international conference madurai dec 2010

8/7/2019 International Conference Madurai Dec 2010

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TITLE OF PAPER

SWAPPING PRACTICES: AN EFFECTIVE TOOL

FOR IMPROVING PETROLEUM CUSTOMERSERVICE LEVEL

INTERNATIONAL CONFERENCEONOPERATIONAL RESEARCH FOR URBAN AND RURAL

DEVELOPMENT (ORURD)THIAGARAJAR COLLEGE OF ENGINEERING MADURAI

, - ,E C E M B E R 1 5 1 72 0 1 0


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04/26/11ORSI 2010 ORURD, Thiagarajar College of Engineering: Madurai , India, 15-17th December2

SWAPPING PRACTICES: AN EFFECTIVE TOOL FOR IMPROVINGPETROLEUM CUSTOMER SERVICE LEVEL

AUTHORS

H. M. Jha Bidyarthi

Professor and Head Department of Business Administration and Research

Shri Sant Gajanan Maharaj College of Engineering Shegaon 444 203, Maharashtra, INDIA

[email protected] Cell: 9422881261

L. B. Deshmukh

Lecturer

Department of Business Administration and Research Shri Sant Gajanan Maharaj College of Engineering

Shegaon 444 203, Maharashtra, INDIA [email protected]

Cell: 9420694924
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Contents Indian petroleum Industry- An Overview

Supply Chain Management

Downstream Petroleum supply chain Management:

Problem Formulation

Methodology of Research

Analytical Perspective of Downstream Petroleum Supply Chains in theState of Maharashtra

Conclusion


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Indian petroleum Industry- An Overview

Oil and Gas Industry Size is estimated at USD 110 bn (about 15% of IndianGDP)

Contributes to about 64% of gross revenues of Government (both Central andState together) through Taxes and Duties

Total Contribution to Government exchequer in 2004-05 = USD 27 bn

Contributes to about 45% of Indias primary energy consumption

Constitutes 30.87% of Indias imports in 2005-06

Accounts for 11.21% of Indias exports in 2005-06

India is the Sixth largest crude consumer in the world

India is the Ninth largest crude importer in the world

Indias has the sixth largest refining capacity - 2.56 million barrels per day

representing 2.99% of world capacity


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Indian Oil and Gas Industry - Prime mover ofthe Indian economy

India is the Fifth largest energy consumer in the world

Primary Energy Consumption (2005) 387.3 MMTOE

Oil and gas accounts for 44% of Indias primary energy consumption

Compounded Annual Growth rate of Energy Consumption (1996-2005)

3.62%

Energy-GDP Elasticity = 0.58

: ; ,Source Integrated Energy Policy BP Statistical Review 2006 Ministry of

,Commerce& , , , ,MoP NG Stg Comm Report FICCI Report ABN AMRO IMaCS Analysis


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Presence of both State and Private players inthe Indian oil market

arketing Infrastructure Oil MarketingCompanies

: &Source MoP NG

Company Retail Outlets LPG Distributors SKO Dealers

IOC 11,739 4,856 3,564

HPCL 7,313 2,202 1,648

BPCL 7,318 2,123 1,014

IBP 3,468 89 381

29,838 9,270 6,607

arketing InfrastructureOthers

Company Retail Outlets

ONGC 1

NRL 58

RIL 1,218

Shell 12

Essar 516

Controlled Pricing Market Determined Pricing

Administered Pricing


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Key Players in the Indian Oil and Gas Sector

Company Fortune 500

Rank

Profile

153 Indias largest company by sales (Turnover of USD 37 bn)Indias flagship Downstream company - Along with subsidiaries accounts for 47% ofPetroleum market share among Public Sector Oil Companies, 41% of National refiningcapacity and 51% downstream pipeline capacityOperates the largest and widest network of petrol and diesel stations in the country

342 Indias largest private sector company on all major financial parametersPresence in Upstream, midstream and downstream segment

