A

DISSERTATION
ON
“STUDY OF SUPPLY CHAIN IN PETROLEUM AND OIL INDUTRY ”

IN THE PARTIAL FULFILMENT OF THE REQUIREMENT OF

MASTERS OF BUSINESS ADMINISTRATION (MBA)

UNDER THE GUIDANCE OF

DR.PADMAKAR SAHARE

SUBMITTED BY

PUSHPRAJ SHINDE

MITU21MSCM0005

2021-2023

SUBMITTED TO

MIT COLLEGE OF MANAGEMENT, PUNE

1
 DECLARATION

I Pushpraj shinde of Masters of Business Administration Semester - IV of MIT

College of Management, Pune, hereby declare that I have successfully completed
this Dissertation on “STUDY OF SUPPLY CHAIN IN PETROLEUM AND
OIL INDUTRY IN INDIA” during the Academic Year 2022-23. The information
incorporated in this report is true and original to the best of my knowledge.

Date:

Place: Name & Signature of Student

Enrollment No. MITU21MSCM0005

2
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous, and the depth is so

enormous.
 
I would like to acknowledge the following as
being idealistic channels and fresh dimensions in the completion of this project.
I take this opportunity to thank MIT-ADT UNIVERSITY for giving me the chance to do
this project.
 
I would like to thank my Dean,. Dr. Sunita M Karad for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank. Dr. Padmakar Shahare for his moral support and guidance.
 
Lastly, I would like to thank each person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout
my project.

Date:

Place: Name & Signature of Student

Enrollment No. MITU21MSCM005

3
 CHAPTER-1
INTRODUCTION

4
 INTRODUCTION

Evolution of Indian Petroleum Industry :

The British Began Oil Exploration in Pre-independent India in 1867 at Assam.

Oil was struck at Makum, near Margherita in Assam. Assam Railways &
Trading Company Limited was registered in London in 1881 to exploit Assam’s
natural resources. It struck oil in exploitable volume near Digboi in 1889; at that
point it transferred its oil interests to a separate company, Assam Oil Company
(AOC) which started systematic exploration and production (E&P) of oil. Assam
Oil Company Erected a small refinery at Digboi, Assam in 1901, which, after
several modernizing steps is still the oldest operating oil refinery in India. AOC
was taken over in 1917 by Burmah Oil Company, which later became Burmah
Shell and then Shell. After Independence, the government of India had become
paranoid about foreign ownership of business; there was a long standoff
between it and AOC over the exploitation of the new oilfield. Finally in 1959,
AOC and the government set up Oil India Limited, a 67:33 joint venture and
then in 1961 it became a 50:50 joint venture. Finally, in 1981, Oil India Limited,
now named, Indian Oil Corporation Ltd. (IOC) became a wholly owned
enterprise of government of India. Today, Indian Oil Corporation is the largest
player in Indian Petroleum industry.

At the time of Independence, India’s domestic oil production was just 250,000
tons per annum. Under its Industrial Policy Resolution Act of 1954, the
Government announced that petroleum would be considered as a core sector
in the country. The Geological Survey of India carried out extensive
reconnaissance surveys and mappings, to locate structures suitable for
exploration of oil and gas. However, petroleum exploration in the country

5
received the real thrust only after the setting up of Oil and Natural Gas
Commission (ONGC) in 1955. Several foreign companies have entered the
Indian E&P scene since the early fifties. These included Indo Stanvac Project, a
joint venture between the Government of India and Standard Vacuum Oil
Company for West Bengal onland. In the early seventies, Carlsbons Natomas
stepped in for Bengal offshore, Assamerc for Cauvery basin on the east coast of
India and Reading and Bates, for Kutch on the west coast of India. Later
entrants inlclude Shell, for Kerala offshore and Chevronn-Texaco, in Krishna -
Godavari offshore. The first oil and gas pool was discovered in Jwalamukhi
(Punjab) and Cambay (Gujarat) in 1958. The two public sector companies,
ONGC and OIL, discovered over 260 oil and gas fields located in Assam, Bombay
Offshore Cambay, Cauvery, Krishna-Godavari, Tripura-Cachar and West
Rajasthan basins. The discovery of the vast Bombay High field in 1974, in the
west coast offshore was the most significant event in India’s upstream
petroleum sector1.
In 1991, The Government of India, further liberalized the Petroleum
Exploitation and Exploration Policy, and invited private companies, both
foreign and Indian, to participate in the exploration of oil and gas. Under the
Petroleum Sector Reforms (PSR), several rounds of exploration bidding were
announced between 1991 and 1994. For the first time Indian companies with or
without previous experience in E&P activities were permitted to bid. The
Government then announced the Joint Venture Exploration Program, in 1995.
The exploration blocks were located in those areas for which the Petroleum
Exploration License was with the National Oil Companies (NOCs) and these
companies were required to have a 25-40 per cent participating interest from
day one. The Government of India has signed Production Sharing Contracts
(PSCs) for 28 exploration blocks. Out of these, 10 blocks have been relinquished
surrendered. At present, 17 exploration blocks are under operation .
In India, 26 sedimentary basins are identified with potentials of oil, so far, only
20% of the total area has been well explored. The remaining areas need to be

1 . H N Kaul, K. D. Malviya, (1997), "Evaolution of Indian Oil", Allied Publisher, Delhi.

