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RETAILING: MODELS, OPERATIONS, STRATEGIES

RETAIL MANAGEMENT PROJECT

ON

HINDUSTAN PETROLEUM CORPORATION LIMITED

TO

DR. B.V. JAYANTHI

ASSOCIATE PROFESSOR- RSB

BY

ARUN PANDIAN J

RSB-1501024
HINDUSTAN PETROLEUM CORPORATION LIMITED

RETAIL MANAGEMENT

INTRODUCTION:

Retail involves the process of selling consumer goods or services to customers


through multiple channels of distribution to earn a profit. Demand is identified and then
satisfied through a supply chain. Attempts are made to increase demand through advertising.
In the 2000s, an increasing amount of retailing began occurring online using electronic
payment and delivery via a courier or via postal mail. Retailing as a sector includes
subordinated services, such as delivery. The term "retailer" is also applied where a service
provider services the small orders of a large number of individuals, rather than large orders of
a small number of wholesale, corporate or government clientele. Shops may be on residential
streets, streets with few or no houses, or in a mall. Shopping may restrict traffic to pedestrians
only. Sometimes a shopping street has a partial or full roof to create a more comfortable
shopping environment protecting customers from various types of weather conditions such
as extreme temperatures, winds or precipitation. Forms of non-shop retailing include online
retailing (a type of electronic-commerce used for business-to-consumer (B2C) transactions)
and mail order.

INTRODUCTION TO HPCL:

HPCL is a Government of India Enterprise with a Navratna Status, and a Forbes


2000 and Global Fortune 500 company. It had originally been incorporated as a company
under the Indian Companies Act 1913. It is listed on the Bombay Stock exchange (BSE) and
National Stock Exchange (NSE), India.

HPCL owns & operates 2 major refineries producing a wide variety of petroleum
fuels & specialties, one in Mumbai (West Coast) of 6.5Million Metric Tonnes Per Annum
(MMTPA) capacity and the other in Visakhapatnam, (East Coast) with a capacity
of 8.3 MMTPA. HPCL also owns and operates the largest Lube Refinery in the country
producing Lube Base Oils of international standards, with a capacity of 428 TMT. This Lube
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Refinery accounts for over 40% of the India's total Lube Base Oil production. Presently
HPCL produces over 300+ grades of Lubes, Specialities and Greases. HPCL in collaboration
with M/s Mittal Energy Investments Pte. Ltd. is operating a 9 MMTPA capacity Refinery at
Bathinda in Punjab and also holds an equity of about 16.95% in the 15 MMTPA Mangalore
Refinery and Petrochemicals Ltd. (MRPL).

HPCL has the second largest share of product pipelines in India with a pipeline
network of more than 2,500 kms for transportation of petroleum products and a vast
marketing network consisting of 13 Zonal offices in major cities and 101 Regional Offices
facilitated by a Supply & Distribution infrastructure comprising Terminals, Pipeline
networks, Aviation Service Stations, LPG Bottling Plants, Inland Relay Depots & Retail
Outlets, Lube and LPG Distributorships.

Consistent excellent performance has been made possible by highly motivated workforce of
over 11,000 employees working all over India at its various refining and marketing locations.
View Past Annual Reports to know more about HPCL. The RTI Information Manual provides
various details about the operation of the Corporation.

HPCL is committed to achieve the economic, ecological & social responsibility objectives of
sustainable development consistently through varied operations and activities. HPCLs focus
areas are in the fields of Child Care, Education, Health Care, Skill Development &
Community Development, touching lives of weaker section of society.

HPCL Retail Outlet:

1. Which retail format does the outlet belong to?

Dealership:

