Sizing up with SCM

This is an interesting case of how IT can bring in amazing seamlessness across business operations and a classic case of aligning IT with core business and in the bargain bringing in a range of tech and business deliverables.

GETTING SENSE OF SCALE AND SIZE

We are talking about Bharat Petroleum Corporation (BPCL) and its network of more than 49 plants, 115 depots, over 100 supply locations, and 10,000-plus dealers and retailers. BPCL to manage this humongous infrastructure and distribution has deployed a Supply Chain Management (SCM) application from SAP.

The company's investment in SAP SCM has helped it build an efficient supply chain for its liquefied petroleum gas and lubricants businesses. This helped improve the company's competitiveness while lowering the overall supply chain costs.

According to sources, by choosing the SAP SCM application, Bharat Petroleum has broken a new premise as it was the first company to embrace SCM in India when it first took that foray. This might be a well known and much written case, but we are showcasing it because of the ability for technology to impact the core business and thereby usher in significant performance benefits.

The SAP SCM application's scalability and functionality enabled BPCL to optimize on the supply chain performance across its Liquefied Petroleum Gas (LPG) and lubricants division. The application was also able to meet each division's unique supply chain challenges. For its lubricants division, SAP SCM helped it switch from executing its production based on available supply to executing it based on actual demand.

For instance, its LPG division accrued defined benefits out of SAP SCM and it helped it lower its high logistics costs and eliminate manual, spreadsheet-based planning processes.

HOW IT WAS DONE?

Bharat Petroleum deployed SAP SCM in phases starting with the lubricants division, which had the software up and running in just nine months. SAP SCM functionality for demand and supply network planning allows it to continuously incorporate the latest demand signals into its supply chain. The application's production planning functionality helped it optimize monthly and daily production schedules-what it means is that it can always make the most of available equipment, material, and transportation resources.

After the lubricants division, Bharat Petroleum continued its rollout of SAP SCM, launching a pilot project in its LPG unit. The company began to see benefits quickly-including a 2.5% reduction in logistics costs and a 60% to 80% reduction in planning cycle time. The LPG division estimates an additional 5% to 6% reduction in logistics costs going forward.

KEY BENEFITS

SAP SCM is fulfilling the lubricants division's goal of high product availability to customers. According to sources, with the SCM solution in place, BPCL gained significant competitive advantage in the market and it addressed the market demands proactively as well. In just the past two years post deployment it was able to grow sales by 38% and the growth continues till date.

That's not it. The company accrued other benefits like shrinking average days in inventory by 56%, and the larger impact if one can call it, the SCM is also helping it drastically lower supply chain costs. The software also helps it accommodate high-volume, last minute orders as well.

OUTLOOK

For BPCL its tech deployments are an ongoing exercise with many milestones fixed for future. For instance, the company will significantly broaden the solution scope and other fuel divisions like aviation, retail, industrial, and commercial will come under its fold.
Clearly, BPCL is marching forward with state of the art IT that is giving it the distinct competitive edge in an extremely competitive and challenging market it operates in.