6
extensively explored with the best of technologies. To achieve this, The
Government of India Announced “New Exploration Licensing Policy”,
commonly known as NELP in 1997-98 union cabinet budget. New Exploration
Licensing Policy (NELP) was formulated by the Government of India, to provide
equal opportunities for all the investors, public and private, and providing
several concessions and incentives to companies in exploration and production
of hydrocarbons with Directorate General of Hydrocarbons (DGH) acting as a
nodal agency for its implementation.

Evolution of Oil :

The Chinese are recorded as having extracted oil from wells 800 feet deep
through bamboo pipes around 347. They used it to evaporate brine and make
salt. American Indians used to put it to medicinal uses. Persians,
Macedonians and Egyptians used tars to waterproof ships. Babylonians used
asphalt in the eighth century to construct the city’s walls, towers and roads.
But the easily available oil was not put to any mass use because the crude
itself was not a good fuel. It gave out much soot and smoke. A distillation
process using a retort was invented by Rhazes (Muhammad ibn Zakariya
Razi) in Persia in the 9th century. Liquid heated in it vaporized, passed
through a curved spout and condensed in another container. The process
could be used to make kerosene, but it was more often used to make alcohol
and essence of flowers for perfume. It was a batch process and it was not
equally efficient at distilling kerosene.

A more efficient and reliable distillation process came out of a series of

inventions after 1846. The last invention was the invention of oil
fractionation in 1854 by Benjamin Silliman, a professor of science in Yale. It
used a vertical column which separated components more efficiently, and
which could be used continuously. Oil was first produced in Titusville,
Pennsylvania (USA) in 1859 by one Edwin L Drake, who refined it into
kerosene, which was then used as an illuminant. Electricity did not emerge
as an illuminant till the Edison Electric Light Company was founded in
7
1878. Well into the 20th century, kerosene, gas and electricity continued to
compete as illuminants. Whilst the use of gas as an illuminant has virtually
disappeared, a large population, especially in India, continued to use
kerosene as illuminant. The invention of the motor car by Karl Friedrich
Benz in 1885 created a market for petrol, a new refined product. In 1898,
Rudolf Diesel invented an engine in which oil was ignited by compression;
the diesel engine he invented came to power larger vehicles, principally
trucks and buses. Diesel engines used a different fuel, which was named
diesel oil. After this, the production and use of motor vehicles spread rapidly
in the United States, especially after 1908 when Henry Ford began mass
manufacture of his Model T. Petroleum and diesel oil became the most
important refined products, first in the US and progressively across the
world. However, only a certain proportion of crude oil can be converted into
motor fuels. The demand for kerosene, the original distillate extracted from
crude oil, has gone down with the spread of electricity. So other refined
products have been developed, and non-vehicular uses developed for them.

Today, in the basic refinery process, crude is heated to 600ºC by injection of

superheated steam and pumped in at the bottom of a vertical distillation
column. As the vapor rises up the column,

it cools. The column has trays at various heights with holes. As the vapor
cools, fractions with different boiling points liquefy, collect in the trays and
are drained off. Products with high boiling points rise to the top, while
products with low boiling points collect on lower trays. The principal
products, with their approximate boiling points, are petroleum gas (20ºC),
naphtha (40ºC), petrol (70ºC), kerosene and jet fuel (120ºC), diesel (200ºC),
lubricant (300ºC), and furnace oil (370ºC); solid petroleum coke collects at
the bottom after the liquid fractions are removed. The proportions in which
these products come out vary to an extent with the crude Oil. Crude Oil is
classified as light or heavy according to the proportion of light products. But
the balance of demand and supply for the products is such that the prices of
furnace oil are much lower than those of light products such as petrol,
kerosene and diesel oil. On completion of the refining process, several

8
derivatives of the crude oil are available such as petrol, diesel, Kerosene,
Lube Oil, LPG, etc.

Refining process :

Product Major Usage

LPG Domestic fuel. Also for Industrial
application where
Technically essential. Now permitted as
auto fuel
NAPTHA / NGL Feedstock/ fuel for Fertilizer Units,
feedstock for petrochemical sector and fuel
for Power Plants.
9
 Petrol Fuel for passenger cars, taxies, two & three
wheelers
ATF Fuel for aircrafts.
SKO (Kerosene) Fuel for cooking & lighting.
HSD (Diesel) Fuel for transport sector (Railways/Road),
Agriculture (Tractors pump sets, threshers,
etc.) & Captive power Generation.
LDO Fuel for agricultural pump sets, small
industrial units, start up fuel for power
generation
BITUMEN Surfacing of roads.
LUBES Lubrication for automotive and industries
(Engine Oil)
Benzens, Toluene, Feedstock for value added products.
MTO,
LABFS, Paraffin Wax
etc

Crude Oil Production in India

With the ever growing demand for petroleum products in India, the
Government owned and private Oil companies have made heavy investments
in the production of crude oil. According to the Ministry of Petroleum and
natural gas, India Produced 37.71 MMT of crude oil in the year 2010-11 which is
11.91% higher than that in 2009-10 when 33.69 MMT of crude oil was
produced in India.

