Re Engineering
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This document discusses re-engineering the material management processes at an Indian petroleum refinery. It identifies issues like excess inventory, procurement delays, and ineffective warehousing. The refinery planned to address these by implementing a single window clearance system, standardizing specifications, developing long-term vendor relationships, automatic surplus identification, and an IT system to improve procurement and performance monitoring. The goals were to reduce inventory costs by over 30% and improve profits by 15% in the next two years.
Re Engineering
- 1. Re – Engineering Material Management Indain Refinery Group Members: Mudassir Iqbal M.Ghazanfar Zain Siddiqui
- 2. Material Management Materials costs constitute approximately 60 percent of the total working capital of any industrial organization. The common issues that are associated with materials management functions are: o Receiving materials before they are required, causing more inventory o Cost and chances of deterioration in quality; o Not receiving materials at the time of requirement, causing loss of productivity; o Incorrect materials take off from drawing and design document; o Subsequent design changes o Damage/loss of items
- 3. Indian Refinery The organization under study operates a petroleum refinery in an eastern part of India This refinery has a materials management function are • Uninterrupted supply of raw materials, • A large procurement cycle time • Huge inventory carrying cost • Ineffective warehousing and surplus disposal methods
- 5. Re-Engineered processes : Materials planning and procurement process: • Single window clearance; • More IT oriented system; • Standardization of materials specification and categorization; • Dynamic vendor performance rating; • Development of long term vendor relationship;
- 6. Re-Engineered Processes Warehousing and surplus disposal process: • Payment through bank to be discouraged; • On-line information to users for pending inspection and mandatory • Visit of indenters twice a week; • Items with third party inspection certificate and proprietary items • Automatic identification of surplus for items not moved for more than five years.
- 7. IT System CIPU • Retrieves specification for each material • Updated vendor database • Help prepare online purchase proposals (tender documents) DSS • Provides information for dynamic vendor/vendors performance rating • Communicate the on-line through the purchase order • They are followed up periodically via Internet/fax/telephone
- 9. Conclusions The organization under study is the market leader in the petroleum sectors working in a closed economy and under an administered pricing mechanism. Due to sudden changes in the industrial policy and economic scenario in the country, the organization is expected to face an open economy, competition from multinational companies reduce the inventory carrying cost by more than 30 percent and improve profitability by 15 percent within the next two years
- 10. Thank You