has been feed through SAP (Computer Software) that which product is to be loaded, how much in different compartment of the truck and also on which loading bay the truck is to be loaded. It also gives the time on which the refilling will star & end as well. The same information is also there printed on the FAN slip. After taking this FAN & magnetic card the T/T driver proceed towards the loading bay entrance, there at the check post this card has to shown in front of the card reader which then opens the gate to enter the TT in the loading bay. As par the bay number & time printed on the FAN slip the T/T driver takes the truck on the same bay. A card reader is also there near the loading arm where the card has to be placed for 4-5 seconds for loading arm to store all the information. Than the loading arm is placed inside the compartment and start the refilling. The arm is shifted to other compartment when the first one is filled and than re-start the refilling. In this way the whole TT is filled and also gauged at the same time with the help of a dip rod & if necessary action taken immediately when something seems abnormal. After refilling the TT is locked by the workers at the locking bay and than moved out of the loading bay. This magnetic card is returned at the S & D Dept after the refilling. Than at last the S&D Dept. will generate the invoice which is given to the TT driver.


Receipt of Product

Storage & Product Handling

Fig 3.1 - Figure showing General Working at Terminals
There two kinds of product deliveries at the terminal 1) Delivered 2) EXMI In delivered the responsibility of the quality of the product up to the dealers end will bear by the terminal/company itself but in EXMI the responsibility will remain just up till the product is in the premises of the terminal, just when the TT moved out the premise of the terminal any loss in the quality of the product will be the responsibility of the dealer himself. Generally kerosene is given with EXMI & petrol, diesel, ATF etc are on delivered bases. Generally the tank trucks at the terminal are on the contractual basis through tenders with the transporters. Some of the pump owners do have their own TT & some are also owned by the corporation. These days company is using more of transporters TT on contractual basis, being the reason that it will reduce the cost for maintenance, drivers etc. In nutshell, the company realizes the importance of outsourcing the road transportation.


For making contracts with the transports the company raises tenders and asks each transporter to give the quotes for three categories of delivering the product: • • • For Free Delivery Zone (FDZ) with in the radius 40 kms from the For delivery with in the state. For delivery with in the adjoining states. terminal.

So the quotes from the transporters are placed in a tabular form starting from the least in the L1 category than after the one which is more than rtes in the L1 as L2, likewise up till L4. According to a rule given by the government the rates given by the transporters in the L1 category could not be negotiated. So, company first makes the agreement with the one in the L1 category and moves towards the L2 group if the requirement still lefts. So in this way this way the company prepares the required fleet of TT. The company also gives instructions like the TT which is under contract with IOCL could not involve in any of the side works as a part time job.

General safety checks of TT‘s at the entrance of the terminal Indent placing at the S & D Dept. Issue of FAN & magnetic card to TT driver
TT moves towards the loading bay for filling

Loading of the TT at the loading bay by showing magnetic card at the card reader
Each compartment is filled by the staff at the loading bay with the loading arm and checks the quantity there after with dip rod

Locking of the TT at the locking bay


TT driver takes the TT out of the loading bay after filling

TT’s driver returns the magnetic card at the S & D dept.
Before generating invoice the officer at the S & D Dept. matches the time with the one mentioned on the FAN slip & if some strange thing seems, necessary action it taken immediately

Invoice generation by the S & D Dept.
TT moves out of the terminal and moves towards its location


Overview of Bijwasan Terminal
Roughly 8 kms from Kapashera border in Delhi, this terminal of IOCL was commissioned in 1982 and covers around 71 acres of land. This terminal fulfills the requirement of white oil in whole Delhi and for black oil in Haryana, Delhi, Uttar Pradesh & Punjab as well. Bijwasan terminal handles motor spirit, high speed diesel, superior kerosene oil, aviation turbine fuel, MTO, light diesel oil, 93 octane, ethanol & lube oil and paraffin waxes. This terminal is being operated by 23 officers, 16 white collar workers, 64 blue collar workers & 37 security personnel. Here at Bijwasan terminal product inlet is through Mathura Jalandhar pipeline which has commenced on 27th April 1982 & is around 763 kms in length. This pipeline runs around 147 kms from Mathura to Delhi with a capacity of about 3.70 MMPTA.


