AGARWAL AUTOMOBILES:

FUEL STATION FORECASTING

AND INVENTORY MANAGEMENT

NAME : SARAVANAN SUBRAMANIAN

ROLL NO : EPGP - 12A - 098
Background
■ Agarwal Automobiles was an authorized fuel station for BPCL located at Sagar district
of Madhya Pradesh, India

■ It was started by Mr Alok and dealership contract with BPCL in March 1981
■ The premises owned by Mr Alok and fuel dispensing machines were installed by BPCL
■ BPCL recognized Agarwal automobiles performance several times for its excellence in
performance
■ Aditya studies Business management and was preparing for a summer job with Agarwal
Automobiles
■ He has taken assignment to improve the fuel station’s inventory management practices
Problem Statement
■ Currently Agarwal automotive facing challenges with To govern ordering and inventory
management policies

■ Right for an analysis and development of advanced  planning models.

■ Better ordering policy

■ No ERP tools deployed. Analyze the Digitization of business

Current Operational Constraints

Joint Transportati-
Ordering on Capacity

Advance Threshold
Payment Volume

Vaporization Systems
of Fuel Failures
Objective
■ Optimal operations strategy

■ Forecast the demand

■ Support customers effectively and maximize profit

■ Determining the purchase policy

■ Cost minimization
Fuel value chain
 Various Business Models in Industry

Company
Dealer
Company owned
owned
owned andManaged
and and dealer 
managed 
managed

■ Regardless of any Business Models, Fuel-dispensing units and underground storage tanks are owned by
Oil companies
Current Products Portfolio and Capacity

Diesel - 20,000 litres

Petrol - 15,000 litres

High-Speed Petrol -
10,000 litres
Revenue Overview – Jan 2016 to May 2016
Revenue - by Fuel Type Profit - by Fuel Type
25.0 0.7
0.6
21.0 0.03
0.6
20.0 0.8
17.4 0.5 0.5
16.8 16.5 0.5 0.02 0.5
15.5 0.5 0.2 0.5 0.03 0.02
0.8 0.6 0.02
15.0 9.9 0.7
0.4 0.2
8.6 0.2 0.2
8.4 8.6 0.2
8.0 0.3
10.0

0.2
0.3
5.0 10.3 0.3 0.3
7.6 8.3 7.3 0.2 0.2
6.8 0.1

0.0 0.0
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jan-16 Feb-16 Mar-16 Apr-16 May-16

Petrol Diesel HSP Total Petrol Diesel HSP Total

3.50%
2.94% 2.90% 2.92% 2.92% 2.90%
■ From the above analysis, Petrol and
3.00%
0.13% 0.15% 0.16% 0.10% 0.11% Diesel have equal revenue split (46%)
2.50% and HSP contributes 4%
1.17% 1.25% 1.24% 1.30%
1.29%
2.00%
Profit 1.50%
% ■ In total profit, by average Petrol
1.00%
1.64% 1.47% 1.50% 1.58% 1.48%
contributes 52%, Diesel 43% and HSP
0.50% contributes 5%
0.00%
Jan-16 Feb-16 Mar-16 Apr-16 May-16

Petrol Diesel HSP Total

 SWOT Analysis

- High Capex / Advance Money

- High revenue - High scale business required

Strength - Sustainable Market - High competition Weakness

- Strong brand name - Prices fixed by Govt / Fluctuations

- Sustainable energy supply - Only scale defines the Profit

Fuel
- No ERP systems in Agarwal Automobiles
Station
- Negotiate with oil company revised MOQ /
- Govt regulations
Payment terms
Opportuniti - Environmental challenges Threat
- Get the fuel during evening / Night time
es - Electric vehicles
- Alternate reserves
Porters Five Force Model
Threat of New Entry
- High possibility for other oil
company distributors
- To be establish brand name

- High supplier power - Very limited Buyer power

- Can dictate the payment - Can’t change the source
Supplier terms / MOQ - Pricing / supply / Quality are Buyer Power
Power - Dependency with Global Oil not there with Buyer control
companies -Oil prices volatility

- Electric vehicles
- Moderate Rivalry - Migrate into Bi-cycle
Competitive - Compete through - Alternate Fuel station Threat of
differentiation of outlets
Rivalries - Public Transportation / Substitution
Metro
Effective Demand Forecasting for Fuel Ordering
• Statistical
Data forecast /
Gathering Historical
sales data

Demand • Management

Planning Forecast

Supply • Capacity

Planning Constraints

• Conflict
Pre- SOP resolution
and
Meeting recommen
dation

Executive
• Decision
SOP on Fuel
Review
Factors affecting the Forecasting in Fuel
Station
Internal External
Factors Factors

■ Sales Territory – Fuel station Location ■ Competition

■ Resource availability ■ Supply / Demand
■ Technology deployed ■ Seasonality
■ ERP systems ■ Inflation rate
■ Global value chain
■ Ex-rate movement
Effective Manage of Inventory
Prioritize
Fuel
inventory

Implement the Audit the

ERP Systems Stock

Inventory
Management

Track Sales
Apply 80 /
Records /
20 Rule
History

Effective
receipt
Maintenance
Summary and Recommendation
■ Trigger the ROL / EOQ in the system : Deploy the Safety stock, Re-order level practices in the business

■ Implement the ERP systems and connect digitization in the business

■ Analyze Sales data for short-term forecasting

■ Analyze order history to sense demand planning with BPCL

■ Adjust forecasts for changes in weather and natural calamities

■ Negotiate with BPCL on Flexibility on total Qty and one week credit Payment terms

■ Reduce the vaporization loss by implementing technology solutions

■ Track the competitor promotional offers

■ Modify the tank Capacity – Increase Petrol Tank size and reduce the HSP tank size

■ Implement the Sensors in Fuel tank to monitor the Fuel levels