Table . India Oil Production by Year

Year Production (Thousand Barrel Per Day)
2001 642.40
2002 664.75

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 2003 660.03
2004 683.11
2005 664.66
2006 688.61
2007 697.53
2008 693.71
2009 680.43
2010 752.39
2011 782.34
Source: Index Mundi – India’s Crude Oil Production By Year
Link: http://indexmundi.com/energy.aspx?
country=in&product=oil&graph=production

Oil Consumption in India

India, Home to the world second largest population and with the recent rapid
economic growth, has became the world’s fourth largest consumer of crude oil
and petroleum products after the United States, China and Japan. India is
forecast to become the world’s third largest oil consumer by 2014.

Oil Consumption in India by Year

Consumption (Thousand Barrels

Year
Per Day)
2001 2,183.73
2002 2,263.44
2003 2,346.33
2004 2,429.62
2005 2,512.43

11
 2006 2,690.90
2007 2,800.75
2008 2,907.65
2009 3,007.99
2010 3,116.22
2011 4,479.61
Source: Index Mundi – India’s Crude Oil Consumption By Year
Link: http://www.indexmundi.com/energy.aspx?
country=in&product=oil&graph=consumption

Crude Oil Import by India

The combination of rising oil consumption and relatively flat production has
left India increasingly dependent on imports to meet its petroleum demand. In
2010, India was the world's fifth largest net importer of oil, importing more
than 2.2 million bbl/d, or about 70 percent of consumption. A majority of
India's crude oil imports come from the Middle East, with Saudi Arabia and Iran
supplying the largest shares.

India Crude Oil Imports by Year

Year Import (Thousand Barrels Per Day)
2001 1,574.12
2002 1,609.78
2003 1,788.68

12
 2004 1,911.98
2005 1,938.18
2006 2,156.00
2007 2,412.27
2008 2,556.69
2009 2,768.44
2010 3,057.63
Source: Index Mundi – India’s Crude Oil Production By Year

Link: http://indexmundi.com/energy.aspx?
country=in&product=oil&graph=imports

The Demand for Oil is on the higher side whereas the supply is not that
efficient, resulting in higher gap between demand and supply. This gap is met
only with the import of the oil. About 65 percent crude oil was imported from
Middle East countries like Saudi Arabia Iraq, Iran etc. About 22 percent crude
oil was imported from Africa and rest from rest of the countries Turkey,
Venezuela and Russia etc.

The reason for importing 65 percent crude oil from Middle East
countries is that distance from India to Middle East countries is comparatively
less leading to lesser cost of transportation.

Current SCM Practices in Global Oil Industry

The raw material needed by petroleum industry is crude oil. Crude oil is the
chemical formulation of Carbon and hydrogen atoms under the earth’s
crest (land and/or sea) formed during millions of years of evolution process.
The availability of crude oil is a naturally occurring phenomenon, limited to
certain regions, however its demand is across the globe. Hence, countries
13
having large crude oil reservoirs have experienced sudden economic boom,
as is evident in Middle Eastern countries. This availability of crude oil to
certain region and its huge demand throughout the world makes the
effective supply chain management of this essential commodity the life line
of a modern world.

The Oil Industry functions in the same manner as other industries, i.e. raw
material is supplied to the company, which processes it to manufacture
goods that will be consumed by the end user. The Petroleum Industry Life
Cycle begins with the exploration of crude oil. Governments and Private
Petroleum companies across the world invest large sums of money in the
exploration of crude oil under the earth’s crust, be it land or sea. Not all
explorations lead to discovery of oil. But, whichever do, returns heavy
profits for its explorers. Once the crude oil reserve is located, the process of
extracting crude oils by setting up oil rigs begins. This crude oil is of very
limited use in its natural form. It is then transported to an oil refinery for
refining process. The phase of the oil life cycle is termed as “Upstream
Stream Supply”.

On completion of the refining process, several derivatives of the

crude oil are available for the consumer market. From here, the “Down
Stream Supply” of the petroleum products such as petrol, diesel, Kerosene,
Lube Oil, LPG etc starts through a network for suppliers, storage depots and
retailers.

The Exploration, Production, Refining & Consumption of Crude oil is not

evenly spread. This has lead to formation of complex supply chains. For
instance, The Largest Consumer of Petroleum Products, USA, Imports most
of its crude oil from Middle East.

Upstream Supply Chain of Crude Oil

The Upstream Supply Chain of Petroleum Industry Start from the

Exploration and Extraction of Crude Oil from Land or Seabed to the trading
and transportation to the oil refineries. The Upstream Supply chain of the

14
petroleum industries is more discrete then the supply chain of other
industries, as it involves many independent operations starting from
exploration, trading and variable modes of transportation to the refinery.

