INSTITUTE OF BUSINESS MANAGEMENT

Fleet Transport And

Product Supply Of PSO
Transportation Techniques and Management Term
Report

Submitted to:
Sir Faiz Ul Islam
Submitted by:
Samiullah Memon()
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

Table of Content:
LETTER OF ACKNOWLEGEMENT…………………………………………..……………………………….……..……3
LIERATURE REVIEW………………………………………………………………..…………………………………..…….4
RESEARCH OBJECTIVES……………………………………………………….…………………………………….……...5
INTRODUCTION…………………………………………………….……………………..………………………….……...6
LOGISTIC KEY PERFORMANCE INDICATORS..............................................................….......6
MAJOR LOGISTIC FUNCTIONS……………………………………………………………….……………………...….7
PRODUCT MOVEMENT…………………..…………………………………………………………..….………………..7
PRODUCT MOVEMENT PLAN…………………………………………………………………………………………….8
PRIORITY BOARD & ITS MANAGEMENT…………………………………………………………………………….9
FLEET MANAGEMENT & DEVELOPMENT………………………………………………………………………….10
PSO FLEET TRACKING MANAGEMENT………………………………….………………………...................10
EXPORTS OF POL PRODUCT VIA TANK LORRIES TO AFGHANISTAN………………………………….12
FUTURE PREDICTIONS OF OIL INDUSTRY………………………….……………………………………………..14
RECOMMENDATIONS…………………………..…………………………………………………………………………15
CONCLUSION…………………………………………………………………………………………………………………..16
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

LETTER OF ACKNOWLEDGEMENT

I respect and thank sir Faiz-ul-islam, for providing me a chance

to do the project work in and giving me all support and guidance
which made me complete the project duly. I am extremely
thankful to him for providing such a support and guidance,
although he had busy schedule managing the corporate affairs.
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

Literature Review
The Oil Industry

Hilmola(2011) stated that economic patterns in the international arena and the
oil industry have become indissoluble for the past few decades and it is having
greater influence on each other. Oil and gas supply have become important for
the economies and showing a increasing demand propensity
(Hilmola,2011;Tierney,2004; CIA 2010). Increased globalization has eased the
trade restrictions and technological improvements has escalated
(Jenkins&Wright,1998). Hussainetal.(2006) encourages the importance of Supply
chain management within the industry and believed that the ongoing competition
is due to the supply chain effectiveness rather than the from the inside of the
company.
Gas, LNG, kerosene and naphtha are the main fragments of the crude oil which
are shifted to the refineries as feedstock. After that the cracking process is done
and new products are extricated for petro-chemical industry such as olefins and
aromatics. After that the extricated products can be used by the plant to produce
products such as plastics, soaps, detergents and healthcare products, synthetic
fibers, furniture, rubbers and paints (Hussain et al., 2006).
The basic raw materials for the petroleum industry are crude oil and natural gas.
Hussain etal.(2006) has explained the production process in a concise manner.
The crude oil can be found beneath the earth or by offshore drilling. According to
Hussain etal(2006), after assessing the crude oil it goes through the distillation
process and different fragments of it are produced.
The oil industry is very unstable as explained by Anderson(2003) due to political
instability and the frequent ups and downs in the world prices of the oil.
Ribasetal.(2011) also added that this unsteadiness is also from the natural
calamities and the destruction of the equipment.
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

RESEARCH OBJECTIVES:
 Performance evaluation
 fleet Transport and Product supply techniques
 opinions
 future challenges of PSO

ABSTRACT
The purpose of this report is to analyze the fleet movement of Pakistan State Oil
(PSO) including methods and techniques used to perform this very function. The
risks associated with them are also the areas that are covered. The report gives a
brief solution to the problem caused by deregulation and privatization of oil
industry for companies like PSO in a way that it flashes a light on the future of oil
industry, ponders over international sale and purchase agreements by domestic
companies and provide recommendations to face hardcore challenges in the long
run. The contents of the report such as company offerings, facilities, value chain,
supply chain, and Transportation.
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

