ABOUT HPCL

HPCL is a Fortune 500 company, with an annual turnover of 25,306 Millions) during FY 2009-10, having about 20% in India and a strong market infrastructure. Marketing

Rs. share

1,08,599 Crores and sales/income from operations of Rs1,14,889 Crores (US$

HPCL operates two

major refineries producing a wide variety of petroleum

fuels & specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum(MMTPA) capacity and the other in Vishakapatnam, (East Coast) with a capacity of 8.3 MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is constructing a refinery at Bhatinda, in the state of Punjab, as a Joint venture with Mittal Energy Investments Pte. Ltd.

HPCL also owns and operates the largest Lube Refinery in the country producing Lube Base Oils of international standards, with a capacity of 335 TMT. This Lube Refinery accounts for over 40% of the India's total Lube Base Oil production.

HPCL's vast marketing network consists of 13 Zonal offices in major cities and 101 Regional Offices facilitated by a Supply & Distribution infrastructure comprising Terminals, Aviation Service Stations, LPG Bottling Plants, and Inland Relay Depots & Retail Outlets, Lube and LPG Distributorships. HPCL,

over the years, has moved from strength to strength on all fronts. The refining capacity steadily increased from 5.5 MMTPA in 1984/85 to 14.8 MMTPA presently. On the financial front, the turnover grew from Rs. 2687 Crores in 1984-85 to an impressive Rs 1,16,428 Crores in FY 2008-09.

HPCL LUBRICANTS

HP Lubes is an integral part of Hindustan Petroleum Corporation Limited, one of India's frontline oil majors, committed to providing energy and fueling growth in every significant area of development. In pursuit of this vision, there is a sustained emphasis on environment protection and preserving the cultural heritage of India.

HPCL Lube market share is around 11%. The HP Engine Oils product range covers over 300 brands of lubricants, greases and specialties catering to the automotive as well as the industrial sector. HPCL has six lube blending plants at Mumbai, Kolkata, Chennai and Silvassa.

HP Lubricants are borne out of an intense and unrelenting R & D effort, which aims at producing quality products that enhance automotive performance standards. The range of HP Lubes is comprehensive and catering to the minutest needs; from new generation cars to ploughing tractors and industrial machinery. The range conforms strictly to OEM specifications, often taking the initiative in customization of products.

The various lubricant segments of HPCL are:

INDSTRIAL SPECIALITIES HP LUBRICANTS AUTOMOTIVE GRADES INDSTRIAL GRADES

GREASES

Since the study is focused on automotive lubricants and within automotive lubricant, engine oils are taken under study within which Diesel engine oil, passenger car motor oil and four stoke oils are taken. The various brands of HPCL in automotive segment are:

HPCL AUTOMOTIVE LUBRICANT

AUTOMOTIVE LUBRICANT
GEAR OIL

DEFENSE

AUTOSPECIAL ITIES

TRANSMISSION GRADES OILS

ENGINE OILS

FIRST FILL ENGINE OILS

PETROL ENGINE OILS

NATURAL GAS ENGINE OILS

DIESEL ENGINE OILS

ENGINE OIL DIESEL ENGINE PASSENGER CAR FOUR STROKE OIL

MILCY 40 LAL GHODA CHAMPION MILCY TURBO HP NO1

HP CRUISE HP ACE

RACER 4 RACER 4- EXCEL

AIMS AND OBJECTIVES

Hindusthan Petroleum Corporation Ltd. has large percentage of share in lubricants market of India primarily it is playing a dominant role in industrial segment. Though it has various advantages still company is unable to make a strong presence in consumer segment of lubricant market. HPCL is thriving hard to minimize its cost in supply chain process. Looking the market trend and situation the study Supply Chain of Lubricants in HPCL has been undertaken to find the following: To portray the lubricant market in India liberalization and current state of competitiveness.

To understand and analyze the supply chain process of lubricants in HPCL particularly in Budge Budge Terminal.

Application of Porters Five Force Analysis and SWOT Analysis to identify HPCLs advantages and disadvantages in lubricant market.

REVIEW OF LITERATURE
1. HPCL Annual Report: It describes about company profile, new project, company structure, financial data and future developmental plan of company.

2. Research on HPCL: It describes company details about various products, company strategy and companys long-term planning.

3. www.crisil.com/Ratings/Commentary/CommentaryDocs/lubart.pdf: It describes about the global and Indian scenario about lubricant market

4. Dawson, Catherine : It describes steps, procedure and methodology of research.

5. www.hindustanpetroleum.com/: It provides information about company, product, market and other information.

