GLOBAL TRANSFORMATION THOROUGH VCTThe Value Chain Transformation

Gypsa Vinod

THE INDUSTRYThe oil industry is basically divided into three major segments: Upstream: Oil Drilling & Exploration Mid-stream: Pipelines and Transportation Downstream: Refineries (Refining)

THE INDUSTRY It is a B2B industry The oil & gas and refinery industry

business and transactions consists of: The End user Companies like IOCL, BPCL,

HPCL, ONGC & RIL, in India Which are engineered and constructed by

Engineering, Procurement & Construction (EPC) companies

The Lump-Sum Turn Key (LSTK) contractors construct these facilities with EPCs

EPCs are supported by various pumps, turbines, boilers, cooling systems, heating units, and complex distillation units manufacturers

‘Process Licensors’ have the patents and rights for the various processes used by the EPCs to engineer the facilities

End User

Engineering, Procurement

& Construction

Company (EPC)

‘Process Licensor

s’

Vendors to EPCs

Lump-Sum Turn Key (LSTK)

contractors

THE INDUSTRY This study is about Kirloskar Pumps

which changed its business process and organisational structure to attain competitive edge over growing Indian competition, and attaining increased market share in International Market

The company manufactures Special Purpose Pumps for Critical applications for Oil & Gas, Refineries, Fertilizer industries

These are engineered custom made pumps for specific critical applications in these rigs, oil pipelines and refineries

BUSINESS TRANSACTION EPCs send requirement enquires to pump OEM companies The company makes offers and supports with its services to

the EPCs The EPCs place the order to the pump OEMs After order, the company manufactures these custom made

pumps and delivery is made at the End User Refineries Thus, pumps are sold to End User Refineries thorough EPCs

There are different departments viz Application Engineering, Design, Engineering Support, Procurement, Planning, Quality and Order Execution in this entire process

Each enquiry is different and needs attention from all departments to study the specifications and help make the offer correctly.

Their feedbacks and support is consolidated by the application engineering team which makes the offer for the EPCs

Since so many department were involved in offer making, and thereafter, the order execution (or manufacturing), the overall process becomes lengthy and errors are more likely to happen, which can lead to incorrect offer making or even order execution!

Application Engineerin

gDesign &

Engineering

Product Developm

entProcurement

Planning

Quality

Enquiry & Specifications

Offer to EPC

EPCTHE CHALLENGE

THE CHALLENGE The enquiries were required to be looked at by each of these departments

This was: Time Consuming & Lengthy Probability of miscommunication Comments and feedbacks were difficult

to incorporate, specially where more than one departments are involved

The knowledge sharing and coordination between departments was difficult

THE PROCESS TRANSFORMATION The company improvised many processes at the backend to support the

proposals and order execution The departments were dissolved and new concept of VCT (VCT stands for

Value Chain Transformation) was introduced The organisational structure was completely changed where three VCT

teams were now created These teams now consist for people from all the departments

Team Captain

Application Engineer Engineering Procurement Planning Costing &

Estimation Quality Order Execution

THE PROCESS TRANSFORMATION The team sits together and works together Headed by a ‘team captain’ it is responsible for complete enquiry-offer-

order cycle Each team is informally like a smaller company in itself, capable of

handling the complete process much faster with high efficiency

THE PROCESS TRANSFORMATION When the enquiry is received, all of

the team members sit together and study the specifications in detail

The feedbacks and comments are incorporated faster for better effectiveness of the offer

The offer is compiled by all the team members together

The final output : Offer and Order Execution: Just Before Time (JBT)

THE RESULT

2012 2013 2014 20150

2

4

6

8

10

12

14

No. of days for Offer Preparation

No. of days for Offer Preparation

THE RESULT

2012 2013 2014 20150102030405060708090

100

Percentage of Contractual Delivery Date (CDD) Adherence

Percentage of Contractual Delivery Date Adherance

THE RESULTIncreased Efficiency & EffectivenessCorrectness of OfferImproved Order Execution & On time DeliveryBetter Feedback and Support of other functionsFaster support to the customer

Reduced Time Taken for offer preparationReduced errors in offers and at order execution stage

THANK YOUGypsa Vinod