Hindustan Petroleum Corporation Limited (HPCL), whose roots go back to 1952, is today

operational in the oil refinery and LPG distribution space. A Fortune 500 company, HPCL

recorded an annual turnover of over Rs 91,448 crores for the financial year ended March

2007. Currently, the company enjoys a 16 percent refining and marketing share in India and a

strong market infrastructure. The company has successfully completed Asia's largest JD

Edwards Enterprise One ERP implementation spanning about 400 locations and 4,000

employees across the nation.

Need for ERP

In a fiercely competitive petroleum industry, keeping partners happy is an imperative. But

HPCL was slowly facing the heat from its dealers. The problem was its manual process that

made human errors a big possibility. All this changed when HPCL implemented an elegantly

simple SMS solution that helped the company improve efficiency and save the day.

What was annoying was that the order processing was standard business practice. For dealers,

placing an indent - an order which typically holds the amount of oil that a dealer requires -

was just another thing that needed to be done every so often. But the process was painful.

Sometimes, dealers complained that when an HPCL official finally picked up the phone, he

or she got their order wrong or recorded it on their systems incorrectly or misplaced their

order.

The epicenter of dealer unrest, however, was a terminal in southern India. With the increasing

number of complaints it was getting, HPCL knew that if it neglected the problem, it could

prove costly. So, the company conducted an internal study and the result has saved it a world

of trouble.

The implementation Plan

The ERP implementation programme was started way back in 2000. The availability of a

sound technical infrastructure was necessary for implementing such a large initiative. This

meant building a centralised data centre where the servers and applications could be hosted as

well as having efficient connectivity for all locations spread across India's geography. Around

400 locations had to be connected.

One of the important initial tasks was to build a data centre equipped with servers and the

related infrastructure required for rolling out applications. To start with, HPCL covered three

locations within a month; ultimately, all 400 locations were completed over a period of two-

and-a-half years. As each location was selected for inclusion, the related infrastructure (like

WAN, lease lines, VPN and VSATs) was built simultaneously depending on the availability.

The DC, based in Mumbai, was powered with adequate computing capacity to enable it to

handle the expected growth in the wake of the ERP rollout. The company is now building

another DC in Hyderabad, which is visualised as a primary DC. By the end of 2008, they

moved their applications to Hyderabad. The company runs a refinery in Vizag and has also

made significant investments in the state, so Hyderabad was a natural choice for the new DC.

As HPCL enjoys a national presence, it was important to determine the path for the ERP

rollout. Several business processes were analysed for determining the points affecting the

process look. They came to the conclusion that the roll out should follow the logical

movement of the product. Thus, the ERP roll out started with locations in and around

Mumbai, followed by other Maharashtra and Gujarat locations, and finally, covered the entire

footprint of all 400 locations.

As per their strategy, they tried their best to get every possible and available means of

connectivity. BSNL was the only player in the connectivity space at that time. It provided a

connectivity platform for most locations; however, for distant locations HPCL had to depend

on VSATs. Over a period of time, as newer options like RF and broadband networks entered

the market, they were embedded into the existing set-up. Today, HPCL’s network is a hybrid

one powered by lease lines, VSATs, VPN, RF links and broadband links. The company

operates on BSNL's MPLS as well as a private service provider’s MPLS network for

redundancy.

The ERP implementation at HPCL, with all its challenges and successes, finally saw the light

of the day in December 2005 at an organisation-wide level.

HPCL continually invests in innovative technologies to enhance the effectiveness of

employees and bring qualitative changes in service. Business Process Re-Engineering

exercise, creation of Strategic Business Units, ERP implementation, Organizational

Transformation, Balanced Score Card, Competency Mapping, benchmarking of refineries and

terminals for product specifications, ISO certification of Refineries and Supply Chain

Management are some of the initiatives that broke new grounds.

HPCL has successfully integrated Information Technology in its activities at different levels.

The Enterprise Resource Planning (ERP) system is now operational on J.D.Edwards, an

Oracle product, across the Corporation.

Alignment of In-house and Vendor Teams

The project was kicked off with a 25 member in-house team comprising representatives from

all functional areas. Post the completion of the first phase of the project, which included

system configuration, more employees were inducted into the team and its size now expanded

to 100 people. In addition to this, a team of 100 consultants was also working from

Capgemini’s side, which was chosen to be the implementation partner for the project.

The company had set up a separate team for infrastructure building at each location. Based on

the roll out schedule, the lead time for infrastructure provision was calculated for each

location. The infrastructure team had to reach the respective locations on the basis of the lead

time available so that the roll out team could initiate the work as per schedule. Planning and

monitoring human resource mobilisation from various teams to various locations was a

challenge for the company.

The locations due for the 'Go-Live' stage in a particular month were given top priority and a

'work backwards' system was followed to arrive at separate tasks and their deadlines for those

locations. These tasks included procurement of hardware, applications for communication

links, and testing and liasioning with local people at the location. This kind of systematic

planning helped the company to reap the maximum benefits of its HR pool and consulting

team.