Figure 1.2: Upstream Supply Chain Activities of Petroleum Industry

Crude Oil Crude Oil Transportation Refining

Exploration & Trading To Refinery Process
Extraction

Source: Compiled from secondary data

Downstream Supply Chain of Petroleum Products

The downstream supply chain starts at the refinery, where the crude oil is
manufactured into the consumable products that are the specialty of
refineries. On Completion of Crude Oil Refining Process, several derivatives
of crude oil are obtained. Most of them are used as a source of energy, like,
LPG, Petrol, Diesel, Kerosene, etc. while others derivatives like Naphtha and
Benzene is used for petrochemical industries. The Downstream Supply
Chain of Petroleum Products deals with making these derivatives of crude
oil available to its consumers through a network of suppliers, distributors
and retailers.

Figure: Downstream Supply Chain of Petroleum Industry

Oil Storage Retail Customer

Refinery Installation Outlets

Source: Compiled from secondary data

Similar to upstream supply of crude oil, ships, pipelines, rail or road may
again be used to supply the finished product to the storage installations and
retail outlets. However, since, most of the Oil Refineries supply the

15
petroleum products inland; the extent of usage of ships for transport is
lesser as compared to upstream supply. Also, the quantity of product
transported is much smaller in downstream, since the crude oil is refined to
providing several derivatives, each of which need to be transported
downstream individually. The amount of product varies depending upon
the type of consumer. We can broadly classify two type of consumer in
petroleum downstream.

A. Wholesale consumers
B. Retail Consumers

Crude Oil Transportation :

There Are Several Ways to Transport Crude Oil to the refineries. Cargo
Ships (Oil Tankers) & Pipelines being the most preferred once. Besides this,
railways and road tankers are also used. Ships are used for intercontinental
transport of crude oil.

The major reasons for using ships are that they are low cost, efficient, and
extremely flexible. Each year, about 1.9 billion tons of petroleum is shipped
through maritime transport, which is roughly 62% of all the petroleum
produced. All ship trade routes do not use the same size ship. Each route

16
 usually has one size that clearly works out the economics best. The size is
selected on the basis of voyage length, port and canal constraints, and
volume. Crude oil exports from the Middle East are moved mainly by Very
Large Crude Carriers (VLCC's) typically carrying over 2 million barrels of oil
on every voyage. About half of the petroleum shipped is loaded in the
Middle East and then shipped to Japan, North America and Europe. Ships
bound to Japan use Strait of Malacca, while that to Europe or America uses
Cape of Good Hope or Suez Canal route depending the destination and the
size of ship.
Figure 1.3: Depicts the Major Sea Routes of Oil Trade

Surce: Straits, passages and chokepoints (Oct 2009): A maritime geostrategy of

petroleum distribution.
http://people.hofstra.edu/faculty/Jean-
paul_Rodrigue/downloads/CGQ_strategicoil.pdf

Pipelines are the mode preferred for transcontinental crude oil

movements. Pipelines are critical for landlocked crude oil transportation
and they also complement tankers at certain key locations by relieving
bottleneck or providing shortcuts to certain other places. They are the
primary option for transcontinental transportation in almost all part of the
world. They are cheaper to a great extent than any alternative such as rail
or road. The development in technology in manufacturing of large diameter

17
 pipelines during World War allowed the development of the vast pipeline
network that moves crude oil and product.

Some major regions covered by Oil and Gas Pipelines across the world are:

Caspian Sea to Mediterranean Sea Pipeline (The Baku–Tbilisi–Ceyhan

(BTC) Pipeline)
The Turkey–Greece pipeline
Alaska – Canada – USA Pipeline
Mexico – USA Pipeline
Russia to Western Europe

Objective of Study

Very Little Literature is available on the petroleum industry’s Supply Chain

Management in India. This Research Attempts to Enhance the Understanding of

18
Supply Chain Management Practices of Petroleum Industries and its effect on the
Availability and Price of petroleum products.

The Research Has Following Objectives:

1. To Understand the Importance of Supply Chain Management in the

petroleum industry related to Petrol & Diesel.

2. To Study the Supply Chain of Petroleum Industry in India and Marathwada

Region in Particular.

3. To Study the Role of Information Technology in Revamping The Supply

Chain of Petrol & Diesel.

4. To Study the bottlenecks in Supply Chain of Petrol & Diesel.

5. To Study the Pricing Policy Followed by Petroleum Industry.

Hypothesis of the study

19
1: Efficient Supply Chain Management of Petroleum Industry will lead to
adequate availability of petroleum products.
2: Utilization of SCM Software will minimize the time and manpower
required for managing the information in Petroleum Industry

20
 Scope of the Study

The Study is an attempt to make a working appraisal of SCM, through

effectiveness of a supply chain depends on many factors; of a company’s own
current situation and strategies, but there are at least ten parameters that need
to be seen for assessing the effectiveness of any supply chain and logistics. The list
is based primarily on an assessment of the relative “Pain to Gain” ratio that most
companies seems to experience when pursuing each category

21
 CHAPTER-2
LITERATURE REVIEW

22
 Literature Review
Literature review focuses on SCM & Pricing of Petroleum Products, Literature
Related to Supply Chain Management, Petroleum Industry in India, Pricing
Policies of Petroleum Products in India are presented. Other factors affecting the
SCM & Pricing of Petroleum Products Such As SCM Software, MIS, Geographical &
Political Challenges Related to Import of Crude Oil, etc are also presented.

