Case Study of Indian Refinery

8/8/2019 Case Study of Indian Refinery

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CASE STUDY OFCASE STUDY OF

AN INDIANAN INDIAN

REFINERYREFINERY


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PROBLEMPROBLEMHUGE INVENTORYHUGE INVENTORY

1.1. Lack of material planning and variety of vendors in due courseLack of material planning and variety of vendors in due course

of time leads to an huge inventory in stores.of time leads to an huge inventory in stores.

2.2. Nobody was accountable for inventory build up.Nobody was accountable for inventory build up.

3.3. Increased in downtime.Increased in downtime.


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Phase IPhase I-- PlanningPlanning

1.Selection of the process:1.Selection of the process:Material procurement as a process was selected.Material procurement as a process was selected.

2.Selection of improving techniques:2.Selection of improving techniques:Process reengineering methodology i.e. WESTINGHOUSEProcess reengineering methodology i.e. WESTINGHOUSE

Technology was selected wherein participants:Technology was selected wherein participants:

Plan for processPlan for process

Analyze the current processAnalyze the current process Reengineer the processReengineer the process

Develop implementation planDevelop implementation plan..


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Phase IPhase I-- PlanningPlanning

3. Scoping the process:3. Scoping the process:Process should begin with plan requirement & ends with stock charge.Process should begin with plan requirement & ends with stock charge.

4. Team Formation:4. Team Formation:1.1. 66--10 members from middle mgmt & a Team Leader from senior mgmt10 members from middle mgmt & a Team Leader from senior mgmt

(Representatives of various departments)(Representatives of various departments)

2.2. Executive director as a sponsor.Executive director as a sponsor.

5. Sponsors expectations:5. Sponsors expectations:i.i. Improve Working capital. profitability & productivity,Improve Working capital. profitability & productivity,

space in store, material planning.space in store, material planning.

ii.ii. Reduce Inventory, lead timeReduce Inventory, lead time..


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Phase IIPhase IIANALYSIS OF THE CURRENT PROCESSANALYSIS OF THE CURRENT PROCESS

The process being analyses w.r.t. to the following:The process being analyses w.r.t. to the following:

1.Process cycle time :1.Process cycle time :a) Process mapping :a) Process mapping :

A sample flow of material (indent) was selected & it was evaluated with on theA sample flow of material (indent) was selected & it was evaluated with on the

following basis ;following basis ;

i.i. Actual time of completion.Actual time of completion.

ii.ii. Total elapsed time.Total elapsed time.iii.iii. Total cost incurred.Total cost incurred.

iv.iv. Tasks DOERS.Tasks DOERS.

v.v. Issues affecting the task.Issues affecting the task.

b) Key Issues :b) Key Issues :The issues which affects the process cycle time were:The issues which affects the process cycle time were:

i.i. Poor requirement planning.Poor requirement planning.

ii.ii. Incomplete indents.Incomplete indents.

iii.iii. Poor storage facilities.Poor storage facilities.


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iv.iv. Discrepancy in computer & physical stocks.Discrepancy in computer & physical stocks.

v.v. Incomplete & incorrect invoices.Incomplete & incorrect invoices.

2) Process cost :2) Process cost :Following data were collected.Following data were collected.i.i. Labour cost/hour.Labour cost/hour.

ii.ii. Number of indent raised/year.Number of indent raised/year.

iii.iii. Number of purchase order issued/year.Number of purchase order issued/year.

iv.iv. Capital incurred in current inventory.Capital incurred in current inventory.3)3)Value delivered to customers :Value delivered to customers :The value analysis for few internal customer was done.The value analysis for few internal customer was done.

