BPCL, IOC Exchange Data In Real Time With SAP Middleware

Public sector oil companies in India often share products and facilities to control operational costs. BPCL (Bharat Petroleum Corporation) and IOC (Indian Oil Corporation) collaborate on a large scale as far as buying and selling of oil products is concerned, which helps BPCL to serve its customers more efficiently and make optimum use of available resources. However, the company was encountering a unique challenge on the path of collaboration. IT came to the rescue and helped BPCL tide over the obstacles it was facing.

Many oil companies all over the world share products and facilities just like BPCL and IOC do. The processes commonly followed are:

- Borrow the product from the competitor where competitor has facility and excess product. Lend to competitor where the company has excess stock. Bill for the net amount borrowed/ lent.
- Buy the product from the competitor where competitor has facility and excess product. Sell to the competitor where the company has excess stock. Bill for each and every delivery.

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In India, oil companies follow the second process where all transactions are billed by the selling company to the buying company.

Incongruence in the accounting of transactions

Buying and selling is a phenomenon that takes place in the downstream oil industry. “In the western region, BPCL sells products to IOC as we have a strong presence in the western region. Consequently, we bill IOC for these sales. In the northern region, we buy products from IOC (IOC has a strong presence in there) and further sell them to our customers. IOC in turn bills us for the same,” says Narayanan K B, GM – ERP Competence Centre, BPCL.

For example, if a lorry from BPCL goes to IOC’s Ambala location for picking up products; the temperature and density of the products is noted down at the delivery station itself. Internationally, oil companies do not settle product volumes at ambient temperature. The product is transferred at ambient temperature; however the quantity used for invoicing between oil companies is accounted for in a commonly accepted volume at 15 degree centigrade. In order to find out the quantity at 15 degree centigrade, the selling company uses the product temperature and density and converts the quantity to the 15 degree parameter using API standards.

The transaction starts by IOC making a billing document on BPCL at IOC, Ambala. BPCL gets this document physically. The BPCL end customer then gets a billing document accounted on the basis of the information contained in the original bill issued by IOC, Ambala. The entire process is conducted through official mail (either speed post, courier etc) without any electronic exchange of information. This is due to the manual information capture process that occurs while trucks are delivering products across locations.

In this scenario, the real challenge would arise at the monthly settlement meetings when BPCL and IOC officials would sit together for reconciliation of all transactions. As there was no electronic exchange of information in real time, there was often incongruence in the data captured by IOC and BPCL for the same transactions. The total amount of reconciliation across India would result in exchange worth crores of rupees resulting in a big reconciliation issue.

Middleware allows exchange of information in real time

Both IOC and BPCL were aware of the roadblocks; however, it was not easy to come up with a joint solution to overcome the issue. BPCL took the lead and working jointly with IOC overcame this challenge with the help of complex IT systems.

“The first challenge was to recognise that there was an issue that needed to be tackled by both companies together,” says Narayanan. The answer was in process integration. Both companies had different processes running at various locations. The objective was to integrate these processes online without any alteration.

“We worked on the data exchange structures, security, availability. The real challenge was making the users at the locations familiar with the new functionalities because they would be using the same on a daily basis,” says Narayanan.

On an average, BPCL and IOC exchange 50 lakh litres of petrol and 160 lakh litres of diesel on any given day amounting to Rs 40,000 crore worth of trade. BPCL and IOC decided to share the transaction information using Process Integration Software (PSI) from SAP, which basically took advantage of the ERP systems of both companies. Let us see how the SAP collaboration worked.

There is a business-to-business architecture (B2B), which functions as the communication medium between the systems of IOC and BPCL. The integration includes the SAP middleware for data exchange. So when IOC creates a document, certain data transfers to the middleware for communication with an external agency. As soon as the data comes into the BPCL middleware, the same identifies the data and puts it into BPCL’s SAP system.

It took the two companies about six months to get the components in place and test them. The first roll out was done in eight to ten months after the initial conceptualisation.

To summarise, there was no integration between the ERP solutions or processes. Both companies simply used a middleware for the collaboration. So what is the role of middleware and what is its significance?

“The data exchange happens across different locations. One has to make sure that the data reaches the right location when it should and in the format required. The middleware extracts the required information, formats it and sends it to the right location,” concludes S Prakash, DGM – ERP, BPCL. Earlier, there was a special team dedicated to the rectification of errors and the reconciliation process, which now directs its efforts towards more productive issues.