Business Process Speed Enhancement & Standardisation: Major Benefits

Post implementation, the company has noticed substantial improvement in efficiencies. For

example, before the implementation, the annual financial accounts closure would

approximately take a month while the monthly closing would consume 15 to 20 days. In the

past year i.e. 2007-08, the monthly and quarterly closing was completed in about five days

while the annual closing took a mere 10 to 12 days.

The second major benefit of the centralised ERP implementation was that it compelled the

company to look at various other services that could be offered to customers with the help of

IT. They realised that they could improve their transparency by making more information

available to their customers, vendors and transporters on a real-time basis with the help of the

Internet so that they can log in and check the status of loads, orders, and payments.

The implementation gave the company an opportunity to re-look at all its business processes

from the beginning. A lot of processes like manufacturing planning, procurement and

employee benefits that were being implemented manually previously are now automated. The

company is now looking at an IT-efficient growth strategy for the future.

Visibility Benefits for Top Management

The ERP enabled the generation of various day-end MIS reports on a regular basis. This

helped to revamp the way in which reporting was done to the top management. The IT team

went ahead and equipped the top management with Information portals to better their

business visibility. They used the concept of portals whereby the top management could

quickly view the summarised information online. At the end of the day, a lot of transaction

details were summarised and converted into a pre-packaged MIS before reaching the top

management.

Factors That Shaped the Success Story

The success of the implementation to four main factors - the expertise of the internal team;

the right implementation partner; commitment and support from the top management; and

effective project management practices.

They had experts from finance, refinery, marketing and LPG departments. These were people

who knew the business line. They brought in that knowledge to add to the expertise of the IT

team. This helped the project to gain a macro, company-level perspective. The HPCL ERP

implementation can be exemplary to other large organisations wishing to derive benefits from

IT adoption.

ERP Drives Parivartan at HPCL

Ever since the government of India announced deregulation of the oil industry in 2002,

HPCL had undertaken a Business Process Reengineering (BPR) study to ready the

organization for post deregulation market conditions. They had to be prepared to take on the

Shells and the Exons of the world.

One of the major recommendations of the BPR was the implementation of a world class ERP

system. The implementation of the ERP system would enable the corporation to meet the

challenges of the emerging market scenario.

Project Parivartan is HPCL’s initiative to implement Oracle s JD Edwards EnterpriseOne, an

ERP solution. The implementation covers all the modules of the ERP software viz. sales &

distribution, manufacturing, finance and HR. Customized modules to suit HPCL processes

have been developed for employee compensation & benefits and also payroll and both

integrated with finance and HR modules of the software.

Team set up and implementation partner

A multi functional team of 25 officers drawn from various functional departments was set up

for undergoing detailed training on the JDEdwards ERP system and take up the

implementation across the corporation, in 2000-01. This team strength was augmented over

time especially in the rollout phase.

After completion of the training, the team documented the As-Is processes of the corporation.

The implementation partner was selected from the consulting partners of JDEdwards. The

contract for the Conference Room Prototype (CRM) and pilot implementation was awarded

to Capgemini and Ernst & Young,.

CRP and pilot roll out

The pilot implementation project was divided into various phases.

* Validation of as-IS processes

* Finalization of the technical architecture and the hardware/software requirements

* Finalization of interfaces/customizations

* Configuration & testing of the Conference Room Prototype (CRP) for business processes of

the Corporation

* Roll out at the pilot locations

Based on the technical architecture, the corporation parallely placed the order for the

architecture components and set up the data centre at Mumbai.

The implementation at pilot locations was preceded by comprehensive simulation & testing

of the solution by building a CRM. All HPCL business processes were simulated and tested

here. The configuration & set-ups of the software were perfected to achieve the desired

business results from the software solution. At the completion of the CRP phase a model for

implementation of the JDEdwards software across all the locations was in place.

A customized module was developed for compensation & benefits and employee payroll

which was integrated to the core finance and HR modules.

The pilot locations were selected to represent every type of location in HPCL. Hence, a

refinery, lube manufacturing plant, depot, terminal, LPG plant, regional offices of retail,

direct sales & LPG SBU, aviation service facilities were chosen as pilot locations.

The first pilot location went live in Feb 2003, and the other specified locations went live by

July 2003. Based on the learning’s, a standardized template was refined so that it could be

rolled out across all the locations.

Roll out across the corporation

As HPCL has a national presence, it was important to determine the path for the ERP rollout.

Several business processes were analyzed for determining the points affecting the process

look & a detailed roll out plan for implementation across all locations of the corporation was

prepared. It was thought prudent that the roll out should follow the logical movement of the

product. Thus, the ERP roll out started with locations in and around Mumbai, followed by

other Maharashtra and Gujarat locations, and finally, covered the entire footprint of all 400

locations.

Before roll out, each location went through change readiness assessment exercise. The central

team visited the location to assess the infrastructure, communication equipment as well as

acceptance of the new system by the location workforce.

Workshops were held with the officers and the staff to explain the rationale of the new

system and take them on board in the whole exercise. They had made a short film depicting

salient features of Project Parivartan. The film also contained messages from the top

management including one from the chairman & managing director. This helped improve

credibility of the initiative as also it helped employees understand their role it.

