The document discusses business process reengineering efforts at a petroleum refinery in India to improve its materials management functions. It identifies issues like long procurement cycles, high inventory costs, and inefficient warehousing. A workshop was held where executives mapped the current and redesigned processes. The redesign aims to reduce procurement lead times, establish long-term supplier relationships, reduce inventories, and improve warehousing and disposal of surplus materials through greater IT usage and standardization. The goal is to cut inventory costs by over 30% and boost profits by 15% in two years.

1. Group Members:
Mudassir Iqbal
M.Ghazanfar
Zain Siddiqui

2. Materials costs constitute approximately 60 percent of the
total working capital of any industrial organization
• Receiving materials before they are required, Causing more inventory
• Cost and chances of deterioration in quality;
• Not receiving materials at the time of requirement, causing loss of productivity;
• Incorrect materials takeoff from drawing and design document;
•Subsequent design changes
•Damage/loss of items

3. The organization under study operates a
petroleum refinery in an eastern part of India
This refinery has a materials management
function Facing Problems are
Uninterrupted supply of raw materials A large procurement cycle time
Huge inventory carrying cost
Ineffective warehousing and
surplus disposal methods

4. Methodology for BPR
• Mapping of current processes;
• preparing cost-time profile;
• Determining customer (external/internal/outside
suppliers) value structure;
• Identifying and prioritizing key issues;
• Mapping re-engineered process;
• Identifying assumptions;
• Determining benefits;

5. A five day workshop was conducted with the executives from different
functional groups. They have worked together to determine the re-engineered
process, applying the above methodology.
 Materials planning and procurement process.
•Reduce cycle time of receipt of indent to placement of order.
•Reduce lead time (time between placement of order and receiving materials).
•Establish long term relationship with suppliers to create a reliable vendor
base.
•reduce current inventory;
•Rationalization and standardization of spare parts amongst different plants.

6.  Warehousing and surplus disposal method:
•System to eliminate/minimize inventory build up of surplus
material;
•disposal procedure for surplus material;
•inventory of non-moving items (not issued for more than five years)
•To be reduced to zero and suitable process to be implemented for
monitoring the same.

7. Materials planning and procurement
process
Warehousing and surplus disposal
process

8. Materials planning and procurement process
• Single window clearance;
• More IT oriented system;
• Standardization of materials specification and categorization;
• Dynamic vendor performance rating;
• Streamlining of indenting system;
• Development of long term vendor relationship.

9. Warehousing and surplus disposal process
• Payment through bank to be discouraged;
• On-line information to users for pending inspection and mandatory
• Items with third party inspection certificate and proprietary items
• Vendor to write/attach metallic tag indicating description and code
number on individual items;
• Automatic identification of surplus for items not moved for more than five
years;
• Circulation of surplus item list through internet;

10. Some projects a implemented an integrated way to form material
management system for the entire refinery based IT.
The centralized indent
processing unit (CIPU)
DSS System
CIPU maintains an updated vendor database. The inventory, surplus
materials and cost database help prepare online purchase proposals (tender
documents) for receiving offers from prospective suppliers with due approval
from the competent authority. The DSS also provides information for dynamic
vendor/vendors performance rating

13. Reduce the inventory carrying cost by more than 30 percent
and improve profitability by 15 percent within the next two
years.

14. THANK YOU