There are many automated system like Terminal Automation System, Pump Automation System, Motor Operated valves, Tank House Automation System etc. Tankage here in Bijwasan terminal is 165720 KLs catering 22 tanks for different products. On an average 400 T/T were loaded per day with the help of 30 loading bays & 23 pumps for different products at the terminal. Many social activities are also conducted at the terminal like – health check up & AIDS awareness program, free TT check up campaign, friendly cricket match between Indian oil & transporters, award to meritorious children of tt crew, painting & dance competition of children of tt crew & transporters employees & many more , clubbed under SAMBAMDH ACTIVITIES. They do organize the transporters/ dealers meeting to clear the doubts & to make them aware of the new schemes & programs.

Overview of Rewari Terminal
Rewari IOCL was terminal of was commissioned in 1996 and covering an area of around 98.4 acres of land. This terminal covers the market of Rewari, Gurgaon, Faridabad & around 40 consumers of Rajasthan. It also gives some of its product to HPCL, BPCL & IBP through pipelines. Rewari terminal handles motor spirit, high speed diesel, superior kerosene oil, bio diesel, Xtra mile & Xtra premium. The terminal is being operated by 10 officers, 2 white collar workers, 10 black white collar workers & 27 security personnel. This terminal operates 24 bays from which 16 bays are being used for high speed diesel, 4 bays for superior kerosene oil, 1 bay for motor spirit, 1 for Xtra premium, 1 is used for both motor spirit as well as high speed diesel at different times, like wise another 1 is used for motor spirit as well as bio diesel. For the purpose of storage over there are over all 22 tanks and used as 5 for motor spirit, 3 for high speed diesel, 3 for superior kerosene oil, 1 for bio diesel, 2 tanks for ethanol, Input of the product is through Kandla Bhatinda Pipeline (KBPL) which is around 1443 kms in length & Panipat Rewari Pipeline (PRPL) & it extends up to 155


kms. The KBPL carries around 2,22,823 kilo liters of product. These days KBPL is used for transporting crude and not products, so the ma in source left for intake of products is PRPL. Bio diesel is also worked as on trial basis in Rewari terminal. This bio diesel is mixed with high speed diesel in the ratio of 5% & 95% & is being given to Haryana roadways buses in Gurgaon. This project is under trial for the last 2 years.

Identification of Problem
The petroleum business is very asset intensive, with multiple islands of independent business units competing for profitability. This internal competition drives profit out of the system and hinders enterprise potential. For decades, the solution to this problem was beyond the reach of petroleum executives. The major players in the field are IOCL, BPCL, HPCL etc. These days the main area of concern is logistical cost, being the reason that it comes just next to the crude oil cost in this industry as the various process are involved as a matter of fact the cost is concerned. Every company is concerned how to make its logistics effective or how to make optimum utilization of its available resources. So my research is conducted on the same issue taking the case study of Bijwasan & Rewari terminal. I personally visited the terminals and understood the whole working and than after implicated my study in the field, I had given some of the recommendations which might


be the one on which the company would be working up on is & might be they are yet to be considered by the company.

The project was completed in two phases: FIELD RESEARCH: In this phase of project I had been at 2 location s of IOCL – Bijwasan & Rewari terminal. There I understood the whole working done at the terminals including various procedures involved in TT filling starting from indent placement upto the invoice generation. DESK RESEARCH: In this phase I had reviewed a lot of data through internet like e-books, had surf a lot of sites, had read some books than after all this I had got to know various trends in the product logistics, various modes for transportation, on what basis the modes are chose etc. 26

Data Sources
Primary: The primary data was collected by interviewing the officers there in the operations dept. as well as officers at the terminal, with the help of a questionnaire. Also the data have been collected by visiting the terminals and by asking various workers & staff personnel at the terminal. Secondary: The secondary data is collected by visiting various Internet sites and studying books on supply chain management, distribution & logistics management & by reading articles in the newspapers.

Sample Design
Samples were collected by visiting various petrol pumps in Delhi, Gurgaon, & Rewari. By visiting them I got to know from which terminal they are taking the delivery of the product. As far as the questionnaire is concerned I had taken views of 8 people. So my sample size is 8.

For the comparative logistical study of Bijwasan & Rewari terminal, firstly I had visited to both these terminals & understood there working with the help of officers and staff there at the terminal. Than after covering the general working there at the terminal like – safety checks in the T/T, placing of the indent, issuing FAN, locking-unlocking, refilling, invoice generation and many more, had collected some information from the officers & workers like annual through put of products, number of T/T regularly loaded, products handled etc. On the basis of this data I have an empirical test and using graphs will be showing the results. Other than that I will be making a questionnaire which will be more or less a case study in the end of this comparative study. This questionnaire will be filled by the senior officers in IOCL & will give an idea that which area is to focus upon from the options taken, to make the logistics more effective and efficient.