In petroleum retailing business, there are mainly two models prevalent in India. One
of the models is known as dealer controlled and the other one is known as company
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controlled. The term COCO basically stands for Company Owned Company Controlled retail
outlets. For an instance, COCO retail outlets of Bharat Petroleum are completely owned by
BPCL and run under the supervision of its officers. Hence, due to professional management,
strategic location and state of the art infrastructure at these outlets, the average sale of
COCOs is much higher than the average sale of dealer controlled retail outlets. The
conceptualization of COCOs in India was done for the first time by BPCL to set an example
for its dealership network as to how a model outlet should look and feel like. BPCL chose the
strategic locations on the major highways to set up its COCO outlets with a format named as
OSTS (One Stop Truckers Shop) offering not just fuel but other daily solutions for long route
truck drivers like dhaba for food, ATMs, fleet card loyalty facilities etc. Moreover, these
outlets were able to distinguish themselves in terms of high assurance of quality and quantity
to the fleet owners (read transporters). These factors and many others resulted into the
success of COCO model on the highways for BPCL. However, the COCO model was not
restricted just to the highways but some of the urban sites owned by oil marketing companies
were also operated on COCO model. IOCL and HPCL also followed the model with success
at some places and lukewarm response elsewhere. Later on, Reliance came into the fuel
retailing market with huge leverage on its COCO model outlets which did very well for the
brief period for which those had been operational. Shell entered Indian markets with most of
its outlets based on COCO model. Private companies are again expected to restart fuel
retailing in India in a big way after deregulation of both petrol and diesel. These companies
will be hugely dependent on their COCO retail outlets yet again.

SELECTION OF RETAIL OUTLET DEALER:

After identifying the location for setting up retail outlet dealership, HPCL releases an
advertisement in newspapers [one English and one Hindi/Vernacular] inviting applications
from candidates belonging to the category for which the location is reserved. The eligibility
criteria, terms & conditions, and procedures for selection are described in the advertisements
as and when they are released and in the Brochure for Selection of Dealers for Regular &
Rural Retail Outlets. The Brochure is available on our,

Website:www.hindustanpetroleum.com.

The same can also be obtained from our Retail Regional Office on payment of Rs. 100/=.
Application can be made only in the prescribed format for the locations advertised by HPCL.
HINDUSTAN PETROLEUM CORPORATION LIMITED

Completed applications have to be submitted to the concerned Regional Office within the
time limit as stipulated in the advertisement. HPCL has got 50 Retail Regional Offices across
the country. Please contact the nearest Regional Office for any further information on the
Retail Business activities by HPCL. For more details, please visit our website
www.hpretail.in or www.hindustanpetroleum.com.

What is Petrol Pump?

The most common point of contact of customers with Oil Industry is the Petrol Pump.
In Oil Industry parlance, Petrol Pumps are referred to as Retail Outlets (ROs).

As per the existing Government policy, Petrol Pumps can be set up by Public Sector
Oil Companies as well as Private Sector Oil Companies dealing in storage and distribution of
petroleum products as per guidelines. Presently, the Oil Companies engaged in retail business
of automotive fuels are IOC, HPC, BPC, NRL, MRPL, ONGC, RIL, Essar and Shell.

Products Marketed at Retail Outlets:

Petrol:

In technical language is called Motor Spirit (MS). It is mainly used in passenger


vehicles such as 2 / 3 wheelers and cars. At present, HPCL markets two types of Petrol across
the country, i.e. normal Petrol and branded Petrol. PETROL PUMPS (RETAIL OUTLETS)

Normal Petrol: Normally used as a fuel for spark ignition internal combustion engines
such as passenger cars, two wheelers, three wheelers, etc.

Branded Petrol: This is preferred by new generation vehicles. It is slightly costlier


than normal Petrol. It has additives for optimizing performance of vehicles. It is sold under
the brand name Power

Power provides benefits like cleaning and prevention of carbon deposits, reduced
smoke / emissions, better acceleration & pick up and smooth driving experience.

Ethanol Blended Petrol: The Ministry of Petroleum & Natural Gas has notified
marketing of Ethanol Blended Petrol (EBP). The Practice of labelling on the pump is
recommended for ethanol marketing. To ensure presence of ethanol, EBMS field test is
HINDUSTAN PETROLEUM CORPORATION LIMITED

recommended in the specification of EBMS and also under MDG. The customer can detect
ethanol by mixing 100 ml of EMBS with 30 ml of water and by following field test procedure
as described in specification / MDG.

High Speed Diesel (HSD): HPCL markets two types of Diesel across the country i.e. Normal
diesel and Branded diesel.

Normal Diesel: These are used in heavy commercial vehicles, buses, tractors, motor
cars, pump sets and in various other diesel engine driven applications.

Branded Diesel: This is preferred by new generation vehicles and is sold by HPCL
under the brand Name Turbojet, which contains multi-functional additive that enhances the
performance of new generation vehicles and ensures peak engine performance.

