With enterprise applications, integration is easier said than done. Even more so because it invariably involves entities outside the organisation as well. We take a look at the successful implementation of EAI at Bharat Petroleum and investigates the challenges they had to face during the process of integration.
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To survive in today’s cutthroat business environment, it is important for each section of an enterprise to work in sync—be it back-end tasks like transaction processing, or front-end customer service. This necessitates the integration of business processes within the organisation as well as outside. One such organisation, which has successfully deployed Ente-rprise Application Integration, is Bharat Petroleum (BPCL). The approximately Rs 47,000 crore public sector oil company is India’s second largest oil and gas company, with sales of 18 million Mt/annum of petroleum products amounting to a mammoth $6.25 billion per annum. It has one refinery located in Mumbai and approximately 331 installations for LPG filling, aviation fuelling and fuel distribution. Though the company has implemented all its modules on SAP, it is interesting to note the implementation challenges BPCL faced in integrating disparate applications across the enterprise.
Other than the refinery in Mumbai, BPCL has controlling interest in three other refineries, including the Kochi refinery. To achieve up-to-the-second visibility for controlling the business, it was necessary to integrate the operations of these refineries along with its six process centres spread across the country.
Leveraging knowledgeIn manufacturing, the applications already in place did not cover all the processes. The software BPCL had deployed was used only for producing reports, and presentations. As a goldmine of information was generated during various processes, BPCL felt a crying need to integrate different applications and leverage the knowledge base it had. But there was no robust system in place to collate this information and translate it into competitive advantage. Due to this BPCL found it difficult to optimise the available resources and use this data to develop business strategies and action plans.
Most of the information generated was wasted, as there was no system in place to analyse and predict business strategies based on this information. At the same time, the oil market was being deregulated. Private players were being allowed to join the fray and market share was eroding. In addition, the crude oil and product price fluctuations had led to lower margins. The government had imposed stringent product and environmental specifications. This would, in turn, change all the rules of the game. At this point of time the company also went in for a scenario-building process to access the situation. The top honchos realised that the chances of privatisation were high. To derive maximum benefit, in case such an event did come to pass, it was necessary to set up a solid robust system in place.
Manufacturing Execution SystemSays Shrikant Gathoo, general manager-project Entrans, BPCL, “To ensure success in the emerging business environment, there was a need to undergo a fundamental change in the way we thought and the way we conducted business. Hence BPCL went in for a complete revamp of its operations.” In the process of this rethinking and reorganisation, the company developed what it calls the IT Master Plan. The plan called for the setting up of a state-of-the-art robust IT infrastructure through the length and breadth of the organisation within a span of seven years, starting from the year 1998 through 2005. The upshot of this planning was a complete integration of its Manufacturing Execution System (MES) with its SAP R/3 implementation.
The MES implementation was necessary for developing a real-time plant database and for the management of information systems. Through MES implementation, BPCL planned to improve the efficiency of core operating processes and overall asset productivity in the refinery. Says Subodh Bhate, MES program manager, BPCL, “Earlier there was a wide gap between the SAP R/3 implementation we had in place and the plant floor. Through the MES-integrated technology suite, we planned to fill this gap.”
There were also other applications, which needed to be integrated to a common database. These included a lab information system, production accounting, advanced process control, oil movement and blend control, and finally, nomination systems. Prior to implementation, each department collated all available information at the month-end. But with the new system in place all information was available on-line at real-time.
Other MES applications at BPCL include an integrated production management system (IPMS). The supply chain management solution, the operations management system, the lab management system and the productions accounting modules were all integrated and this combined whole is what makes up the IPMS. Says Bhate, “The integration and seamless flow of real-time information has enabled faster decision- making and a quicker response to the customer. Also, the advanced process control and optimisation system we have put in place has helped us in optimisation of resources and inventories as well as efficient credit and treasury management.”
For the MES integration process the company partnered with AspenTech, an EAI solution provider. Initially, BPCL had decided to go in for best-of-breed applications and then integrate them. BPCL had set close to 70 parameters for selecting the most appropriate applications. But during the process of selection, the IT team realised that AspenTech met all the criteria set down by BPCL. Also, the company realised the advantages of a single vendor. Says Bhate, “It makes sense in going for a single vendor as the total cost of ownership comes down drastically. This includes training cost, cost of future upgradation, maintenance, etc.”