1. Sunil Chopra & Peter Meindl, (2003), Supply Chain

Management:Strategy, Planning, and Operations, Prentice Hall; 2nd
Edition, ISBN-10:0131010284, ISBN-13:978-0131010284

Sunil Chopra & Peter Meindl Discusses in this book the strategic role of the
supply chain, key strategic drivers of supply chain performance and the tools
and techniques for supply chain analysis. The Authors identify inventory,
transportation, information, and facilities as the key drivers of supply chain
performance. This book then conveys how these drivers may be used on a
conceptual level during supply chain design, planning, and operation to
improve performance. For each driver of supply chain performance, the goal
is to provide practical managerial levers and concepts that may be used to
improve supply chain performance.

2. Peter Bolstorff & Robert Rosenbaum, (2003), Supply Chain Excellence :

A Handbook for Dramatic Improvement Using the SCOR Model,
Amacom, 1st edition, ISBN-10: 0814407307, ISBN-13: 978-0814407301

This book discusses implementing new supply chain projects using the official
techniques of The Supply Chain Council. It provides step-by-step guidelines
of the entire Supply Chain Operations Reference (SCOR) Model, showing how
to align workflow, define business opportunity, use metrics to determine

23
 success, and gain internal support. Besides the guideline on step-by-step
process for completing a successful project, it has a built-in timeline to assist
you in accurately projecting when a project will begin to reap the benefits of
reshaping your supply chain. Utilizing the process steps as outlined will result
in a project portfolio of recommended improvements which will be easy to
prioritize based on the rating system included in the process.

3. Janat Shah, (2009), Supply Chain Management: Text and Cases, Pearson
Education Publications, 1st Edition, ISBN-13: 9788131715178

Supply Chain Management: Text and Cases, integrates concepts and

application to turn the spotlight on innovations. The Author presents the
concept of SCM using illustrative examples, caselets and case studies from the
Indian context. Divided into five parts, this book presents numerous examples
and caselets, thus blending concepts with current industrial practices and
state-ofthe-art know-how, for enhanced understanding and a holistic view of
supply chain management. A complete part of the book is devoted to
innovations in supply chain management that may be used by firms operating
in competitive markets to improve their performance.

4. Larry Paquette, (2003), The Sourcing Solution: A Step-by-Step Guide to

Creating a Successful Purchasing Program, Amacom Publication, ISBN-
10: 0814471919, ISBN-13: 978-0814471913.
The Author brings forth that globalization and rapidly evolving technologies
have accelerated and refined the procurement function in every industry and
at every scale. 'The Sourcing Solution' presents an overview of new sourcing
strategies & tools. It offers clear overview of the new tools of sourcing
success, including e-commerce and Internet strategies, supply-chain
management technology, inventory auction sites, strategic sourcing
initiatives, offshore and international sourcing.

24
5. Vinod V. Sople, (2012), Supply Chain Management: Text and Cases,
Pearson Education Publications, ISBN-13: 9788131760994.
The book addresses the issues of Supply Chain Management in seven parts,
which deal with the basics of the supply chain, sub-systems of the supply
chain, tactical and operational decisions and strategic approach to the supply
chain, measurements, controls and sustainability practices. The author has
used diagrams and examples for better explanation of the concepts. A part
devoted to 15 comprehensive case studies is included of Indian companies
such as Ambuja Cement Ltd, United Art Logistics, Shri Mahila Griha Udyog
Lijjat Papad Cooperative Society, ITC Limited, Zapak Ltd, etc.

6. Terence T. Burton & Steven Broeder, (2003), The Lean Extended

Enterprise: Moving Beyond the Four Walls to Value Stream Excellence,
J Ross Publications, ISBN-10: 1932159126, ISBN-13: 978-1932159127

The book provides a great reference model ("Lean Extended Enterprise

Reference Model-LEERM") for understanding the structure and framework for
assisting companies, their customers, and suppliers in transitioning to a total
value stream conversion to lean. This Book goes beyond addressing the
applications of lean tools such as, Kanban, SMED, etc, and discusses the entire
methodology for implementing such tools. The authors discuss how to
integrate the total value stream — vertically, horizontally, and laterally and
achieve success through empowered people and teams, cultural
transformation, and an integration of Lean, Six Sigma, Kaizen, and enabling
technologies such as ERP, SCM, APS, CRM, PLM, networks, exchangers, and
portals. Using the Lean Extended Enterprise Reference Model (LEERM), the
authors demonstrate that by deploying the right methodologies and
technologies to the right situation you can achieve huge breakthroughs in
performance.

25
7. Sonia Shah (2004), Crude: The Story of Oil, Seven Stories Press, ISBN-
10: 1583226257.

The Author Present unexpurgated story of oil, from the circumstances of its
birth millions of years ago to the spectacle of its rise as the indispensable
ingredient of modern life. It then brings forth the Geographical and political
challenges of Oil.