I will be using the data I had taken from the officers and staff members at the terminal and also some of it had also taken from the internet. Comparing the data of both the terminal on the bases of intakes product wise, out takes, number of T/T refilled on the daily basis, products handled, transportation charges paid including Central Sales Tax, cost per worker & areas covered. Data taken from internet and from the officials is than analyzed and through empirical methods comparison is made. Questionnaire is developed to have the views of the top officials that which head is more important to focus from the given, in the logistics to make more effective and efficient. In last conclusions will be on the basis of analysis & recommendations on the basis of knowledge of the field.

Survey Questionnaire
In this questionnaire I had taken some of the key driving factors of the logistics industry & implementing those will really make the logistics more effective. The factors I have covered here are – • • • • • Inventory management Depots machinery automation Refilling stations machinery automation Effective & efficient workforce Technical advancements

Some of these factors might not be concerned with the logistics directly but attributes a lot in its procurement.

Inventory management


Inventory management and its concepts are not actually practiced in Indian petroleum industry but work is going on. Now the days had gone when companies use to invest around 40% of its capital in maintaining the reserves, these days strategies are being worked out to reduce this reserves while developing the logistics system in such a way so as to reduce the reserves which in result also requires less space for storage, less maintenance, less work force etc. in nut shell will reduce a large part of operating cost.

Automation in the machinery at depots
Automation in the machinery at depots will reduce a lot of wastage, shortens the time span to fill/empty a T/T, reduce the number of workers etc at the time of loading and unloading. Automation will also safeguard the workers for machinery handling up to an extent. Automation will also curb some of the malpractices by the laborers on the terminal like – over filled T/T’s are reduced up to the required mark by the employees at the loading bay manually, so mischief can be made by employee if he/she wants to.

Refilling stations machinery automation
Refilling station are the last but the most important part of logistics being the reason that the ultimate consumer comes in touch of this segment of logistics. It is here in this segment the brand name will be created & if this segment of the company couldn’t able to satisfy the customer than will reduce its sales and vice-versa. As far as the general public is concerned no body bother about that I need to get my car refueled at INDIAN OIL or other OIL COMPANIES but the main area of concern is the service they will be getting and the quality as well as the quantity they will be getting as a value for there money. So if they see that the machines are fully automated at a refilling station, thus will give the accurate quantity so will definitely go for that one.

Effective & efficient workforce
Workforce here represents the laborers at depots, refilling stations & there behavior to the customers, as these are the laborers only who comes in contact of the consumers & if he/she treats the customer well than can increase the companies market, being the reason that product differentiation is very hard to make in this area. Perks are required to make the workers motivated towards there job and to make him honest towards his/her duty on


the other hand. Customer satisfaction can only be achieved when the workers work efficiently and this can only be happen when he/she is satisfied with there jobs.

Technical advancements
Now more and more logistics personnel are using technology to electronically transfer large volumes of data with speed and accuracy; improving coordination and customer satisfaction. It helps in reducing inventory, systematize work, reduce wastage, reduce cost; all in all it makes the logistics effective and more efficient. By technology I mean all those stuff which will be helpful in making right thing in right quantity to a right person & at a right time. This can also be a technique or software which will make the product logistics more efficient, effective & safe. So these are the options on which my whole questionnaire is based. Rate the following options according to there importance in the given questions from 1 to 5, starting from 1 to the one which should be focused more & 5 to the least focused in comparison to others. Option A – Inventory Management Option B – Depots Machinery Automation Option C – Refilling Stations machinery Automation Option D – Effective & Efficient Workforce Option E – Technological Advancement Q1- How to increase the sales of the petroleum product?






Q2 - How to reduce the wastage in the process of logistics like at the time of loading, unloading etc?






Q3 - How the malpractices like-adulteration, meter setting to reduce the actual refilled product quantity practices at the refilling stations can be curbed?






Q4 - How to reduce the overall transportation cost of the petroleum product in the process of supply chain?






Q5 - How to reduce the overall time taken in the process of transportation of raw material up till it becomes a finished product?






Q6 - How to maintain the quality of product in the whole supply chain starting from the raw material to the finished goods?






