Petroleum and Supply Chain

A Report On Castrol India Ltd. , Mumbai Assignment Supply fibril Executive digest Castrol India LTD. Castrol India Limited is a Public Limited union with 70. 92% of the equity held by Castrol Limited UK ( fall in of BP Group). From a minor flagrant attach to, with a manage of about 6% in 1991, Castrol India has grown to become the cooperate largest lubricating substance troupe in India with a food grocery divide of around 28%. Castrol India manufactures and markets a range of automotive and industrial lubes. It markets its automotive lubricating substances chthonian 2 brands Castrol and BP.The call offr has leadership positions in most(prenominal) of the segments in which it operates including passenger automobile engine fossil anoints, premium 2-stroke and 4-stroke oils and multigrade diesel engine oils. Castrol India has the largest manufacturing and marketing ne dickensrk amongst the lubricant companies in India. The company has 5 manufacturing Plants cro ssways the country, including a state-of-the-art define in Silvassa. The company carry throughes its consumers through a distribution ne twainrk of 270 distributors, operate over 70,000. retail outlets.From a minor oil company, with a shargon of about 6% in 1991, Castrol India has now grown upto a market share of around 28%. Product and expediencys * Passenger car oil * Gear Oil * Diesel Engine oil * twain wheeler engine oil * Grease * Coolant * Castrol Supply Chain interlocking overview * Manufacturing facilities In India there are 12 occupation facilities with major ones at Patalganga, Silvassa, Tondiarpet, Paharpur. Each take plant has its own capacity in cost of different packing lines and non SKU. * Plant and capacity informationDaily available fill up capacities crosswise current locations(in KL) Single Shift w/o extra clipping*Data taken by project Report Distribution inbound Logistics The base oil for Castrol is centrally purchased by British Petroleum . Some of the Indian refineries too provide base oil to Castrol India Limited. The oil is brought to the plants by tankers from shoreward tanks. Castrol India Limited has four plants-Patalganga, Silvassa, Paharpur and Tondiarpet and in total 12 filling stations.Outbound Logistics Castrol has third tier distributor social system-distributor hubs (CDC/RDC), carrying & Forwarding Agents (CFA) and Distributors. The transportation from manufacturing plant to distributor hub is called primal Transportation (P0). Transportation from distribution centre to carrying & forwarding agency (CFA) (P1), from storage wareho part to warehouse (P2) and warehouse to customer and distributors is called Secondary transportation. The entire country is split into four zones North, East, West and South.There are 30 CFA,2 DC and 4 marine warehouses in India. The diagram below shows the picture set up distribution structure at Castrol India. There are five layers Supplier, Plants, Distribution Hubs, Warehouses and Distributors. Castrol has recently utilise DRM in which get hold of is taked at the CFA aim once the scrutinise at the distributor level falls below an established norm. * The diagram below shows the communicate chain distribution structure at Castrol India. There are five layers Supplier, Plants, Distribution Hubs, Warehouses and Distributors. Castrol has recently put oned DReaM in which penury is acquired at the CFA level once the bloodline at the distributor level falls below an established norm. Global R individually The global reach of British Petroleum is shown in the below mentioned figure. Castrol is a subsidiary of that. homework Process Forecasting Generating achievement imagines is a key work process in the oil and fellate perseverance. output enters are used to elaborate cash flow employ economic shams and to assess reserves in the corporate portfolio. These forecasts involve the financial health of the company and its market v alue.To generate forecasts, the super majors use in-house generator simulators and commercial pretension products, nearly(prenominal) of which exist on the market. Generally, companies use a variety of methods for labor forecasting. Production forecasts for brown fields, i. e. fields currently in issue, are regularly updated with production data getd with off-take volumes. Many production forecasting packet products on the market are generally applied on a fit-for-purpose arse. Reservoir simulation is a standard part of the reservoir engineers toolkit for generating production forecasts.The reservoir models have become more sophisticated over the years, overdue to the increasing computing power available, with the creation of earth models and use of high-technology tools to acquire data for business relationship matching. For brown fields it is special K practice to use a reservoir simulation model and history to match the model with new reservoir data on a regular basis and run the model in forward prediction mode to generate forecasts of oil, catalyst and water production volumes. Use of 3-D seismic data acquisition became widespread in the 1980s and 1990s.This has allowed construction of detailed reservoir models of the subsurface architecture and identification of additional oil (new zones, bypassed oil, etc. ). emergence use of geostatistical models during the 1990s has raised the awareness of risk and hesitancy and their impact on decision-making. The driving force has been to reduce the bandwidth of uncertainty, i. e. to narrow the range of uncertainty by victimization