8. Donald Bowersox, David Closs & M. Bixby Cooper, (2002), Supply

Chain
Logistics Management, McGraw-Hill/Irwin, ISBN-10: 0072351004,
ISBN13: 978-0072351002.

‘Supply Chain Logistics Management’ examines traditional logistics issues

within the context of the supply chain. This Book studies internal functions of
an organization with inclusion of issues that relate to the entire supply chain.
‘Supply Chain Logistics Management’, provides a solid foundation that clearly
describes the role of logistics within the supply chain, portraying a complete
view of the subject and going farther to show how all the pieces fit together.
The authors of the book discuss Supply Chain Logistics Management with a lot
of industrial insights as supporting cases.

9. Ananth Iyer, Sridhar Seshadri & Roy Vasher, (2009), Toyota Supply
Chain Management: A Strategic Approach to Toyota's Renowned
System, McGraw Hill, ISBN-10: 0071615490.

‘The Toyota Production’ System is the benchmark used throughout the world
for “lean” thinking. The authors of the book, being industry insiders and
former Senior Executive of Toyota, describe in detail ‘Toyota’s Supply Chain’,
explaining the operations and the logic behind them. The Book help you
design and oversee significant improvements to your supply chain, including
26
 Sales planning, Production scheduling, Supplier Management, Logistics, Parts
ordering, Demand fulfillment. The authors pool their extensive and well-
rounded knowledge to provide “how-to” insights for applying the lessons of
Toyota in any industry. Using enables readers to create operational efficiency
by better connecting offices, plants, facilities, and vendors.

10. David Blanchard, (2010), Supply Chain Management Best Practices,

Wiley, 2nd edition, ISBN-10: 0470531886, ISBN-13: 978-0470531884.
This Books Demonstrates how to build supply chains that works, by
illustrating how leading companies are doing it. Identifying world-class
supply chains in more than a dozen different industries and explaining in
detail how these companies got to where they are. This book reveals the
proven strategies, solutions, and performance metrics used by leading
companies to design their extended enterprises. It also offers guidance on
the latest technology, green supply chains, going lean, how to choose third-
party logistics providers, and how to manage the supply chain in a global
environment.

11. Shoshanah Cohen & Joseph Roussel, (2004), Strategic Supply Chain
Management, McGraw-Hill, ISBN-10: 0071432175, ISBN-13:
9780071432177.

Strategic Supply Chain Management explores the knowledge, techniques,

and strategies necessary to create value and achieve competitive advantage
from your supply chain. The Books Demonstrates How today's industry
leaders are building supply chain efficiencies and creating long-term
competitive advantage. The Authors offer In-depth and illustrative profiles of
seven leading and distinct supply chain organizations, ranging from Eli Lilly
to the U.S. Department of Defense. It Also Discusses Strategies built around
the Supply Chain Operations Reference-model (SCOR) for increasing both
the internal and external productivity of your company's supply chain. It

27
 Provides Guidelines for assessing and improving a company's interaction
with its supply chain partners.

12. David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi, (2003),

Managing the Supply Chain: The Definitive Guide for the Business
Professional, McGraw-Hill, ISBN-10: 0071410317, ISBN-13: 978-
0071410311

This results-based book examines the experiences of today's most

accomplished companies to demonstrate supply-chain innovation at work in
the marketplace. The Authors of the books presents case studies on
Innovative Supply Chain Management of the leading companies like Coca
cola, Walmart, dell, Amazon, etc.

13. Vivek Sehgal, (2009), Enterprise Supply Chain Management: Integrating

Best in Class Processes, Wiley; 1 edition, ISBN-10: 0470465455, ISBN-
13: 978-0470465455.

This Book offers a comprehensive look at the role of SCM within an

organization. It demonstrates how to manage a supply chain across an
enterprise, encompassing technological, financial, procurement, and
operational issues. It Covers A primer on supply chain and finance, Elements
of a supply chain model, The scope of the supply chain, Demand and supply
planning, Supply chain network design, Transportation and warehouse
management, Supply chain collaboration, Reverse logistics management,
Supply chain technology. It clearly explains how each process works and the
relationship between them.

28
 CHAPTER-3

RESEARCH METHODOLOGY

29
 Research Methodology :

Collection of Data:
A. Primary Data

The Data is collected from Petroleum Industry Experts and People Involved
in Supply Chain of Petroleum Products through structured Questionnaire,
Telephonic Talks & Personal Visits.

B.Secondary Data
The Secondary Data is gathered from the following sources:
1. Books & Reports
2. Case Study Analysis
3. Journals, News Papers & Company’s official websites.

30
 Research Tools & Techniques used:

1.Percentage Analysis
2.Flow Charts

Sampling

The Sample contains 7 big & small petroleum industries in India, namely, Indian
Oil Corporation Ltd, Hindustan Petroleum, Bharat Petroleum - All Three Public
Sector units & Some Private Companies like Reliance, ESSAR, Shell and Kaine.

Out of these, nearly 97% of market share belong to the 3 PSU, Indian Oil
Corporation, Hindustan Petroleum & Bharat Petroleum. Hence, I have decided to
include sample for my research based on three major Petroleum Industries.