Q7 – How to manage the storage requirements in the most efficient manner so as to reduce the cost for storage?






Q8 – How to minimize the reserves maintained?






Q9 - How to reduce the hazardous properties in this process of logistics like at the time of loading-unloading of product, at the time of storage etc?






Q10 – How to satisfy the customer for the amount they are paying for the fuel?






Bijwasan terminal of INDIAN OIL was commissioned in the year 1982 covering around 71 acres of land, where as the Rewari terminal is commissioned in 1996 and covers 98.4 acres.

Products handled
Products supplied in Bijwasan are motor sprit (MS), high speed diesel (HSD), superior kerosene oil (SKO), aviation turbine fuel (ATF), MTO, light diesel oil, ethanol, 93 octane, lube oil & paraffin waxes, on the other hand in Rewari products are motor spirit


(MS), high speed diesel (HSD), superior kerosene oil (SKO), bio-diesel, Xtra mile & Xtra-premium.

Receipt of product
In earlier days Rewari terminal have got two options to receive the product – Kandla Bhatinda pipeline (KBPL) & Panipat Rewari pipeline (PRPL). But for the past 2 years it has converted into crude pipeline. So these days all product intakes in the Rewari terminal is being done through the Panipat Rewari pipeline, which is around 155 kms long with capacity of 1.50 MMTPA. Where as in Bijwasan terminal the product intake is through Mathura Jalandhar pipeline (MJPL), which is around 763 kms long with a capacity of 3.70 MMPTA. Its length from Mathura to Delhi is around 147 kms.

Bijwasan mainly covers whole Delhi for the supply of white oils & Haryana, U.P & Punjab as well for delivering black oil where as Rewari terminal covers Rewari, Gurgaon, Faridabad & around 40 consumers of Rajasthan state

\ Manpower
The Bijwasan terminal is handled by around 23 officers, 16 white collar workers, 64 blue collar workers & 37 security personnel while the Rewari terminal is managed by 10 officers, 2 white collar workers, 10 blue collar workers & 27 security personnel.

TABLE – 5.1 Logistical comparison
Bijwasan Rewari

FACTORS Pipelines

Terminal Terminal Mathura Jalandhar Kandla Bhatinda pipeline Motor spirit (MS) High Speed Diesel (HSD) pipeline & Panipat Rewari pipeline Motor spirit (MS) High Speed Diesel


Superior (SKO)

Kerosene Turbine

Oil (HSD) Superior Fuel Oil (SKO) Bio-Diesel Xtra Mile Xtra Premium Kerosene

Products Handled

Aviation (ATF) MTO

Light diesel oil Ethanol 93 Octane Lube Oil & Paraffin waxes

Number of Product Tanks

22 tanks

15 tanks

Product Tankage

165720 KL including 90350 KL including 2000 KL Ethanol 70 KL Ethanol 3280 KL 10 Officers 2 WCW 10 BCW 27 personnel security

Water Tankage Manpower

14000 KL 23 Officers 16 WCW 64 BCW 37 security personnel

TLF Bay Pumps for pumping Product
Normal Monthly Off Takes Motor Spirit High Speed Diesel Superior Kerosene Oil Aviation Turbine Fuel MTO

30 bays 23 pumps 56000 KL 67890 KL 17130 KL 58960 KL 40 KL -----

24 bays 12 pumps 4788 KL 50052 KL 4953 KL




70 KL

Avg. monthly offtakes of bijwasan & rewari terminal
80000 70000 Mothly Off-Takes 60000 50000 40000 30000 20000 10000 0 MS HSD SKO ATF MTO Bio-Diesel petroleum products bijwasan terminal rewari terminal

GRAPH 5.2 – Showing avg. monthly off-takes

Findings on the basis of questionnaire
After evaluating all the questionnaires the result is like Option A – Inventory Management Option B – Depots Machinery Automation Option D – Effective & Efficient Workforce Option E – Technological Advancement = 21 marks = 19 marks = 15 marks = 27 marks

Option C – Refilling Stations machinery Automation = 14 marks

These marks are out of 30 marks and the marking is made on the basis of questionnaire which is filled by some of the officers at the operations department as well as the terminal managers. This is being evaluated by taking out that what should be given more consideration from the given options is being given by evaluating the questionnaires filled by some officers.