INTRODUCTION
Pakistan State Oil (PSO) is a Karachi-based Pakistani state-
owned multinational petroleum corporation involved in marketing and
distribution of petroleum products. It has a network of 3,689
petroleum filling stations, out of which 3500 outlets serve the public retail
sector and 189 outlets serve wholesale bulk customers. Pakistan State
Oil is Pakistan's largest fuel marketing company

SUPPLY CHAIN DEPARTMENT:

PSO, the largest oil marketing company in the country, is currently engaged in
storage, distribution and marketing of various POL products. The company’s
current market share of 82.3% in the black oil market and 59.4% share in the
white oil market, alone speaks volumes about its success.

SUPPLY CHAIN DRIVERS AT PSO

Inventory – Responsiveness can be had by stocking high levels of inventory for a
wide range of products. Additional responsiveness can be gained by stocking
products at many locations so as to have the inventory close to customers and
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

available to them immediately. Efficiency in inventory management would call

for reducing inventory levels of all items and especially of items that do not sell as
frequently. Also, economies of scale and cost savings could be gotten by stocking
inventory in only a few central locations. PSO has few storage units due to which
inventory level is low. PSO can fulfilled the demand for its POL products for only 2
weeks with the level of inventory they store. They should increase their storage
capacity in order to increase responsiveness in delivering their POL products.
Location – A location approach that emphasizes responsiveness would be one
where a company opens up many locations so as to be physically close to its
customer base.PSO has very few storage locations so they must have to increase
their storage locations.
Information – The power of this driver grows stronger each year as the
technology for collecting and sharing information becomes more wide spread,
easier to use, and less expensive. Information, much like money, is a very useful
commodity because it can be applied directly to enhance the performance of the
other four supply chain drivers. High levels of responsiveness can be achieved
when companies collect and share accurate and timely data generated by the
operations of the other four drivers.

LOGISTICS KEY PERFORMANCE INDICATORS:

Our rotation at PSO logistics department started with Key performance indicators
of the PSO logistics department which obviously plays a key role in understanding
the expectations of the department and the operational activities to achieve the
objectives.
The important KPI’s are listed below with major logistics function in details ahead
in the report,
1. Adequate stocks availability at all Depots / Installation and customers
locations.
2. Movement of major stocks via railways & pipeline instead of Tank Lorries.
3. Conversion of old fleet to new version
4. 100 % fleet installed with tracking system
5. Training of drivers on HSE & SOP compliance
6. Lube sales
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

7. Fleet management & development

MAJOR LOGISTICS FUNCTIONS:

There are two major objectives of the logistics department of PSO which are
mentioned below:
1. Product movement
2. Fleet Management & Development

FLEET MANAGEMENT & DEVELOPMENT:

Fleet management & development is one of the other major task performed by
logistics department. Its salient features are covered as under:
 PSO prides to have the largest fleet in the industry with approximately
cartage contractors & tank Lorries fleet of approximately 8000 tank lorries.
 PSO also has new vision fleet in line with its new vision retail concept for
major urban cities and is termed as FMTL (Fleet management tank lorries as
per ADR scheme).
 All tank lorries for both primary and secondary movement of POL products
are managed by the tankers association and is governed by PSO via
contracts for seamless supplies of POL products throughout Pakistan to
ensure minimum liability and risk.

PSO Fleet Tracking Management:

Tracker for all tank lorries which moves POL products was one of the requirement
put forward by OGRA for all the OMCs in Pakistan which turned out to be a big
challenge. However, with dedication and pro activeness PSO logistics department
is been able to install tracker system in around 95% of tank Lorries whereas
remaining 5 % are also under process of installation of trackers.
Tracker is a contract between cartage contractor and the tracker company but the
same tracker reports are provided to PSO by these pre-qualified tracking
companies.
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

The basic objective of this requirement is to ensure monitoring, manage

accidental claims and minimize pilferages , there are other features as well that
will add to the advantages of tracking i.e. real time tracking management, reports
etc.