Lubricants: This is a vital product for healthy life of an engine. A lubricant is a


viscous product used in the engine for its smooth functioning. Different grades of lubricants
are needed for different engines, gear box and other components. The RO dealer can guide on
the recommended grade of lubricant for the vehicle. HPCL regularly develops new products
to cater to different needs of the customers.

Facilities provided at Retail Outlets:

Facilities: A Retail Outlet is not just a place for meeting fuel needs. It offers a range
of services which can be classified as under:

Mandatory Facilities: These are the facilities which every retail outlet must provide.
These include free air, display of working hours and display of name and telephone number
of oil company personnel for the convenience of customers. First Aid Box, toilet and safety
equipment as per statutory requirements such as fire extinguishers and sand buckets etc. are
also available at retail outlets.

Other Facilities: For the convenience of customers these additional facilities may be
provided by dealers at the retail outlet premises. These include water-coolers, convenience
stores, snack bars, dhabas and rest-rooms, bathing and washing space for truckers, telephone
facility- PCO/STD, ATM, servicing / repair shop, tyre shop, loyalty card program etc.

Quality: The term quality implies that the product you are buying is meeting the
prescribed specifications and is free from any contamination or adulteration. The customers
can ensure quality by carrying out specific checks for different products as listed below :
HINDUSTAN PETROLEUM CORPORATION LIMITED

Filter Paper Test (for Petrol) a) Clean the mouth of the dispensing nozzle to remove
stains. b) Put a drop of petrol on the filter paper from the nozzle. c) It should evaporate in
about 2 minutes without leaving a stain on the filter paper. (If the area of the filter paper
where the drop of MS was put remains pinkish, it is the colour of the MS and not any stain).
If a stain is left on the filter paper, then there is a possibility of adulteration.

Customer should immediately lodge a complaint if Filter paper is not available at the
Retail Outlet for testing of Petrol. It is the duty of the Dealer to provide filter paper on
demand by the customer.

Density Check (for Petrol and Diesel, including branded fuels)

a) A 500 ml jar, calibrated hydrometer, thermometer and ASTM (American Society


for Testing of Materials) conversion charts are required to carry out density test. Hydrometer
is a very simple instrument for measuring density of any liquid, which is different for petrol
and diesel.

b) Fill about 3/4th of the jar with the product taken through nozzle of the Dispensing
unit.

c) Dip the thermometer and hydrometer in the jar and record the temperature and
density.

d) The actual density observed is then converted to density at 15 degrees centigrade


with the help of conversion chart. This converted density is then compared with the reference
density taken from the density register maintained by the Retail Outlet.

Checks for Lubricants:

Please check the seal of container, date of manufacture and name of the manufacturer.
For the convenience of 2/3 wheeler segment, Retail Outlets generally provide self-mixing
(petrol-oil mix) dispensers, 2T dispensers and they also keep tamper proof 2T/4T pouches.

Quantity:

It is mandatory for each retail outlet to keep a calibrated 5 litre measure, stamped by
Weights and Measures Department every year, to verify quantity. Quantity can be checked
with 5 litre measure. The permissible variation due to any unforeseen malfunctioning of the
dispensing unit is 25 ml in 5 litres which is to be rectified immediately.
HINDUSTAN PETROLEUM CORPORATION LIMITED

Price: The selling prices of products are displayed prominently at the outlet.
Customers must ensure to take cash memo for every purchase.

Other useful tips for customers: Meter to be set to zero before starting delivery and
final reading to be checked after delivery.

Malpractices / Unauthorized Activities: In case a citizen comes across any of the


following possible malpractices, he/she may contact Companys Officer whose name &
contact number is displayed at the Retail Outlet.

Adulteration: There is a Possibility of adulteration, by mixing cheaper homogeneous


products in petrol or diesel. Adulterated product will definitely affect the performance of
vehicle. In such case, one should carry out the filter paper / density check as explained above.

Short Delivery: Although all dispensing units (Machines delivering petrol / diesel) are
annually calibrated and sealed/stamped by Weights & Measure Department and also
periodically checked by the Company Officer, there could be a possibility of tampering or 14
machine malfunctioning. As mentioned earlier, a citizen has the right to check the quantity
delivered with a duly calibrated and stamped 5-litre measure available at petrol pump.

Overcharging: The dealer is not allowed to overcharge for the product sold. The
prices of products are always displayed at the retail outlets. One must ensure to take a cash
memo for every purchase.