Methodology
A structural representation of study methodology:

PROBLEM DEFINITION

DEVELOPMENT OF APPROACH TO THE PROBLEM

RESEARCH DESIGN FORMULATION

DATA COLLECTION

DATA PREPARATION AND ANALYSIS

RECOMENDATION

STUDY ON INDIAN LUBRICANT MARKET: Introduction:

Global demand for lubricants in the world is estimated at around 41 million KL. Automotive lubricants account for around 54%, Industrial lubricants at around 41% and marine for the balance. Globally the lubricants industry has been growing 2.0 to 2.5% per annum in the past 5 years. In developed countries automotive lubricants have been growing at slower rate of 1.0% per annum on account of the saturation of vehicle population, improved engine technology and better quality oil. Asia is the 3rd largest market for lubricants in the world and is expected in future to grow at a faster rate as compared to other developed markets. Asias share in the world lubricant market has increased from 22% in 1993 to 25% in 1998.

AREA WISE DEMAND

Asia Paciic Europe Central- Southern America Northern America

28%

25%

12% 35%

INDIAN SCENARIO
India is the 6th largest lubricant market in the world, with a consumption of around 1.12 Million KL. In 1998-1999 as against a installed capacity of 1.6 Million kl and has grown at a CAGR of around 7.0% over the period between 1993-1998. However with the industrial down turn an also slower growth in the automobile sector, the growth of the industry has slowed down to around 4.0% in the last few years. Till 1993, the Indian lubricant industry was totally controlled by the Govt. with the Oil Coordination Committee (OCC) controlling all aspect of the industry. Thus, the industry was dominated by the oil public sector units (PSUs)-IOCL, BPCL, & HPCL. Castrol was the only major private sector in the industry.

COMPANY WISE MARKET SHARE

TIDE WATER 4% GULF OIL 6% CASTROL 19% IOC 30% BPCL 8% ELF 3% OTHERS 6% HPCL 24%

RECENT TRENDS Increasing industry competition: In 1993 the Govt. liberalized the lubricant sector and announced a number of regulatory changes. This included The entry of foreign companies into the Indian market Decanalisation of imports of base oil.

MARKET SHARE
Automative segment Industrial Segmnt

Country America China

Per Capita Consumption 31 14 2 1

40%

Europe
60%

India

Decontrol of pricing of base oil. Reduction of custom duties on base oils.

REASONS FOR DECLINING LUBE TO FUEL RATIO

TECHNOLOGICAL DEVELOPMENT Automotive engineering technology has improved significantly in past few years, with a corresponding impact on the improvement of lubricant quality. Improving engine and lubricant technology has resulted in the decline in the lube to fuel ratio. Additionally, there has been demand from both the OEMs and the customers for better quality lubes with longer life, better properties and lower deposit formation, meeting the stringent emission standard required.

Supply chain Process of HPCL:

IMPORT OF ADDITIVES (IN FCL) IMPORT OF CRUDE OIL (IN FSL)

ADDITIVES ARE UNLOADED & TRANSPORTED THROUGH TRUCKS

CRUDE OIL ARE UNLOADED IN FEDDER VESSELS OR ARE TRANSPORTED THROUGH PIPELINE

MATERIALS ARE STORED IN TANKS

IN-HOUSE PROCESS (EXPLAINED IN FIGURE)

A typical lubricnt manufacturing process:

FINISHED PRODUCTS ARE STOCKED IN CAPTIVE

DEPOT (STOCK STRANSFER)

INDUSTRIAL CONSUMER (DIRECT SALES)

DISTRIBUTORS/ WHOLESELLER

RETAILERS

SMALE GARAGE

ADDITIVES
Plain mineral oils cannot provide all the necessary functional properties that an engine requires. These plain mineral oils need fortification with chemicals/additives which when used in small quantities, import or enhance the desirable functional properties. Some of the types and reasons for their use are as follows:

Dispersants: Keeps sludge, carbon and other deposit- precursors suspended in oil. Detergents: Keeps the engine parts clean from deposits.

Rust/Corrosion increase.

Inhibitors:

Prevents

or

controls

oxidation

of

oil,

formation of varnish, sludge and corrosive compounds, limit viscosity

Extreme Pressure (EP), Anti wear and friction modifiers: These form protective film on the engine parts and reduce wear and tear.

Metal deactivators: Forms surface films so that metal surface does not catalyze oil oxidation.

Pour Point Depressant: Lowers freezing point of oils assuring free flow at lower temperatures.

Anti-foamants: Reduces foam in crankcase and blending.