ACCIDENTAL & IN-HOUSE INSURANCE MANAGEMENT:

Unfortunate incidents and accidents are faced by tank Lorries while transporting
PSO products, which involves a level of risk & which needs to be mitigated by the
logistics department. Therefore, in order to mitigate the risk there are several
procedures followed at logistics department and separate section that looks after
such cases.
 In case, of accidents at first instance drivers are required to save human
lives and then in the second phase try to save the environment and the
product which may get lost due to any such accident.
 If, the tank lorry carrying the product met an accident and the lorry is not
capable of movement than the contractors are required to transfer the
product in another tank lorry and carry the same product to the most
nearby location where it may be decanted.
 Divisional officer retail will do the initial investigation and be the eye
witness of the incident accompanied by the independent surveyors hired by
PSO. The driver or any contractor representative also in case of accident is
needed to report the incident and lodge an FIR in the police station near to
the area of accident. Both divisional officer and the independent surveyors
submit their individual reports.
 Where the remaining product after the accident is reported, at the nearest
depot or installation, from the point of accident for decanting for such
purpose the location in charge develops a shortage invoice (after quality
and quality measurements) and old invoice is already been cancelled in
such cases at the initial location where the first invoice was generated for
that particular load.
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

 After all the investigation a decision is made by the logistics department

and in case of any dispute the CFT Insurance look each case and make their
decision which is binding on the concerned contractors.
 PSO has also ensure the insurance of tank lorry drivers and helpers and a
pool of amount is been developed over the years and the insurance fund is
managed by EFU Life.

EXPORTS OF POL PRODUCT VIA TANK LORRIES TO

AFGHANISTAN:
We also got to know about the export business of PSO and the role of logistics in
transportation of POL products to Afghanistan. The export business was based on
export of POL products to NATO troops including the JP8 fuel and other
commercial clients.
Also, we were briefed on how the margins were increased during the period this
business was on boom and how PSO capitalized on the opportunity which was
unique information.
In recent times, there have been concerns and many have argued that the oil and gas
industry may have entered an era of very scarce resources. In reality however, the
resources are not the cause of supply constraints, given the enormous potential still
available including currently known and booked reserves, the increasing scope for
recovery from existing fields with new technologies, further potential discoveries and
the new frontier of vast oil sands and oil shale reserves. According to a good majority
of the industry’s research, we have enough resources left to sustain current
production levels for at least the next 50 years. Therefore, the main challenge facing
the oil and gas industry is not the availability of oil and gas resources, but putting these
reserves into production and delivering the final products to consumers at the
minimum cost possible. Thus, a solid supply-chain management program will enhance
this goal.
In this industry, the types of shipments made vary widely from gloves to pipes, valves,
cranes, chemicals, cement, steel, and drilling rigs.These are just fewexamples to be
mentioned. In addition, very few industries require this immense array of supplies to
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

move daily and frequently in large quantities domestically, globally, onshore and
offshore. In exploration and production, most of the work and activities are repetitive.
The companies drill a lot of oil and gas wells every year. A drilling contractor is
required and as many as 45 or more different services are required to drill and
complete each well.
In the oil and gas industry, almost all significant and important operations are planned
in advance. Thus, the whole process can be massaged and fine-tuned into a high
performance money making machine. The goal of supply chain management is to
provide maximum customer service at the lowest possible cost.
There is a need to ensure that each company or operator along the supply-chain can
respond quickly to the exact material needs of its customers, protect itself from
problems with suppliers and buffer its operations from the demand and supply
uncertainty it faces.
One of the weaknesses of a supply-chain is that each company is likely to act in its best
interests to optimize its profit. The goal of satisfying the ultimate customer is easily
lost and opportunities that could arise from some coordination of decisions across
stages of the supply-chain could also be lost. If suppliers could be made more reliable,
there would be less need for inventories of raw materials, quality inspection systems,
rework, and other non-value adding activities, resulting in lean production. Oil
country tubular goods (OCTG) is a family of seamless rolled products consisting of drill
pipe, casing and tubing subjected to loading conditions according to their specific
application. Tubes and tubular goods are among the important goods supplied to the
oil and gas industry on a daily basis. These goods are very crucial and form part of the
supply-chain link. The supply-chain in tubular goods is the process through which oil
field tubular goods such as pipes, tubing, and casing are ordered, manufactured,
transported, stored, prepared, and then delivered to the website for installation into a
well. Managing this part of the supply-chain can be both an operational and logistics
nightmare for most oil and gas companies. Delays in the arrival of pipes, casing, tubing,
and other accessories, can result in extensive rig downtime and consequently high
operating costs
In the industry supply-chain link, exploration operations create value through seismic
analysis and identifying prospects. Production operations become the customers that
use the output of exploration. In like manner, refining is the customer of production
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