Safety Our utmost concern:

Petroleum products are highly inflammable and are, therefore, dangerous if not
handled properly. Their handling is strictly governed by Petroleum & Explosives Safety
Organization (PESO) Rules. A Petrol Pump is a licensed premise and all activities are carried
out with strict adherence to PESO Rules.

For the safety of all concerned, the following precautions must be observed: Switch
off the engine before taking delivery of fuel (to avoid possible fire caused by spillage of fuel)
Please DO NOT smoke within the Petrol Pump premises. Never light a match stick within
the Petrol Pump premises. SWITCHOFF the Mobile Phones within Petrol Pump premises.
It is advisable to get off the vehicle while refuelling. It is not advisable to carry petrol /
diesel in plastic / glass bottles.

Complaints:
HINDUSTAN PETROLEUM CORPORATION LIMITED

For any unsatisfactory service or product, customer may please bring it to the notice
of the dealer immediately or in his absence, the Manager. However, if the explanation given
by the Dealer or Manager is not satisfactory, a 15 customer can record the complaint in the
Complaint and Suggestion Book available at each petrol pump or contact Companys Sales
Officer on phone.

A written complaint can also be sent to Companys Sales Officer, Regional Office or
a complaint can be lodged through helpline - 1800 2333 555 or 155233. Contact details are
displayed at each Retail Outlet. Complaint can also be lodged through Website -
www.hpretail.in or hindustanpetroleum.com.

Each complaint received by letter, through the website or entered into the Complaint /
Suggestion book is investigated by Company Officer and suitable action is taken to resolve
the complaint.

Refining process:

Generally, crude petroleum is heated and changed into a gas. The hot gases are passed
into the bottom of a distillation column and become cooler as they move up the height of the
column. As the gases cool below their boiling point, they condense into a liquid. The liquids
are then drawn off the distilling column at specific heights, ranging from heavy resids at the
bottom, raw diesel fuels in the mid-sections, and raw gasoline at the top. These raw fractions
are then processed further to make several different finished products.

Although all fractions of petroleum find uses, the greatest demand is for gasoline. One
barrel of crude petroleum contains only 30-40% gasoline. Transportation demands require
that over 50% of the crude oil be "converted" into gasoline. To meet this demand some
petroleum fractions must be converted to gasoline. This may be done by cracking breaking
down large molecules of heavy heating oil and resides; reforming changing molecular
structures of low quality gasoline molecules; and isomerization rearranging the atoms in a
molecule so that the product has the same chemical formula but has a different structure, such
as converting normal butane to isobutene.

Generally, the simplest refineries consist of crude, vacuum, reforming and some hydro
treating capacity. The next level of complexity adds cat cracking and some additional hydro
treating. The most complex refineries add coking, more hydro treating and hydro cracking.
HINDUSTAN PETROLEUM CORPORATION LIMITED

Refining separates crude oil into components used for a variety of purposes, from high-
performance fuels to plastics.

The Facts About Crude Oil:

The refining process begins with crude oil. Crude oil is unrefined liquid petroleum, which
ranges in colour from yellow to black, and may have a paraffin, asphalt or mixed base. Crude
oil is composed of thousands of different chemical compounds called hydrocarbons, all with
different boiling points. For example, a typical crude oil may begin to boil at 104 F to
produce petroleum gas used for heating and making plastics, and finish boiling at greater than
1112 F to produce residuals such as petroleum coke, asphalt and tar.

Crude oil is generally described as sweet or sour according to its sulphur content, and heavy
or light according to its API Gravity. The API Gravity index is a relative measure of weight-
the lower the number, the heavier the material; the higher the number, the lighter the material.
While there are no exacting definitions for these types of crudes, a general rule of thumb is:

A heavy crude is less than 30API, while a light crude is greater than 30API.

If crude contains a sizable amount of sulphur or sulphur compounds, it is called sour


crude; if it has little to no sulphur, it is sweet crude. Sour crude may contain 1%5%
sulphur content, while sweet crudes will have less than 1% sulphur content.

Refining Process Definitions:

Coker Unit: processes vacuum resides, which is heated to over 900 F and put into the coke
drums, where it undergoes thermal cracking as the oil decomposes under the extreme heat.
Products include butane and lighter material, naphtha for Reforming, turbine and diesel fuel,
gas oil for Cat Cracking, and fuel grade petroleum coke.