These results are being worked out by evaluating separate views of the interviewee & than after a compiled out look of the entire questionnaire and the resultant can be seen in the figure below.

ratings as per the questionnaires

– Ratings as per the questionnaire
30 25 20 15 10 5 0 Inventory Depots Managem Machinery 21 19 Refilling Stations 14 Effective & Technolog Efficient ical 15 27 27 21

19 14 15 Series1


From the above bar diagram it can easily be make out that technological advancement means a lot for product logistics efficiency. Than after comes inventory management in the line. Likes wise depot machinery automation, efficient & effective workforce & at last but not least the refilling stations machinery automation. So, if the above taken things moved in a right direction will give a good direction to the whole petroleum industry by improving its logistics. Some of things are explained as under –

By technological advancement I mean the techniques used for the product handling, database management, making planning on the basis of database through some specialize software and the basis of which corrective measures can be taken in advance if any thing going wrong in the whole process. The days are gone when available crude is given to the refineries and refineries process that crude according to there capacities. This was happening being the reason that 36

there wasn’t any synchronization within the refineries of a company but now supply is made according to the demand. So, in this respect these days the demand of different product is studied at different locations with respect to the available modes of transportation in that areas as well as the near by areas. Techniques are being searched to make appropriate projections for sales in a particular period and on the basis of which crude oil could be purchased. Techniques should be implemented so as to make available the product/material right at the place of requirement and right in time with the least & optimized logistics expenses. Logistics is given a great privilege after the quality crude oil in this industry. The reason being it covers a huge part of cost after the cost of raw material i.e. crude oil. This is the reason why refineries these days are given a guide lines that what to produce & how much to produce, some deviation will be there. Like –in earlier days suppose a refinery is working out in its full capacity and yielding Motor Spirit – 100 TMT High Speed Diesel – 300 TMT Superior Kerosene oil – 40 TMT But the actual requirement is Motor Spirit – 130 TMT High Speed Diesel – 270 TMT Superior Kerosene oil – 40 TMT So, the refinery should be given the actual projections and it will work according to that, so the refinery will not be short off any product as well as it should not have any product in excess, some deviations after fulfilling the demands can be there. If the refinery have got the projections of product requirement in hand, than they can also choose the quality of crude oil that suits them better according to there requirements. This demand projection is made keeping in mind the companies owned modes of transportation first, so as to utilize them in the full capacity & also in the optimum manner. Some synchronization should be there within the other oil


Companies in India like the refinery there in northern region should serve the north fully and if than have the surplus capacity than moved towards the middle region like Madhya Pradesh, Chhatisgarh etc. Latest techniques of data transfer & data maintain should be used and always work to improve them. Technical advancement can also be made with making a contract to the specialize companies in the field of information technology and the developed software can also be outsourced. For exampleThe convergence of GIS and other technologies specially Relational Database Management Systems (RDBMS) with the support of spatial information via spatial cartridges has opened a new era which will allow to manage the spatial components of these everyday petroleum "business objects," such as leases, wells, pipelines, environmental concerns, facilities, and retail outlets, in the corporate database, and apply appropriate geographic analysis efficiently in a desktop-focused application. For the purpose of retail outlet management & distribution this GIS covers the distribution of refined petroleum products from the production center to various retail units like petrol pumps, gas stations and other petroleum products retail stores. This is the area where a lot of GIS developmental activities can take place. Retail companies can use the power of GIS systems to optimize their business with intelligent analytical GIS tools and planning tools and provide better customer and outlet services. • • • • • • • • • Coverage Analysis. Fleet management Develop Sales territories Locating Optimal position of a new outlet Optimal routing of Petroleum tankers across the country and across the city. Crisis management Volume distribution of petroleum products Geographic analysis of distribution pattern. Finding a specific outlet in a city and deriving a route to go there.


