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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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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]8/7/2019 International Conference Madurai Dec 2010
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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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Analytical Perspective of Downstream PetroleumSupply Chains
Chart No. - 1: Showing Product Availability at the petrol pumps
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Analytical Perspective of Downstream PetroleumSupply Chains
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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Analytical Perspective of Downstream PetroleumSupply Chains
Chart No. - 2: Frequency of procurement orders at the Petrol-pumps
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Analytical Perspective of Downstream PetroleumSupply Chains
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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Analytical Perspective of Downstream PetroleumSupply Chains
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.
Analytical Perspective of Downstream PetroleumSupply Chains
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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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