Base Oils
The name given to lubrication grade oils initially produced from refining crude oil (mineral base oil) or through chemical synthesis (synthetic base oil). Base oil is typically defined as oil with a boiling point range between 550 and 1050 F, consisting of hydrocarbons with 18 to 40 carbon atoms. This oil can be either paraffinic or naphthenic in nature depending on the chemical structure of the molecules. Mineral oils (paraffinic, naphthenic), synthetic hydrocarbons (PAO, Alkylates) and other synthetic compounds (Esters, Polyglycols, etc.)

Logistics process of crude oil in HPCL: The crude oil is coming from various countries Iran, UAE etc. The crude price is controlled by various bodies like The Organization for Petroleum Exporting Countries (OPEC). The crude comes in full ship load and gets unloaded in deep mooring in to feeder vessel. Then feeder vessels ship the crude oil from transshipment point to destination i.e. refineries like Mumbai, Vizag. The crude oil then transfer in to tanks of refineries through pipeline which are located in storage area of plant. As requirement and production plan the refining process starts. Base oil is prepared in refineries HPCL has the largest lube refining plant in Mumbai. It has a capacity of 6.5 MMTPA which is 40% of Indias total capacity.

Logistics process of Base Oil in HPCL: The processed oil is shipped in different terminals i.e. the blending units in different parts of country. Logistics process of Additives in HPCL: There are two option to acquire the additives (Source) Local Vendors Import

Both the option has its own merits & demerits.

PRIME ACTIVITIES OF LOGISTICS: The key activities of logistics are: 1) Inventory Maintenance It is usually not possible or practical to provide instant production or instant delivery to customers. In order to achieve a reasonable degree of product availability, inventories need to be maintained as buffers between supply and demand. The extensive use of inventories results in the fact that, on the average, they account use of approximately on third of logistics costs, making inventory maintenance a key logistics activity. 2) Order Processing Order processing cost tends to be minor as compared to transportation or inventory maintenance costs. Nevertheless, it is a primary logistics activity. Its essential nature comes from the fact that there is a critical time element in

getting goods and services to customers. Also it is the primary activity that triggers product movement and service delivery. 3) Transportation: For most firms, transportation is the most important logistics activity, simply because it absorbs, on the average, approximately two thirds of logistic costs. Transportation refers to the various methods for moving a product. Road, rail, water and air are just a few of the popular choices. Management of the transportation activity usually involves in making choices regarding the method of shipment, the routings, and the utilization of vehicle capacity.

TRANSPORTATION AT HPCL Effective transportation management can help to reduce the total cost. It functionally provides two major functions: product movement and product storage. Here at H.P.C.L. Budge Budge and Ramnagar Terminal the main model used for transportation are well managed and effective in cost. The transportation is done by road. The road transportation is used for lubricants products. For delivery of the products, mainly 3 transporters are selected through bidding which covers each and every region of India. Various regions of India are allocated to particular transporter. After selecting transporter, the contract procedure takes place. In contract, the contract conditions are written which are prepared by expertise of H.P.C.L.

CONDITIONS FOR THE CONTRACT IN HPCL

1. The corporation reserves the right of accepting or rejecting the whole or any part of the tender. The tenderer should code competitive or workable rate for operating throughout the contract period. 2. EMD (Earnest Money Deposit) EMD of successful tenderer shall either be converted in to security deposit towards the fulfillment of contract or refunded after submission of bank guarantee. 3. Security deposit in case of cash security deposit the balance amount is paid by way as under Demand Draft Bank guarantee from any nationalized bank or specified bank in favor of HPCL. 4. Corporation shall pay interest @ 8% per annum on the cash/DD security deposit. 5. FORCE MAJEURE uncontrollable conditions like fire, explosion, and natural causes like flood, earth wake, strikes etc. neither the corporation nor the transport contractor shall be liable or deemed to be in fault. 6. Settlement of dispute/ arbitration in case of any disputes the rules of arbitration of Indian council of arbitration shall be binding of the party.

EXSISTING RIVALRY AMONG COMPETITORS Lubricant market is highly competitive, with more than 30 players in the market Major competitors are Castrol, BPCL, IOCL, Gulf, Valvoline Strong product promotions through advertisements for example Castrol is doing for its CMO and FOUR STOKE (Castrol magnetec) segment Quality of parent brand- quality of first brand launched by the competitors have good impact on customers mind, therefore driving the customer to buy the current brand Strong distribution channel- Castrol has strong hold on bazaar shops

BARGAINING POWER OF SUPPLIER Lube base stock is obtained from its own (HPCL) refinery, hence have some control over bargaining power Though in case of crude oil the supplier has higher power and impact on price depends on various economical, political and legal aspects. In case of additives during imports it has stringent process though supplier power is limited. As large number of supplier are present in market. BARGAINING POWER OF BUYER

Bargaining power of consumer in high because of large number choices. of competitors, therefore consumer has many

Margins for retailers and bazaar shop owners Schemes provided for retailers, mechanics. Product variety/ differentiation based on pack size, based on quality or specification

Quantity/ volume purchased (KL) per month by buyer- Based on the amount ordered the schemes can be provided to the retailers and bazaar shop owners.