368 PSU engaged in refining and marketing of petroleum products Has two subsidiary companies Kochi Refineries Ltd. And Numaligarh Refineries

Limited Refining Capacity 22.5 MT (16.25% of Indias refining capacity)


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Key Players in the Indian Oil and Gas Sector

Company Fortune 500

Rank

Profile

378 Another mega Public sector company with focus on refining and marketingTurnover of about US$ 17 BillionAccounts for about 10% of Indias total refining capacity

402 Indias Flagship E & P CompanyAccounts for 77% of crude oil and 81% of natural gas produced in IndiaVenturing into downstream refining and marketing

ll the five Indian companies in the Fortune 500 list are from the oil andas industryll the five Indian companies in the Fortune 500 list are from the oil andas industry


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Supply Chain Management

A supply chain is an integrated manufacturing process whereinraw materials are converted into final products, thendelivered to customers.

At its highest level, a supply chain is comprised of two basic,integrated processes:

(1) the Production Planning and Inventory ControlProcess, and

(2) the Distribution and Logistics Process.


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, ,T h e se P ro ce sse s illu stra te d b e lo w in Fig u re 1 p ro vid e th e b a sic

fra m e w o rk fo r th e co n ve rsio n a n d m o ve m e n t o f ra w m a te ria ls in to

.fin a l p ro d u cts


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Petroleum supply chain Management

India imports 70% of its requirement of crude petroleum.

Transportation costs in India account for about 20% to 25% of the totalcost of the product.

Currently in India, the share of railways is about 40%, the share of roadtransportation is about 18% and the share of coastal transportation isabout 12%. Pipelines account for about 30% of the share.

In India adulteration of petrol and diesel is a big ticket scam that involvesan annual recurring loss of at least Rs. 10,000 cr to the exchequer

(Ramchandran, 2005).


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e tro le u m V a lu e C h a in a n d th e V a lu e S e a rch

:o u rce S tra te g ic S h ift in In d ia n D o w n s tre a m S e c to r Te ch n o lo g ie s in S u p p ly C h a in;a n ag em e n t A u g u st 2 00 5 :by , shish Gaikwad Director Advanced,olutions Honeywell Asia Pacific


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Problem Formulation

PCSL (petroleum customer service level) is a function of reduction in thedistribution cost (a), availability (b) , reduction of lead time (c), oil companysasset utilization (d) etc.

Swap, practice of sharing the competing companys resources seemed to have anavenue with all the elements of PCSL.

Systematic cooperative reciprocal barter system (Swap/ hospitality/sharing) in

downstream supply chain is already being practiced in many developedcountries.

These swaps seemed to be a positive bearing on the customer services. hence theverification of it by petroleum customers is highly needed.

Hence the problem under study can be stated as: PCSL = fun (a, b, c, d,.)

Swapping practices (PCSL) shows positive bearing between these factors.


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Methodology of Research

Industry coverage Indian Petroleum IndustrySector coverage Public Sector Units

Companies coverage HPCL and BPCL

Products coverage HSD, LDO and Lubes

Geographical coverage State of Maharashtra

Retail outlets coverage 100 retail outletsClusters identified 4 Districts ( Amravati, Akola, Buldhana, Washim)

Sampling Cluster plus Convenience sampling

Data collection Structured questionnaire

Analysis tabulation & graphical representation


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Analytical Perspective of Downstream PetroleumSupply Chains

Petrol Pumps under study

Clusters Buldhana Akola Amravati Washim Total no.of PetrolpumpsCategory

RespondentsCompanyOwned

PrivatelyOwned

CompanyOwned

PrivatelyOwned

CompanyOwned

PrivatelyOwned

CompanyOwned

PrivatelyOwned

HPCL 02 10 02 07 02 06 02 07 38

BPCL 01 05 02 06 02 06 01 05 28

Others 02 09 00 11 02 04 01 05 34

Total No. ofPumps

05 24 04 24 06 16 04 17 100

Subtotal ( byCluster

29 28 22 21 100

Table No. - 1: Showing Analysis of select petrol pump respondents


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Chart No. - 1: Showing Product Availability at the petrol pumps