These GIS software’s are available with Infotech Enterprises Ltd. Madhapur, Hyderabad, India. Other than this GIS many other companies of I.T. industry makes a specialize software for the petroleum industry like – IBM, BP GLOBAL etc. Other than this outsourcing, some trend can also be make out using the figures of the last 10 years for the purpose of sales projection & to make the logistical planning on its basis. Some mathematical/statistical techniques can be used like- trend analysis, transportation model, standard deviation etc. After taking out some trend through the mathematical/ statistical tools the results are shown to the experts who can make necessary changes being the reason there are many calculative things that the computer can’t able to judge like – uncertain collapse of some heavy buyers from the market, the sales of the product increases being the reason of o festival which happens once in 10-15 years. So, these experts will make necessary changes in the projections which will be matched with the actual figures after the expiry of that period. This way the deviations can be made. In the same way hi tech machines can be used to reduce the wastage in product handling which will also reduce the time of functioning hence, making the whole working more efficient. We can also use tracking system for the trucks which carries the product. The vehicle will have a-mounted microphone which will locate the truck. It can be given the features of GSM & GPS technologies to acquire location data and transmit it to a network command centre. The received data is authenticated and forwarded to an application server which provides tracking information through an internet accessible user-friendly interface. The user also has options to receive tracking information via e-mail, mobile, fax or SMS besides the facility of calling the customer support team on a toll-free telephone line. Some basic features of this tracking system would be • • Fully automatic real time system No driver intervention • • • Location details are sent automatically at pre-determined intervals from remote locations It will be a 24 hours service Can cover a huge area and could be viewed in a digital map of India.


Establishes a low cost communication channel between mobile assets,

owners and users of the mobile assets. Applying these types of technologies will help a lot in making the logistics effective by • Idle-time reduction through better monitoring • • Less chance of adulteration within the process of transportation Improvement in productivity

This way the technological advancement will surely give the best results.

This model is useful to determine the economic size of orders if a product is procured at one stage, stored as inventory & than transmitted to customer. In other words, when the rate of flow of inventory is greater than the demand rate, this model is most appropriate for determining the size of lots. But tis model do have some assumptions 1. 2. Annual demand, carrying cost & ordering/procurement cost for a product can be No safety stock is utilized, goods are supplied at a uniform rate & used at a 3. Stock out, customer responsiveness & other costs have no effect 4. Quantity discounts do not exist 5. Supply rate is greater than the usage rate estimated uniform rate & goods are entirely used up when the next order begins to arrive

Let D = Annual demand of a product Q = Quantity of the product ordered each time C = cost of carrying one unit of inventory for one year (Rupees per unit per year) S = average cost of completing an order for a product (Rupees per order) d = rate of which units are used out of the inventory 40

(Units per time period) p = rate at which units are supplied to inventory (Units per time period) Maximum inventory level Minimum inventory level Average inventory level = Inventory build-up rate * Period of delivery = (p – d) [Q/p] =0 = Maximum inventory level = (p – d) [Q/p] + 0 / 2 = Q/2 [(p – d)/p] Annual carrying cost Annual ordering cost Total annual stocking cost = Average inventory level * Carrying cost = Q/2[(p – d)/p] C = Orders per year * Ordering cost = D/Q * S = Annual carrying cost + Annual ordering cost = Q/2[(p – d)/p] C +D/Q*S To get the formula of optional quantity, the total stocking cost should be minimum, which will possible when Q2 = [2DS/C] [p/ (p – d)] ___________________ EOQ = Q = √ {(2DS/C) [p/ (p – d)]} + Minimum inventory level

This EOQ stands for economic order quantity. So by putting actual figures in this formula we can get the minimum quantity of product that we should handle at a time, so that to reduce the expenses of product handling like – storage, manpower to take care etc. and also it will reduce the working capital which is blocked in maintaining high inventories.


Machinery automation at the terminals will be of enormous help in improving the over all logistics • • • • It will reduce time taken in the process of loading unloading of the product Will make the process of loading and unloading comparatively safe Will result in reduction of wastage also in the process Will use less of manpower as compared to the present scenario.

This way by using fully automatic machineries at the machineries at the loading bay & making the locking system we can reduced the time taken in the process, makes the loading safer when used by trained workers, will reduce the wastage & also curb the mal practices in the process of transportation like adulteration etc.

By effective and efficient workforce I mean the workers at the refilling pumps and workers at the terminals, there efficiency in work, there behavior to the customers, there honesty level etc. According to me, customer for a refilling pump can’t able to judge which petrol is better because it is very difficult to have product differentiation in this industry at economical cost in comparison to the other oil majors. More or less this industry is regulated by the government, this being the reason that the competitors could not attract the customers by giving them the cost benefit. The thing which comes into play here in this kind of services given to the customer at there ends. This is the only reason why the oil companies are putting up stores, drinking water, toilets, free air check in tyres, free news papers in the morning, free cleaning etc. These all are the extra perks which can be different from company to company. At the same time the workers at the pumps also work as the brand ambassador of the company because they are the only person who comes in real contact with the customers. Here if the behavior of the worker is not good towards the customer than the company may lose its customer. Some important points like• Employees/Workers should be perfectly trained 42

• • • •

Should be educated enough to deal the customer up to his satisfaction level. They should always be polite towards the customers Should be honest towards his job Should ask customer - what changes he would like to have

Also the workers at the terminals play an important role. There should always be surprise checks at the pumps quite frequently to check the working of the employees. And also there should be regular training programs in a time span (let say 6 months) to make them aware of the latest things demanded by the customers. They workers should be rated by the pump owners and the best employee will be given some perk so as to get him interested in his job & also honest towards his job.