fourfold realisations. Systematic application of statistical techniques whitethorn be used to understand the predicted reservoir behaviour and the range of production forecasts.Production forecasts can in addition be generated using traditional methods, such(prenominal) as decline curves. Classical reservoir engineering methods, such as real(a) balance, should also be in the reservoir engineers toolbox. It is most-valuable to recognise that the reservoir simulator should not be used as a black box. For history matching, the production data has to be quality-checked to hold back good quality sway and validity. The forecasts generated by a reservoir simulator should be consistent with other reservoir engineering methods that are used, for example, in gas field P/Z plots (i. . the visual image of the gas actual balance, where the original gas volume equals the remaining gas volume positive(p) the volume of gas produced). Future flairs in real time production forecasting with automatic history matching willing include production data and 4-D seismic data, the creation of geo statistical models and multi-realization simulation models for forward prediction. This will still require reservoir engineering intervention to assure and control the quality of the output.With the advent of the e-field, an executive might be directly coupled to the same c omputer as the reservoir engineer and can view, on a screen at his desk, the corporate production forecasts and the corporate reserves being updated in real time. Oil industry (Castrol) forecasts are generated using the best-practice techniques of time-series modeling. The precise form of time-series model used varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined.For example, data for some industries may be peculiarly prone to seasonality, i. e. seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than circular booms. Approach varies from industry to industry. Common to analysis of every industry, however, is the use of sender auto regressions. Vector auto regressions allow us to forecast a variable using more than the variables own history as explanatory nurture. For example, when forecastin g oil prices, we can include information about oil consumption, supplement and capacity.When forecasting for some of our industry sub-component variables, however, using a variables own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modeling. We use the most common and versatile form of univariate models the autoregressive lamentable average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting.It moldiness be remembered that human intervention plays a necessary and desirable part in all our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. Inventory mea n The company recently had implemented an inventory optimization application from Tools Group, Amsterdam, called DPM (formerly, Distribution prep Model). But Tenaglia knew that technology was only part of the solution.After gaining some experience with the software to understand its capabilities, the European division of Castrol undertook the hard work of organizational change, creating a write out-chain prep department that was totally separate from execution functions. Aggregate training Methodology Castrol initiated a program to improve their Sales and Operations Planning (S&OP) processes. The team was faced with reactive supply chains caused by forecasts that were inaccurate, treacherous and incomplete. The forecast did not extend to all SKUs and calculations need intensive manual of arms work.The supply chain was still widely order-driven and structured to be reactive, quite than proactive. The demand forecast was carried out by sales and marketing, so the supply chain people reworked the forecast in order to trigger replenishments. We had a lot of uncertainty due to poor forecast practices. The inventory stead was also challenging. Most slow moving products had excess inventory. Fast moving products were often out-of-stock. Safety stocks had been set manually, based largely on personalized experience. In the calculations, there was little formal sense of supply and demand uncertainty.Safety stocks were infrequently adjusted, and when they were, it was often in reaction to a single event. For instance, an under stock situation would often trigger an increase in golosh stock levels. addition, planners were expediting to constantly to overcome the poorly derived inventory targets. This expediting was triggering production reschedules and urgent deliveries, increasing costs and amplifying supply chain noise. Weve seen dramatic increases in our advantage level with significant declines In inventory across Europe.Castrol determine the need to b uild an effective S&OP proviso process which they would implement in one country and accordingly roll out across Europe. The resulting system would coordinate ten independent systems into one global and interrelated coherent planning process, encompassing the downstream portion of Castrols supply chain, from blended oils and packaging through to the end user customer. The system would fit high process levels to customers, reduce stock-outs and cut back on manual expediting. BP Castrol quickly came to the conclusion that to accomplish the above, they needed to include nventory in their S&OP process. Improving the forecasting process was clearly required, but alone it would not achieve the high customer-service levels they wanted. A Castrol uses software that analyzes demand history across multiple dimensions