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Opinion about Profitability as a function of Distance from supply depots

Clusters:

Buldhana Akola Amravati Washim Total

Category ofRespondents

HPCL BPCL Others HPCL BPCL Others HPCL BPCL Others HPCL BPCL Others

Positive 7 3 6 5 5 6 5 6 3 4 5 4 59

Negative

4 3 4 3 3 5 3 1 2 5 1 1 35

Neutral 1 0 1 1 0 0 0 1 1 0 0 1 6

Total 29 28 22 21 100

Table No. - 2: Opinions of the select petrol pumps on the bearing of supply depots distance on their individual profitability


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Chart No. - 2: Frequency of procurement orders at the Petrol-pumps


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Category of vehicle used for procurement purpose:

Clusters: Buldhana Akola Amravati Washim Percentage

CategoryofRespondents

HPCL BPCL Others HPCL BPCL Others HPCL BPCL Others HPCL BPCL Others

Yourownvehicle

1 1 3 0 0 2 0 0 2 1 0 1 11%

Yourrentedvehicle

0 0 1 0 0 1 0 0 1 0 0 1 04%

Companyvehicle

4 1 2 3 1 0 1 2 1 2 2 1 20%

Companypaid(3PL)vehicle

6 4 4 6 6 7 5 5 2 6 3 2 56%

Others 1 0 1 0 1 1 2 1 0 0 1 1 09%

Sub-total 12 6 11 9 8 11 8 8 6 9 6 6 100

Table No. - 3: Categories of vehicles used for procurement purpose


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Awareness About SWAP practices

Clusters Buldhana Akola Amravati Washim Total

Category(Ownership)

Company OwnedPrivately OwnedCompany OwnedPrivately OwnedCompany OwnedPrivately OwnedCompany OwnedPrivately OwnedAllRespondents

(%Awareness)

Category(Dealership)

HPCL

BPCL Others

HPCL

BPCL

Others

HPCL

BPCL

Others

HPCL

BPCL

Others

HPCL

BPCL

Others

HPCL

BPCL

Others

HPCL

BPCL

Others

HPCL

BPCL

Others

Aware 2 1 2 0 0 0 2 2 0 0 0 0 2 2 1 1 0 0 2 1 0 0 0 0 18%

Unaware 0 0 0 10 5 9 0 0 0 7 6 11 0 0 1 5 6 4 0 0 1 7 5 5 82%

Subtotal ( byCluster

29 28 22 21 100

Table No. - 4: Awareness of SWAP practices:


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Awareness of SWAP is about 18% in the state of Maharashtra

The petrol pumps owned by oil companies have the greater awareness of the swapping practices

About 19% reduction in the cost of distribution can be exhibited through SWAP practices

Availability of POL products supplies at desired time is enhanced by 22% as a result of SWAPpractices

SWAP practices reduce the lead Times by 28%.

Customer service level (PCSL) is or can be improved by 25%

Most common benefit of SWAP reveals that the strategic resources of these oil companies can beoptimally used with Oil companies and all marketing intermediaries & customers as

beneficiaries.



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Conclusion

Systematic Cooperative Reciprocal barter System of downstream petroleumsupply chain has a positive bearing on the petroleum customer service level.

In highly dense state of Maharashtra, the awareness of SWAP is only 18%

Mostly this awareness exists in the company owned retail outlets (petrol pumps)

Customer service level (PCSL) is or can be improved by 25% that is significantcontribution to PCSL can be obtained if hospitality arrangements are used.

Common benefit of SWAP reveals that the strategic resources of these oilcompanies can be optimally used with Oil companies and all marketingintermediaries & customers as beneficiaries.


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