Reformer Unit: using heat, catalyst and moderate pressure, the reformer changes the
molecular structure of crude and Coker naphthas to produce a high octane primary gasoline
blend stock called reformate.

Alkylation Unit: uses acid catalyst to combine small molecules into larger ones collectively
called alkylate, which has a high octane and is the cleanest burning of the gasoline blend
stocks.
HINDUSTAN PETROLEUM CORPORATION LIMITED

Fluid Catalytic Cracking Unit: uses heat and catalyst to break or crack large gas oil
molecules into a range of smaller ones, specifically gasoline, low quality diesel stocks, and a
residual oil called slurry (fuel oil).

Desulfurization Unit: a device used to remove sulphur from petroleum oil.

Hydro treating: removes impurities by using hydrogen to bind with sulphur and nitrogen.

Hydrocracking: breaks or cracks diesel stock material into gasoline blending stocks using
heat, catalyst and hydrogen under very high pressure.

Isomerization: rearranges the atoms in a molecule so that the product has the same chemical
formula but has a different structure, such as converting normal butane to isobutene.

2. Description of Target Audience:


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Every random common people has been considered as a target customer for every
petrol pumps. But retaining them plays a vital role for every dealer. By my retail mentor, how
they are retaining their customers are,

Based on service:

The service which provides by the dealer has the capability to retain the customers.

Credit payments:

This dealer allows the customer to pay their bills on credit period by the timing cycle
of 30 days. By this way, they can expect new customers as well as existing customers.

Loyalty Cards:

HPCL provides loyalty cards to issue to the customers through dealers. In this way
they can assure to retain the customers by the use of loyalty cards only used by HP retail
outlets across the country.

Loyalty Cards for Transport Agencies:

This system of initiative had been taken by HPCL. This card system is especially for
transport owners. They can get the card from the retail outlet and issue to the drivers. The
transport owners can top-up the cards from the retail outlets whenever needed.

By this way, drivers can fill the diesel only through loyalty cards that too on HP retail
outlets alone. This method had been helpful for the transport owners to track their drivers
through this loyalty cards. When and where it is used had been tracked

3. PORTERS VALUE CHAIN MODEL:


The idea of the value chain is based on the process view of organisations, the idea of
seeing a manufacturing (or service) organisation as a system, made up of subsystems each
with inputs, transformation processes and outputs. Inputs, transformation processes, and
outputs involve the acquisition and consumption of resources - money, labour, materials,
equipment, buildings, land, administration and management. How value chain activities are
carried out determines costs and affects profits.

Most organisations engage in hundreds, even thousands, of activities in the process of


converting inputs to outputs. These activities can be classified generally as either primary or
support activities that all businesses must undertake in some form.
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According to Porter (1985), the primary activities are:


Inbound Logistics The dealer gets the petrol and diesel from HPCL Ennore
terminal.
Operations Sale of petrol and diesel in petrol pumps.
Outbound Logistics Storage capacity of 12000kl in the retail outlet.
Marketing and Sales It is mainly dependent products. So mainly on firm
infrastructure focuses on marketing and sales.
Service - includes all the activities required to keep the service working effectively
for the buyer during the sales.
Secondary activities are:
Procurement Procuring Petrol and Diesel from Ennore terminal.
Human Resource management - consists of all activities involved in recruiting,
hiring, training, developing, compensating and (if necessary) dismissing or laying off
personnel.
Technological Development All the pumps are automated, so malpractices will not
have been entertained. The sales in the retail outlet also tracked through automation
device directly by HPCL.
Infrastructure This will vary depends on the location of petrol pumps where it lies
on the division and highways of the retail outlet. Improve in infrastructure also had an
impact on sales volumes. But contribution from the company boosts the improvement
from the dealer of maintaining the infrastructure.
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REFERENCES:
https://www.hindustanpetroleum.com/documents/pdf/Retail.pdf
https://www.quora.com/What-is-the-difference-between-COCOs-and-retail-petrol-
pumps
http://www.hindustanpetroleum.com/aboutus
https://www.afpm.org/the-refinery-process/
https://en.wikipedia.org/wiki/Retail
http://tenders.hpcl.co.in/tenders/tender_prog/tenderfiles/526/Tender/7000077%20Ten
der/04%20Tender%20Volume%20III.pdf
http://www.ifm.eng.cam.ac.uk/research/dstools/value-chain-/