so you can obtain the best possible forecasts and inventory targets for driving your supply chain. Innovative and advanced technologies enable Castrol to improve and change planning processes. Solutions span key supply chain planning areas such as Demand Planning, Demand Sensing, Promotion forecasting and Inventory Optimization.BP Castrols resulting system delivered the target service levels, reduced out of stocks, and largely eliminated the expediting. everyplace a two year period, KPIs improved dramatically. Aggregate forecast truth improved by 15% on average and channel forecast the true* improved to 90% for retail. (* % of SKUs demand deep down 20% of a 2 months aged forecast) Total network inventories were reduced by 35%, 20% in the first year after implementation and accordingly 20% again in the following year. Despite the lower inventories, service levels to customers, as defined by line fill rates, were up by 9% boilers suit.The system has become a unique company standard for excellence in forecasting, customer service level planning and inventory optimization. The system now spans 29 installations, 25 countries and has been expanded to two continents. The Payoff Reduced Inventory and Higher Service Levels The replenishment flows had to be synchronized with the demand signal through optimized inventories. They improved demand detecting by generating more robust and reliable forecasts. They implemented an improved and standardised monthly demand forecast process cycle.A single point of right was instituted. Promotion planning and monitor was also improved. They improved demand solvent by improving safety stocks using a solution provided by Tools Group. Reliable statistical modeling accurately measured demand and supply chain unpredictability. Reliable inventory modeling and mix optimization techniques accommodated this volatility and accurately set the inventory targets required to achieve a reactive inventory mix. The Payoff Reduced Inventory and Higher Service Levels BP Castrols resulting system delivered the target service levels, reduced ut of stocks, and largely eliminated the expediting. Over a two year period, KPIs improved dramatically. Aggregate forecast accuracy improved by 15% on average and channel forecast accuracy* improved to 90% for retail. (* % of SKUs demand within 20% of a 2 months aged forecast) Total network inventories were reduced by 35%, 20% in the first year after implementation and then 20% again in the following year. Despite the lower inventories, service levels to customers, as defined by line fill rates, were up by 9% boilers suit.The system has become a unique company standard for excellence in forecasting, customer service level planning and inventory optimization. The system now spans 29 installations, 25 countries and has been expanded to two continents. Pricing The rising crude prices caused severe Base-oil supply imbalances. The shortage of unexampled material also severely wedged many of the small-scale players in the Indian lubricant market. (Castrol) Further, the supply uncertainty triggered rapid Base oil price increases. This in turn caused most lubricant players, including Castrol, to take multiple price increases during the year. . Economic slowdown the global financial crisis in the minute of arc fractional of 2008 severely impacted the Indian stock market and caused the rupee to depreciate by about 20% with respect to the US sawbuck. The rupee depreciation offset benefits of softening Base-oil prices during the latter half of the year. The lower overall economic activity level and restricted availability of finance also impacted automotive sales and trucking activity in the second half of 2008. a slow-down in the construction sector earlier in the year due to the high interest rate regime was go on affected by lack of credit in the second half.This has caused an overall slackening of demand in the lubricant market, particularly in the industrial, mining, off-road and fleet-operators segment, in the last quarter of the year. The lubricant channel partners reacted to this period of uncertainty by tightening their inv entory levels, causing a one-off impact on lubricant volume in the second half of 2008. 2. harsh oil Crude prices continued to remain an important cost input element to Base-oil in addition to supply demand economics. In 2008, crude prices rapidly increase and crossed US$145 a drumfish in July.This triggered ingest increases on various crude derivatives including Base-oils across the globe. In the second half of the year the crude prices collapsed but the depreciation of the rupee against the US Dollar offset some of the increases. Refiners also carried inventory of high priced crude procured earlier and as a result, the benefits of the falling crude prices were not passed on by refiners to industrial customers in tandem with the crude prices. The following graph indicates the trend of crude prices 3. Base-Oils and AdditivesThe steep rise in crude prices severely impacted the Base-oil prices with multiple price increases charged by the Base-oil refiners. At its peak, the Base-oil price moved(p) uS$1800 per ton in the second half of the year, almost stunt woman from 2007 exit levels. The increases were regular and quick until September 2008. Supply situation had and deteriorated due to refinery closures, production issues and turnaround at domestic and international sources. due(p) to limited availability, customers were put on allocation by major refineries.Post the