Factors Weightage(w) Performance(p) Value (v =w*p) Gap(wFactors Weightage(w) Performance(p) Value (v =w*p) Gap(w--v)v)

i. Complete inf. On indent. 70 0.7 49 21i. Complete inf. On indent. 70 0.7 49 21

ii. Approval status 10 0.8 8 2ii. Approval status 10 0.8 8 2iii. Schedule delivery time. 10 0.4 4 6iii. Schedule delivery time. 10 0.4 4 6

iv. Enclosures (parts drawings). 10 0.2 2 8iv. Enclosures (parts drawings). 10 0.2 2 8

100 63100 63 3737


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Phase IIlPhase IIl Designing New ProcessDesigning New Process

1) Stretch targets :1) Stretch targets :In order gain radical change in the process & to align with sponsors expectationsIn order gain radical change in the process & to align with sponsors expectations

w.r.t. quality, cost & delivery was set.w.r.t. quality, cost & delivery was set.

i.i. Reduced the elapsed time by 60%.Reduced the elapsed time by 60%.

ii.ii. Reduced cost of indenting & procurement by 50%.Reduced cost of indenting & procurement by 50%.

iii.iii. Standardization of items by 10% every year.Standardization of items by 10% every year.

2) Brain storming:2) Brain storming:The ideas generated by the team are then evaluated & used for designing theThe ideas generated by the team are then evaluated & used for designing the

reengg. Process.reengg. Process.

i.i. Procure only what is needed.Procure only what is needed.

ii.ii. Standardization of parts.Standardization of parts.

iii.iii. Integrated computerization (indentor, purchase, stores, finance).Integrated computerization (indentor, purchase, stores, finance).

iv.iv. Rationalization of vendors & online vendor rating.Rationalization of vendors & online vendor rating.

v.v. Timely Picking of materials.Timely Picking of materials.

vi.vi. Minimum approval signatures.Minimum approval signatures.

vii.vii. Alternate payment system apart from bank.Alternate payment system apart from bank.


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Current v/s Reengineered processCurrent v/s Reengineered process

Measure Current Reengineered Saving(%)Measure Current Reengineered Saving(%)

1. No. of steps in process 51 16 681. No. of steps in process 51 16 68

2. Elapse Time (days) 305 123 602. Elapse Time (days) 305 123 60

3. Process Cost in Rs. 13121 2925 783. Process Cost in Rs. 13121 2925 78

4. Sign needed for Approval 60 16 824. Sign needed for Approval 60 16 82

5. Customer Value 63 92 505. Customer Value 63 92 50


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Phase IVPhase IV -- ImplementationImplementation

a)a) Formation of Quality improvement teamFormation of Quality improvement teamwith thewith thefollowing recommendationsfollowing recommendations

i.i. Develop vendor rating system.Develop vendor rating system.

ii.ii. Development of indent planning.Development of indent planning.

iii. Design information technology solution.iii. Design information technology solution.

iv. Identification of surplus material.iv. Identification of surplus material.

v. Develop quality system under ISO 9000 System.v. Develop quality system under ISO 9000 System.


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c) Strategy to overcome barriers:c) Strategy to overcome barriers:

i.i. Regular monitoring of the process.Regular monitoring of the process.

ii.ii. Intervention of the top management.Intervention of the top management.

iii.iii. Massive communication across the organization.Massive communication across the organization.

iv.iv. Identify who were supporting, opposing etc. using peer/supervisors.Identify who were supporting, opposing etc. using peer/supervisors.

b) Implementation barriers :b) Implementation barriers :

i. Resistance to introduce planning in indent requisitions.i. Resistance to introduce planning in indent requisitions.

ii. Increased accountability & responsibility.ii. Increased accountability & responsibility.

iii. Revision of payment terms for vendors.iii. Revision of payment terms for vendors.


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Benefits GAINBenefits GAIN

1.1. Saving of $ 0.3 million.Saving of $ 0.3 million.

2.2. Reduction of inventory.Reduction of inventory.

3.3. Reduction in Lead Time.Reduction in Lead Time.

4.4. Better store management.Better store management.

5.5. Lesser inter department conflicts.Lesser inter department conflicts.

6.6. Reduce in Elapsed time, no. of steps for completion of a task.Reduce in Elapsed time, no. of steps for completion of a task.

7.7. Reliable vendors with minimum follow up.Reliable vendors with minimum follow up.

8.8. Smoother plant operation.Smoother plant operation.

Case Study of Indian Refinery

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