Other challenges
In addition, there were other challenges, which had to be taken care of. One of the main challenges was automating the manufacturing process. The earlier system was largely dependent on humans. This, in turn, led to errors, which sometimes proved to be fatal, leading to heavy losses. MES involved new concepts and new ways of doing things. This called for training the entire administrative staff to upgrade their skills in order to meet the new demands. This was a big challenge, as the team had to be trained to meet the high standards required by the system. “Teaching them how to operate the system was not so tough. But the challenge was in teaching them the intricacies of the system. They had to learn how to use the system effectively to derive maximum benefit,” says Bhate.
In addition, there were other challenges, which had to be taken care of. One of the main challenges was automating the manufacturing process. The earlier system was largely dependent on humans. This, in turn, led to errors, which sometimes proved to be fatal, leading to heavy losses. MES involved new concepts and new ways of doing things. This called for training the entire administrative staff to upgrade their skills in order to meet the new demands. This was a big challenge, as the team had to be trained to meet the high standards required by the system. “Teaching them how to operate the system was not so tough. But the challenge was in teaching them the intricacies of the system. They had to learn how to use the system effectively to derive maximum benefit,” says Bhate.
Automating the manufacturing process also helped BPCL in proper economic planning, production planning and production accounting. “The company,” says Bhate, “was able to do it in a scientific and aggressive manner. We were able to cut down on the time taken to do things and foresee new areas for realisation of profit.”
The project, which required an investment of close to Rs 30 crore has already helped BPCL in achieving tremendous cost benefits. The government has allowed BPCL to purchase and process crude oil because of MES. The system provides an up-to-the-minute report on the status of the crude oil. Also the system helps BPCL stay ahead of the competition by providing real-time information on the changes in the market. The various departments can then analyse the effects of this change on the company’s business and develop new solutions and implement them.
The business sideThough MES took care of all aspects of manufacturing and the process department, the business transactions were still being handled by functional solutions. This was not only time-consuming but also expensive. Hence the company decided to go in for a SAP R/3 implementation. With more than 100 processes to be integrated, this was certainly a daunting task. In fact, BPCL’s SAP implementation is considered to be one of the biggest in the country. To make use of existing data, the SAP team in conjunction with Mahindra Consulting (MCPL) built interfaces between the legacy systems and the various SAP modules.
The scope of implementation included modules like sales and distribution, materials management, financials, plant maintenance, production planning, HR, quality management, investment management, asset management and payroll. Currently BPCL is implementing business warehousing and data warehousing. The IS-OIL solution (an industry specific solution from SAP) was also implemented for hydrocarbon product management, bulk transportation, exchanges and crude procurement.
Return on investment
The benefits that BPCL has been able to derive have more than made for the Rs 60 crore the company invested in implementation of SAP R/3. Not only has the company achieved savings of Rs 38 crore by cutting down on inventory but myriad other problems have been solved as well. MCPL has developed a solution, which captures the readings of the refueller metres while creating deliveries for the aviation fuel to aircraft from different airlines. MCPL also helped in incorporating readings of various instruments like pumps, with SAP to show their spatial positions by graphics for easy and correct entries.
The implementation of SAP allowed for standardisation of maintenance practices including reports across various locations within each business unit and wherever possible across all business units as well. Transparency in dealings has led to tremendous cost savings. Says Gathoo, “In case of our inventory, the value was around Rs 36 crore but we were able to bring it down by 40 percent. Our procurement cycle, which took eighty days prior to SAP was brought down by two-thirds—that is around 60 percent. And we are trying to bring it down even further.”
Though the MES and SAP R/3 implementation took care of internal operations, the front-end users demanded more. They needed a system, which would allow automatic flow of information between SAP and MES. “Integrating the various MES applications was in itself a great challenge. But what has proved to be an even bigger challenge is integrating the MES with SAP. Currently we have built interfaces between the two systems,” says Bhate. The biggest challenge in marrying the two systems has been because one deals with real time transactions while the other deals with processes. Interfacing the two applications also means tying up the versions. In addition, there is a familiar problem of changing versions of each application of SAP and MES—all leading to more problems for integration.
Though the challenges of integration are huge, BPCL is determined to pull it through simply because it will lead to huge cost savings. Also, aided by the new system, BPCL will be able to improve performance by better plant monitoring, a huge increase in yields, faster analysis and most importantly—better margins. The savings already achieved have helped in creating an optimistic mood and BPCL intends to optimise the mileage already achieved to set in place a highly integrated state-of-the-art robust system comparable to the best in the world.
This article first appeared in Express Computer
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