From a basic BI system that was started in 2001, the Indian Oil Corporation (IOCL) has come a long way and is now changing gears to move to a structured BI platform.
The petroleum sector in India is a little strange - while nobody questions the demand, you can only sell at a price that is fixed by the government. Added to this, is the fact that customers can buy the same product from any of your competitors at the same price.
The obvious question that haunts CIOs in the petroleum industry is: how do I make my company gain a competitive edge?'
A steep rise in sales indicates that IOCL seems to have found its answer. The company's figures speak for itself. It sold 59.29 million tons of petroleum products during 2007-08, as compared to 54.84 million tons in 2006-07.
If that sounds like great statistics, here is another its gross turnover, inclusive of excise duty, was up by 12.1 per cent.
It turned to BI
"This goes back to 2001 and it was conceived as a decision support system (DSS). We had realised from the very beginning that once SAP gets stabilised, transaction processing would not be the only requirement of the system. We were determined to exploit the SAP database for our decision aiding process," says Swaranjit S. Soni, executive director for information systems & CIO, IOCL.
But, as simple as that sounded, it wasn't smooth sailing. The implementation brought with it a new set of hurdles. It was a time consuming process. SAP itself was a complicated implementation, covering as it did 700 locations. Once they had SAP in place, the IT team at IOCL had to implement an add-on optimisation package for SCM. After this, the DSS was implemented. In its infancy, the DSS was in the form of structured useful reports, developed in-house by Soni's team.
The hard work paid off. He says his DSS goes far beyond a traditional SAP system that is used only for managing transactions. "We are not talking about reports for transaction processing," he reiterates strongly, "the reports I am referring to are pointed and focused reports for decision support."
Even today, the system is helping IOCL immensely. "Our approach helps us optimise procurement, thereby ensuring the best product mix, lowest logistics cost, and maximum gross margins," says Soni.
But being a frontrunner in the oil industry, IOCL realised that it couldn't afford to rest on its laurels. It had to move with the times. Which is why, it is in the process of putting together a new structured BI system based on the existing system. "Our IT re-engineering project is called 'Manthan' (churning) and this mythological name itself suggests discovery of 'amrit' (nectar) from the churning of the ocean," says Soni. Under the new structured BI platform, existing reports will be more visually appealing with interactive graphics and dashboards.
The existing system takes care of demand forecasting, among other things. Soni says that this is based on a custom model. "This is the starting point for integrated planning through our optimisation model and forms the base for our long term investment decisions. It also forms the base for our marketing strategies." This system also enables IOCL to handle crude procurement, arrive at the right product mix, and manage inventory.
Soni says that a crucial part of the exercise that ensures that IOCL is king of the hill -- competition analysis - is currently collected on a monthly basis from industry performance reports and this process is not currently under the ambit of the SAP system.
So, will the new system help IOCL stay ahead of competitors like Reliance Petroleum, Bharat Petroleum, and Hindustan Petroleum? "To maintain and enhance market leadership, management must have access to various forms of data like historical data, projected data; data that is capable of interpolation and analysis, and data that is easy to access and visually appealing. Armed with these tools, we can definitely excel," Soni points out.
"We are happy that our IT group has discovered the 'amrit' with the DSS system, and the journey will continue with the structured BI system," says Soni.
With soaring profits and an effective BI system in place, India's energy major registered a growth of 8.7 per cent in 2007-08. Today, IOCL stands tall with its head held high - proving that it's not just the oil prices that can skyrocket.
Not when your BI mantra is 'value for knowledge'.