while marketing is the customer of refining and the consumer of refined products such
as gasoline is the ultimate customer.

FUTURE OF OIL INDUSTRY

Energy trade is expected to expand rapidly in the coming years and, in particular,
the major oil and gas consuming regions will see their imports grow substantially.
This trade will increase mutual dependence among nations. But it will also
intensify concerns about the world's vulnerability to energy supply disruption, as
production is increasingly concentrated in a small number of producer countries.
As such, supply and price security has moved to the top of the energy policy
agenda.
The governments of oil and gas importing countries will need to take a more
proactive role in dealing with the energy security risks inherent in fossil fuel trade.
They will need to pay more attention in maintaining the security of international
sea-lanes and pipelines, and they will have to look anew at ways of diversifying
their sources of fuels, as well as the geographic resources of those fuels.
Necessary expansion of production and supply capacity will call for massive
investment at every link in the energy supply chain. Greater investments will be
needed in developing countries, and it is unlikely to materialize without a huge
increase in capital inflow from industrialized countries. World energy use will
increase steadily through to 2030. Global primary energy demand is projected to
increase by 1.7% per year from 2004-2030, reaching an annual level of 15.3 billion
tons of oil equivalent. This increase will be equal to twice the amount of current
demand.

RECOMMENDATIONS:
As the world is now adopting a more social responsive approach to achieve its
aims, it is important that the Pakistani companies also incorporate this strategy in
order to remain competitive. After our interview with PSO’s team and our own
analysis, we have come to conclude that there are a few loop holes in PSO’s
 FLEET TRANSPORT AND PRODUCT SUPPLY OF PSO

strategy. We have compiled few recommendations which we thought that PSO

should follow. These are mentioned as follows:
 Invest in other energies as well apart from its product line. It should try to
offer environmental friendly products as well. PSI is already offering
biodiesel.
 Find ways through which it can reduce its reliance on the truck lorries
especially in the northern region of Pakistan. This recommendation is made
in line with flood issue that the country faces. Despite the high costs, it is
better to install pipelines in these areas as it will help PSO in adopting
sustainable supply chain approach.
 As most of PSO’s revenue are on accrual basis, the company faces liquidity
issues. PSO should find ways to shorten the collection period, so that it can
in turn pay its liabilities on time.
 Plan how the untapped reserves can be put into production and then
deliver the final products to consumers at the minimum cost possible.
 Use fleet management software solutions to increase efficiency and reduce
cost.

CONCLUSION:
Pakistan is among few nations which are blessed with abundant natural
resources. We should try to use these resources in the most efficient and the
most ethical manner. As PSO is Pakistan’s leading company in the Oil and Energy
sector, it should make it certain that its strategies are not only cost effective but
sustainable as well. The hurdles which the company faces in its fleet management
can be solved by adopting strategies that will help to overcome these. Pakistan
has a huge potential that is still left untapped left untapped. PSO should use this
as advantage and move into other producing other energies as well for example
biofuel etc. This is because demand is predicted to rise considerably in the future
so PSO should remain prepared to make this anticipation its strength.