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Indian Oil uses BI to fuel growth

Indian Oil uses BI to fuel growth

How do I make my company gain a competitive edge? Turn to BI.

From a basic BI system that was started in 2001, Indian Oil Corporation has come a long way and is now changing gears to move to a structured BI platform.

It stands looking skywards at US$140 a barrel. A surge of inflation -- and that one-drop of oil has just become a lot dearer than it ever was. 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.

Then, the obvious question that haunts someone who is an integral part of the petroleum industry, among other things, would read: how do I make my company gain a competitive edge?'

IOCL seems to have found its answer. Otherwise, how does one explain this steep rise in sales? 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. The profit after tax was US$1.6 billion after considering the compensation of US$4.4 billion in the form of oil bonds issued by the Government of India.

If that sounds like great statistics, here is another -- IOCL's gross turnover, inclusive of excise duty, is up by 12.1 per cent as compared to the previous year. But, the question still remains: what exactly did the company do?

It turned to BI.

"This goes back to 2001 and it was conceived as a decision support system (DSS). We had realized from the very beginning that once SAP gets stabilized, 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 optimization 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 optimize 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 realized 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 optimization 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.

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