31
CHAPTER- 4
FINDINGS

32
 Findings

Indian Petroleum Industry is an ‘Import Dependent’ Industry as 70% of our crude

oil requirement is imported, mostly from Middle Eastern countries. Hence, the
thesis started by researching and presenting The Global Oil Industry in Chapter I.
It presents the life cycle of petroleum products, right from extraction of crude oil
to retailing, while listing the global leaders of petroleum industries with respect to
oil reserves, productions, consumption, imports and exports. Chapter II presents
the existing literature related to petroleum industry, Supply Chain Management
and other related concepts such as Information Technology.

In India, Petroleum Industry is Tightly Controlled by the government Companies.

So much so, that the market share of private players is negligible. The Supply
Chain Management of Petroleum Industry in India Cannot be understood without
the knowledge of the Institution Structure of the Govt. of India’s Petroleum
Companies, which are divided into Upstream – Exploration & Production and
Downstream – Refining & Marketing segments. Chapter 3 Discusses the Indian
Petroleum Industry in detail and presents key statistics of India’s oil reserves, oil
consumption, oil needs and oil imports. The Three Key Players of the Indian
Petroleum Industry in the downstream sector, Indian Oil Corporation, Bharat
Petroleum & Hindustan Petroleum control 97% of total petroleum retail market of
India.

33
Advancements in Information Technology are revamping every section of our life,
right from personal communications to the way organizations manage their
business. This becomes even more significant in any global industry, such as the
Petroleum Industry. The Recent developments in the IT Sectors, which are of
tremendous benefit to any organizations, have been so fast, that organizations
have either failed to realize its competitive advantages or have failed to adopt
and implement them. This research also includes the key beneficial advancements
in

Information Technology which may surely optimize the SCM of Petroleum

Industry.

India is the 7th Largest Country in world by area and 2nd Largest by Population.
Although Indian Petroleum Industry has a supply network spread across its length
and breath, it is not completely efficient as Shortages of Petrol/Diesel is a
frequent event. The Supply chain module in operation today has many obstacles
and these have contributed to be a factor affecting the efficiency of SCM of
petroleum product. The questionnaire survey conducted in this research was able
to extract information relating to supply chain bottlenecks in operation.

34
 CHAPTER-5
SUGGESTIONS & RECOMENDATIONS

35
 Suggestions & Recommendations

Based on the in-depth study of Supply Chain Management, Indian

Petroleum Industry and Analysis of Data Collected, the following suggestions as
solution are proposed by this research.

1. Advance Payment / Deposit System:

Oil Marketing Companies (OIL, HPCL, BPCL) must take a additional
security deposit of 2 or 3 tanker consignments, while awarding retail
franchises and use this deposit as a security for delivering the product on
request of the retailer, even If the retailer fails to deposit the required amount
at the time of ordering. This will also decrease the dependence on Banks
while ordering.

2. Retailer Rating System:

With 592 Petroleum Retail Outlets in Marathwada alone, it is
necessary for Oil Marketing Companies to develop a ‘Retailer Rating
System’ and granted the best rated retailers extra benefits by giving them
priority to them in terms of Ordering and Delivering Products.

3. Development of ‘Demand Forecast System’:

The Retailers must develop and use a ‘Demand Forecast
System’ to known the requirement of a given product at given time of
month/year so as so plan and prepare in advance for its procurement.

4. Petroleum Industry To Be Included in ‘Essential Services Maintenance

Act, 1968’
36
 Retailers face problem in ordering due to Holidays. To overcome
this, the Petroleum Industry must be included in Govt. of India’s ‘Essential
Services Maintenance Act, 1968’ to allow its operations 24x7x365.

5. Petrol Vending Machines to be Installed:

Sale of petrol is more in smaller fractions hence tiny Retail Outlets / Self
Service Retail Outlets, on the lines of commodity vending machines to be
installed for the easy accessibility of petrol to consumers.

6. Establishment of New Terminals / Depot:

The Only source of Petroleum Product Procurement in
throughout the country, the existing Terminals & Depot are over worked. To
decrease the encumbrance faced by these terminals/depot, new terminals /
depots must be established, keeping in view the ever growing demand due to
increasing sale of all types of vehicles.

37
 CHAPTER-6
CONCLUSION

38
 Conclusions

The retail outlets more in the urban area can be increased with the specialized
outlet of only petrol and only diesel which will give more prompt service and also
will require less space and the bigger outlets can be in suburbs i.e. outside city
limits, providing more space for parking with departmental store attached and
washroom for customers. This would also add to the income from other sources
for the retail outlets.

1.

Education does play an important role, especially in the era of cut throat
competition. Management education or those with higher qualification in the
growing disciplines will certainly innovate in services and also contribute to ease
the bottleneck of supply chain management of petroleum products.

2.

Moving with technology help organizations keep pace with times but
those who do not move or change with time, the difficulty in adopting new
gadgets, makes them slow and by the time they become aware they are outdated
grappling to regain their position, SCM in petroleum products can be made
smooth with technological help in their march towards progress.