crude prices falling from the high of over uS$145 a barrel and the economic slowdown, the availability of Base-oils witnessed strong improvement. However, there was very little reduction in prices till the last quarter due to the depreciation of the rupee against the US Dollar and the high inventory of Base oils held by refiners in anticipation of demand. Input costs of additive manufacturers witnessed a rapid increase and with the expectation of higher demand, the pricing balance tilted in estimate of additive manufacturing companies.Additive prices witnessed an increase of circa 25% over the 2007 levels. However, Castrol has managed the volatile input prices by ensuring effective procurement and inventory prudence. Productivity of purchasing spends and working outstanding oversight has been an area of focus. Tight control of Base-oils and additives inventory has ensured higher inventory turnaround and release of cash in a timely modal value for the business. EXCECUTION Checking and Controlling of Inventory Plan The management conducts physical verification of inventory at reasonable intervals during the year. b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory and no material discrepancies were spy on physical verification. Performance Evaluation Parameters Facilitate planning, execution, and management put forward visibility Reduced inventory and demurrage cost better pr oductivity and running(a) force Respond quickly and synchronize changes Reduced costs Improve decision making Increase customer satisfaction Build strategic relationships Improve agility, competitiveness, and business performance Information Technology In the oil and gas industry, knowing where and what product is being produced or delivered is essential to an economic and effective organization. The use of IT to offer possible remote control of equipment and facilities, performance services monitoring, and even transportation management service is important. Firms like British Petroleum have developed new systems to aid in their business operations by using these technologies.Past and present methods of communication in the oil and gas industry have included satellite communications (on a limited basis), Cellular and Specialized Mobile Radio, fiber-optics, and general offshore telephone service using piano tuner frequencies consisted of a radiotelephone based transmitt ing aerial/transmitter that would allow communications between any offshore oil platforms and land-based telephone networks. These systems required a team of employees to monitor and report to management on a continuing basis.Currently, cellular and specialized mobile radio services are in the process of providing better services to the offshore drilling platforms and are generally expected to replace the older offshore radiotelephone systems found primarily in the Gulf of Mexico region. Such systems receive use of these technologies to reduce and/or eliminate on site monitoring by a team of employees. With respect to labor costs, the organization could but substantial amounts of money because there is no need to have strength continuously on location to inspect, monitor, maintain, and/or report conditions.Wire slight data provided by implemented wireless technology would automatically produce reports on processes. Adjustments could be made at appropriate times reducing any over time payments. The benefits of IT integration to the Castrol as a whole could be substantial. Supply Chain Collaborations, Coordination, And Cooperation Supply-chain management requires an oil and gas company to integrate its decisions with those made within its chain of customers and suppliers. This process involves relationship management by the company. Both customer relations and supplier relations are key to effective coordination of supply-chains.Often, the fundamental interaction between suppliers and their customers are adversarial in nature, based on a negotiated obligation that spells out all the terms and conditions by which all parties are required to comply. Instead, a firm can create long-term strategic relationships with their suppliers. In most cases, it is a collaboration process between the oil and gas operating company and its suppliers. One of the weaknesses of a supply-chain is that each company is in all probability to act in its best interests to optimize it s profit.The goal of satisfying the net customer is easily lost and opportunities that could arise from some coordination of decisions across stages of the supply-chain could also be lost. If suppliers could be made more reliable, there would be less need for inventories of raw materials, quality inspection systems, rework, and other non-value adding activities, resulting in tend production. Coordination from the perspective of British Petroleum Company involves the following issues * ensuring supplier force n cost, timeliness and quality * setting appropriate targets for inventory, capacity, and lead time * monitoring demand and supply conditions * Communicating market and performance results to customers and suppliers. A typical challenge in the petroleum industry supply chain is the attitude and anxiety regarding collaboration and information sharing between supply chain partners. While collaboration and information sharing rep-resent a of the essence(p) factor for supply cha in efficiency. Improved supply chain efficiency in the petroleum industry, therefore, needs a new philosophy in collaboration, even if this means working with competitors.