Scm : Ioc Case

SUPPLY CHAIN MANAGEMENT PRACTICES OF INDIAN OIL CORPORATION LIMITED LIQUID PETROLEUM GAS (LPG) DIVISION

Term Paper for the Partial Fulfillment of the requirements of the course

SML 843

SUPPLY CHAIN LOGISTICS MANAGEMENT

Course Coordinator: Prof. D.K.BANWET

SAMIR JAIN

2005SMF6553

SAURABH BANSAL

2005SMF6573

ASHISH Kr. SINGH

2005SMF6648

CONTENTS

1. INTRODUCTION 3

Global Oil and Gas Industry 3

Indian Oil and Gas Industry 3

Indian Oil Corporation Limited 4

Challenges and opportunities

2. DESCRIPTION OF SUPPLY CHAIN OF IOCL (LPG) 7

Details of Working of LPG Supply Chain (in Delhi Region) 8

Types of Products 8

Costs involved in the supply chain 9

Production at the Bottling Plant 10

Distribution at the Bottling Plant 10

Reverse Logistics 10

Scrap Process 11

3. ILP: Answer To Supply and Demand Fluctuation 12

Demand Forecast 13

Aggregation 14

Observation 17

Indane Linkage Planner 17

Charges associated with sourcing 18

Rough Cut Schedule 22

APPENDIX 24

REFERENCE 25

1. INTRODUCTION

GLOBAL OIL AND GAS INDUSTRY IN 2005

The global oil and gas industry has been experiencing high prices for crude oil and petroleum. Strong growth in global demand, economic resilience to higher energy costs, hurricane related supply disruptions in the United States and a three decade low global oil spare capacity pushed up the oil prices. Besides, concerns over the stability of supplies from the Middle East due to geo-political uncertainties as well as speculative purchase by hedge funds further caused ripples in the global oil market, impacting a great deal of volatility to oil prices. World natural gas consumption grew by 2.3% during 2005. The enhanced production in Russia and Norway contributed to an overall growth of 2.5%. Increase in production was also witnessed in china during the year. International trade in gas also showed a robust increase by 6.4%. The Asian LNG consumption was also on rise.

INDIAN OIL AND GAS INDUSTRY

The Indian Oil and Gas industry consists of the following three sectors:

* UPSTREAM (Exploration & Production): It has companies like Oil & Natural Gas Corporation Ltd., ONGC Videsh Ltd., Oil India Ltd., Reliance, Cairn Energy, HOEC, Premier Oil etc.

* DOWNSTREAM (Refining, Marketing & Pipelines): Indian Oil Corporation Ltd. (IBP Ltd. (Pure Marketing), Chennai Petroleum Corporation Ltd.(Pure Refining), Bongaigaon Refinery & Petrochemicals Ltd.), Hindustan Petroleum Corporation Ltd., Mangalore Refinery & Petrochemicals Ltd., Bharat Petroleum Corporation Ltd. (Kochi Refinery Ltd. (Pure Refining), Numaligarh Refinery Ltd. (Pure Refining)), Reliance Industries Ltd./ Essar Oil Ltd./ Shell.

* (Gas Transport & Distribution): GAIL (India) Ltd.

Faster growth, industrialization, rising incomes and accompanying urbanization have started exerting pressures on the already tight global energy market. As the seventh largest importer of crude oil in the world, India is one of the more energy intensive economies, importing over 70% of its crude oil needs. However it continues to have net export surplus of refined petroleum products.

With international prices rising, the government raised the prices of petrol and diesel during June 2005 and September 2005, and also in June 2006. But the prices of LPG and kerosene oil have remained the same.

INDIAN OIL CORPORATION LIMITED

Indian Oil Corporation (IOCL) is India's number one oil company and holds the 189th spot on the famed Fortune 500 list of companies. It is the19th largest petroleum company in the world and has also been recognized as the number one company in petroleum trading among the national oil companies in the Asia-Pacific region.

As India's flagship national oil company, IOCL accounts for 56% petroleum products market share among public companies, 42% national refining capacity and 69% downstream pipeline throughput capacity. The company has a countrywide sales network of more than 23,000 retail outlets, including more than 10,000 petrol/diesel stations - backed by 165 bulk storage facilities, 95 aviation fuel stations and 85 LPG bottling plants. Its subsidiary, IBP Co. Ltd., has another 3,000 retail sales outlets.

Figure1: Breakup of production

Subsidiary Companies

IOCL has the following subsidiaries: Indian Oil Blending Limited, Chennai Petroleum Corporation Limited, Bongaigoan Refineries and Petroleum Limited, IBP Company Limited, Indian Oil Mauritius Limited, Lanka Indian Oil Limited, Indian Oil Tracking Limited and Indian Strategic Petroleum Reserves Limited.

IOCL