Machinery automation at the refilling station is really a key factor to attract more and more customers. In general view, some settings are performed in the machinery at the loading pumps so that it will always give less quantity than the once shown on the meter. In this type of situation, it will create a good impression on the customers if the machines are fully automatic. The concept like self service can give a good response when the pumps are company owned & company operated (COCO). • • • Here the company can issue prepaid cards to the customers like in metro trains A token service could also be worked like taking tokens from the counter and Can also have the combination of both the token & the prepaid card. If this concept works out than the workforce can be reduced but would need to have frequent checks and some guards will have to be there on 24 hours basis. In this type the customer will be satisfied in comparison to the present scenario, for the meter settings, mixing at the pumps etc being the reason the pumps are owned & operated by the company itself. and also can give some discounts on that cards. refilling the vehicle


By studying both these terminals in detail & also by comparing the product logistics within these two I get to know many things which I will be discussing as under • Rewari terminal has captured more land area as compared to the Bijwasan

terminal but could not able to give more business as compared to the Bijwasan terminal. • In Rewari terminal, automation is less as compared to the Bijwasan

terminal. So automation in machinery will surly enhances the working & as a result through put will also improve. • Due to the Central Sales tax on the inter state transfer of petroleum the

product, the pump owners have to be take the product from the locations which are far away as compared to the which is very near by but is in another state. • IBP pumps in Gurgaon & Faridabad have to go to the Rewari terminal to

get filled either than the Bijwasan terminal which will result in more transportation cost. • If permission for setup of pipeline infrastructure to the nearest pumps

could be granted than much of the transportation cost could be saved but will require huge capital in its initial stage. • Bio-diesel and ethanol projects should be given more importance as these

things are profitable & environment friendly to. Like – Bio-diesel project is under trial for the last 20 months on the Rewari terminal & no action to implement the same on the other terminals, had been taken yet. In the same way ethanol requirement for 5 % which had given green light by the government couldn’t be


able to fulfill yet and the government is in a mood to further extend it to 10% in the surgarcane producing areas. • Refilling pumps are allotted the terminals where the transportation should

be the cheapest on the basis of the distance from the terminal like most of the pumps in the Gurgaon & Faridabad should be filled at Bijwasan rather than Rewari terminal Like the terminals account the deliveries under three categories – 1. FDZ (free delivery zone) 2. With in the state 3. In the adjoining states So, after calculating the cheapest distance for transportation within the different terminals pumps would be allotted for filling at that terminal from where it will be cheapest to him. • The pumps under IBP should also be given the permission to get refill on

the IOC’s terminal also, so that the overall transportation cost can be reduced, if the other option is available at the nearest. • Mostly trucks used at both these terminals are of capacity with 12 KL.

These trucks covers around 95% of the traffic at the terminal, if some trucks of high capacity are taken on contract than much of the time will be saved when delivered at the pumps which carries 3 - 4 TT’s at a time & also will save a lot of time as well as money. • At Bijwasan terminal ATF is pumped through to IGI Airport & is

marketed and handled by BPCL & refueling system is again of IOCL. • The additives which are used for kerosene, Xtra premium & Xtra mile are

taken from Neo-Petcorn. It has got its distributors/agents all India.


Blended with



Blended with MS to convert it into Xtra premium Blended with HSD to convert it into Xtra Mile

600 ml per KL


400 ml per KL

Dorf 1440 Marker Blue Dye

Blended with ethanol as an 200 ml per KL anti corrosive agent Blended to check the adulteration in kerosene Blended with kerosene to give it blue color

TABLE 6.1 – various additives blended with products to improve there quality
• The additives used with the products have to be transported through the plans and

comes first to the IGI airport than stored in the warehouse in the Janakpuri (New Delhi), than after again supplied to the Bijwasan terminal which if transported directly would reduce a lot of cost for transportation.