3.

Demand Forecast system if adopted will certainly help into optimum utilization of
funds as well as maintain appropriate inventory at the outlet, take fullest
advantage of SCM in present scenario.
39
4.

Cash and Credit system both can survive, if the cash management in these
outlets is optimally done, further the advance cash payment or automatic
overdraft can also contribute in making SCM of petroleum products smooth.
5.

If Ordering & Demand Forecast is done scientifically, then it will be very

easy to finalize the working capital with optimum limit. Excess or Shortage of
working capital problem will be solved if a suggestion of advance payment of 1 or
2 container is accepted by the oil companies supplying the product.
6.

Non Availability of working capital may be a reason with for limit of working
capital but the non Availability in time deprives the retailer in SCM of Petroleum
products to go for advance payment or scientific application of forecasting tools.
7.

Overdraft although is the popular measure but then the vulnerable

handloans is also an feasible option, here the better solution will be to keep small
amount of cash available and also atleast a tanker advance payment made to the
supplier making the SCM of petroleum smooth and free from bottlenecks.

8.

Uncertainty is due to faulty approach and reliance on the staff of the tanker
carrying petroleum products. Logistical delays are inevitable as also a time bound
system to lift the petroleum product is not in its place. In fact logistical delays can
be avoided if the present SCM module of petroleum products in Marathwada is
alered to make it more effective.

40
9.

Manpower in SCM of petroleum product can be reduced considerably

provided new gadgets and a fool proof measuring system is installed at the
earliest.

10.

Sale of diesel can be judged from the spot if there is further subdivision of
product making it exclusive diesel and exclusive petrol separately where very
small space can be effectively used and heavy rush or rather waiting period of
these can be reduced with segregation.
11.

Petrol is sold in fractions more as compared to diesel hence any move to

segregate diesel and petrol outlet will make SCM more effective and reduce
chances of manipulation of any kind at lowest level.
12
Quality control & measurement is equally important as is service in the supply
chain because petroleum products being highly sensitive products and the nature
to perform with greater efficiency after adulteration makes it more challenging
for the quality consciousness in SCM of petroleum products from the place of
distribution to place of selling & distribution.
12.

Quality Assurance can only come when it is supported by regulatory mechanism,

then only it will be effective SCM of Petroleum Products

41
 CHAPTER-7
BIBLIOGRAPHY

42
 BIBLIOGRAPHY
References Books:

Mohanty & Deshmukh (2005), “A Study of Implementation of SCM in India: Theories & Practices”,
Biztantra – Delhi. ISBN: 81-7722-191-4

Sunil Chopra, Peter Meindl & D.V.Kalra (2006), “SCM: Strategy. Planning & Operations”, 3 rd
Edition, Peasron Eduction, Delhi. ISBN: 0131730428.

Lambert Stock (2001), “Strategic Logistics Management”, McGraw Hill,

Boston, USA. ISBN- 1428812806

W. H. Inmon (2005), “Building the Data Warehouse”, Wiley; 4 editions,

ISBN-10: 0764599445 ISBN-13: 978-0764599446

H N Kaul, K D Malviya (1991), “Evolution of Indian Oil”, Allied Publishers, Delhi. ISBN – 81-7023-
269-4

Nobou Tanaka (2007), “World Energy Outlook: India & China Insights”,

International Energy Agency - France, ISBN: 978-92-64-02730-5

Journals & Articles:

Kumar, K. and Van Hillegersberg, J. (2000), ``ERP experiences and evolution’’, Communications of
the ACM, Vol. 43 No. 4, April, pp. 22-6.

International Energy Agency: Focus on Asia Pacific, PETROLEUM PRODUCT PRICING IN INDIA,
Where have all the subsidies gone?, Paper October 2006.

43
 Kirit Parikh, 2010, Report of the Expert Group on a Viable and Sustainable System of Pricing of
Petroleum Products, Government of India, New Delhi.

Basic Statistics on Indian Petroleum & Natural Gas 2010-11, Ministry of Petroleum & Natural Gas,
Government of India, New Delhi.

151

Rangarajan (2006), Report of the Committee on Pricing and Taxation of Petroleum Products,
Government of India, New Delhi.

International Energy Agency (2010), India’s Downstream Petroleum Sector Refined product pricing
and refinery investment

STATE OF COMPETITION IN THE INDIAN PETROLEUM INDUSTRY

(2009), Final Report, By Indicus Analytics Pvt. Ltd New Delhi

International Energy Agency (2009), PETROLEUM PRICES, TAXATION

AND SUBSIDIES IN INDIA

Web Links:

Rangarajan Committee Report: http://petroleum.nic.in/Report1.pdf Kirit Parikh Committee

Report: http://petroleum.nic.in/reportprice.pdf

http://www.iea.org/work/2006/gb/papers/petroleum_product_pricing.pdf

http://www.iea.org/papers/2009/petroleum_pricing.pdf

Petroleum Planning and Analysis Cell (PPAC) http://ppac.org.in/ Ministry of Petroleum &

Natural Gas, http://petroleum.nic.in/

44