Even though the system was tested in the conference room prototype, at each location, the

system was put through further tests using location specific data. This testing was done by the

users themselves under the guidance of the implementation team. This helped achieved twin

objective of increasing confidence of the users in the system and preparing the users for

actual working on the system. Typically, the implementation team would be at the location

one month prior to go-live. It would carry out the set-ups & testing as described above, train

the users during the month. The first of the next month, the system would go live. A part of

the implementation team would proceed to the next location to repeat this cycle. The other

part of the team would be left behind to support the users in case of any problems in working

with the new system.

HPCL took up the roll out across the locations from August 2003 based on the roll out plan.

Every month a set of locations were taken up for roll out. Number of locations to be taken up

each month depended on the type of locations, requirements of team size/composition,

coexistence issues etc. The entire roll out was completed without any delay.

Change management

A change management programme was put in place to facilitate a smooth transition for the

employees.

The first form of communication was spearheaded through Parivartan News, a newsletter

informing stakeholders about the project, and developments. The corporation also encouraged

pilot location visits, and conducted readiness surveys. The HR department organized basic

computer training programmes.

Champions were identified for the pilots. A champion was normally a senior person who

would champion the Parivartan cause among peers, and be a one-point contact between the

management and the employees. Competitions were organized for the best pilot.

A few quick win solutions such as SMS messages to the dealers/distributors were

implemented to increase the visibility of the system.

Extensive training was imparted to the potential users of the system. Some of the users were

given end-to-end process training for an in-depth understanding of the system. This enabled

them to perform the role of Key Users to provide support to the other users at the location.

Comprehensive training imparted to the users during the implementation at any site is still

being followed by refresher courses from time to time. Over 3000 man days of training have

been provided during the last year to the end users of the system covering the functional and

operational areas of the system. Apart from the traditional modes of class room training,

some innovative technologies like remote e-training have been used that have been found to

be very effective in quickly reaching to the users across the length and breadth of the country.

Now, the ERP system is in place in every location. The system helps the decision makers at

various levels in taking timely business decisions based on on-line & accurate information

that is available from the system. Standardization of business processes in the system has

resulted in better management control. Cost of operations can be tracked easily in the system

which helps the managers in controlling them. The system has contributed to substantially

reducing the time taken for closing the quarterly, half yearly and annual accounts.

It has been interfaced with Maximo maintenance management systems at the refineries, and

has been interfaced with the automation system at the marketing locations, electronic

weighbridges for weight based loading of bitumen, FO and LPG tank trucks. These interfaces

have made the operations simple and reduced the human intervention reducing human errors.

The number of locations where the interface has been implemented is being increased as

more and more terminals and depots are automated.

A state-of-the-art data centre in the Head Office at Mumbai hosts IBM enterprise servers

which manage the entire data and applications in a centralized architecture. The connectivity

to the locations has been established by using various available communication channels such

as leased lines, VSATs, radio links, ISDN, VPN and dial-ups. A separate Data Centre has

been set up in Hyderabad for providing a back-up in the event of any physical contingency to

the primary site. This DRC mirrors the main server and would be in a position to take over in

case of any disaster at the primary site as well as to enable any maintenance shutdown to the

server.

New initiatives in Parivartan

A multitude of IT-enabled solutions could be developed based on the foundation of the ERP

system. The availability of on-line and real time information in these systems enables speedy

decision making, improved responsiveness, reduced cycle times and could improve customer

service. ERP platform also enables development of real time interfaces to the IT enabled

systems of our various business partners. Various such new initiatives have been

implemented and sustained efforts continue to bring in more of these to reality.

E-banking initiative has been expanded to cover all payments to outside parties including

vendors, contractors and employees. We have tied up with multiple banks to offer the service

to the various categories of payees. E-payment has been rolled out to all locations, i.e. zonal

offices, refineries, Marketing & Corporate HQOs. Payment information flows seamlessly as

ERP server communicates directly with the bank servers. The payment is effected by the

bank through ECS, account transfer, EFT or by cheque. e-payment is helping the Corporation

to bring about transparency in the payment process and also ensure timely payment to all

vendors.

A customer portal is being maintained which provides complete visibility to the direct

customers, dealers & distributors on their transactions with the corporation. It is being

enhanced to provide a two way interface wherein the customer, in addition to seeing

information, is also able to place indents for products.

A portal for the transporters has been rolled out during the year to enable the transport

contractors to access information pertaining to their transactions with the Corporation. A

number of work flow based applications have been implemented for employee self service so

as to speed up the process of benefits administration. Capital budgeting process for Non-plan

projects has been captured in the system through workflow based application.

In the area of procurement, the platform provided by the ERP system is being used for

bringing in transparency. System for on-line vendor registration of vendors through the

Internet has been implemented. Similarly the system of hosting of tenders on the internet has

also been implemented. The corporation has completed a pilot for e-procurement which

would gradually be expanded to cover procurement of a wider range of products and services.