General Recommendations
1. Terminal/depot on the highway should have a pump for general public at its out skirts which is to be managed by the terminal itself, will increase the profit as it will utilize the empty space & also gives more coverage and sales too, being the reason that, according to the general mass of public, its one of the company owned as well as can have the usual check of the terminal officers quite frequently, so these pumps obviously provide good fuel as well as service. 2. Workers at petrol pumps should be well trained because they are the only one who comes directly in contact with the customers & here they plays the role on the companies behalf.


If we think from the point of view of the general public, there is nothing like product differentiation in companies in the public sector, so that’s why it’s just the service & treatment which builds the whole image. 3. As the guidelines had been given for new pumps like space factor, toilets provision, drinking water provision, beverages stall etc all these things should be applied to the older refilling stations also, as they are also a part of chain. 4. Mobile testing labs should be there. A group have to be formed to check the mal practices at the petrol pumps & they should make surprise visits to the refilling stations and take tuff action against them so that to create an example for others. 5. More of high capacity T/T should be used for the pumps of usually high throughputs like those once which use to take 2-3 T/T at a same time. This will reduce transportation cost, time, 1 truck will be used instead of 3 etc, in nut shall it will make transportation quite cheaper.

The main area of concern is the area covered and the business given, like Rewari covers more area and gives lesser business in comparison to the Bijwasan terminal. Automation of the machinery used at the loading bay in Rewari terminal is also lesser automated as compared to the Bijwasan, so it might be one of the reasons of lesser through put in comparison at the same time a lot of difference is there in the manpower at both the terminals, terminal in Rewari there are just 22 people as compared to the 103 people in Bijwasan covering officers, blue collar workers as well as white collar workers.


Central sales tax (C.S.T) has been an area of concern for the interstate transfer of the petroleum products. A lot of transportation cost can be saved if a resolution can be made. The IBP petrol pumps are allowed to get filled at the IOCL terminals also, so that apart of transportation cost can be saved & the best option as per the distance can be taken out. It will also be of great benefit in the long run if the near by petrol are connected through the direct pipelines, it will be capital intensive in the initial stage. Ethanol projects are very important area for a company like IOCL, so proper arrangement should be made for the suppliers to cater the need of Ethanol to mix it with MS. Government is making its mind to give green signal to 10 % blending of the Ethanol with MS and here in IOC we could able to made available the 5% Ethanol requirement.. The additives used in the process of blending are imported through IGI airport than shifted to Delhi (Janakpuri) for storage, than taken back to Bijwasan. All this process requires lot of time and at the same time extra cost too. So being the reason company have got much vacant space at the terminal, we can store the additives at the terminal it self Most of the TT’s used at the terminals are of 12 KL capacity, apart form these some of the TT’s should also be of higher capacity of the pumps which have got the requirement of 2-3 TT regularly, it will reduce a lot of transportation cost, time & maintenance cost too. . As from the questionnaire also it had been revealed that our Indian petroleum industry requires a lot of technological advancements to improve its operations & to make itself more effective as well. This technological advancement should be made to the machineries used in operations as well as to maintain the records & day to day working. In the machinery our best effort is to reduce the wastage which is done at the time of loading & unloading of the product. To curb this particular fact and also to make the product logistics more effective the petrol pumps should be connected directly with a pipeline from the terminal itself. This will be costly in the initial stage but will cut a lot of unusual costs in the process of transportation at the same time a lot of time will also be saved as there would not be any loading unloading of the product at the terminal. And also by implement SAP at the petrol pumps also we could make a regular check in the inventory being send to the 48

pumps & maintaining the regular records of the sales the malpractices at the pumps will also be curbed. By maintaining the regular records if some change in the inventory comes into play that means there is some mixing being done at the pumps. So, by this way we can make our working in logistics fast and effective too.



Books 1. Logistics & Supply Chain Management (Strategies for reducing cost & improving services) By- Martin Christopher 2. Logistics & Supply Chain Management By- Raghuram & Rangaraj 3. Logistics Management & Distribution Presentations • • • • Global logistics Inventory management Transportation Customer services Sites


• • • • • • • • • IOCL- Indian Oil Corporation Ltd HPCL- Hindustan Petroleum Corporation Ltd BPCL- Bharat Petroleum Corporation Ltd MS- Motor Spirit ATF- Aviation Turbine Fuel HSD- high Speed Diesel SKO- Superior Kerosene Oil TT – Tank Trucks C.S.T- Central Sales Tax


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