Importance of product to the buyer- Whether the brand is providing all the benefits or not

Credit period to the buyer, whether the period is 1 month or more Quality of pack- Attractive packaging (sticker, labeling), packaging material

Cost of lubes is low as compared to Castrol, Valvoline, Gulf etc.

THREAT OF SUBTITUTE PRODUCTS

Infect no close substitute is present but recently bio-diesel is coming in the market. And in the present world where the environment is a pivotal concerned it can be a challenging situation for HPCL.

THREAT OF NEW ENTRANTS

Government policies- Decentralization of lubricant industry in 1993 gave entry to private players.

New technology- IOCL to launch biodegradable lubricant.

Cost advantage- Provide same segment lubricant brand at lower price.

Entry barrier- Brand name and image of existing brand and distribution network.

SWOT ANALYSIS
STRENGTH Prices are comparatively low. Consumer have good image about the company. Laal G h o d a has made position as low price DEO, which is competitive as per cost of product is concerned. Schemes offered to consumers are good. Manufactures raw material (LOBS) for lubricants thus having control over margins. Retail outlet as strong distributional channel.

WEAKNESS Low above the line (ATL) activities such as advertisements through media, hoardings, bill boards etc. Since lubricant marketing is same as that of FMCG products therefore requires continuous media promotion as a reminder to the customers. Packaging of Racer 4 is not attractive specially the label and sticker.

Laal Ghoda is used only for top-up purpose. Also, most of customers use this brand for pressure jack oil, not as engine oil.

Has lower percentage occupancy of lubes in bazaar shop shelf, which is around 10-12%.

OPPORTUNITY Tie ups with OEMs (original equipment manufacturers) such as with Eicher Motors, Tata Motors, Volvo etc specifically in DEO segment. Expansion in rural India, auto firms have begun tapping the countryside. For instance, Maruti Suzuki generates 10 per cent of its sales from rural sales, amounting to 32,000 cars. THREATS Increasing market share of Valvoline and IOCL in Delhi NCR region. High duplicity in market leads to low pull for product.

FACTORS AFFECTING TOTAL CYCLE TIME OF TRUCK

The main purpose of any project is to study the system and find the problems and loopholes, which exits in the system as here at HPCL Budge Budge Terminal. We have been assigned the problem of high cycle time and for that we have to observed the system and found out the solution for reduction of cycle time. For that we observed the system from various aspects and we found out some reasons that were increasing cycle time. HPCL is dealing in a market, where optimum utilization of time is also very important factor, as the profits equally depends on the production as well as the time saved and optimally utilized time could add to more of the profit of the company. 1. Improper handling of forklift and materials The laborers at different warehouses are not handling the material properly in the truck. In every consignment sometimes product get damaged which increases the time of loading and the cost because company has to replace this product. 2. Laborers Over manpower in HPCL which is increasing cost. 3. Lack of Professionalism - People at HPCL are having casual approach towards their work. They are passing their work to others which increase the processing time. They also take long lunch breaks, frequent and long tea breaks which hampers the system badly. Now the system is fully automated because of SAP but adaptation of new technique is difficult for them and still people dont know much about it. 4. Improper distribution of laborers Company is not placing laborers properly at the ware houses. 5. Lack of supervision There is lacks of supervision while laborers are loading the trucks which results in improper handling.

6. Improper distribution of trucks From the graph, we can say that there is lack of proper distribution of trucks during the entire day. We have divided the total time of loading and invoice of truck in three different ranges so that we can see that maximum numbers of trucks came between 12:00 to 16:30 hours. This improper distribution of trucks is due to the transport market which affects the logistic system very badly. OBSERVATIONS There is a lack of coordination between transporters and the warehouse department. So the department is unaware of the exact status of the no of trucks coming to HPCL and its arrival timing. Due to lack of coordination, the labors are also not aware of the trucks arrival schedule. This results in less no of laborers when the work load is more and vice a versa. Sometimes the driver of the truck has to wait because there is no one to attend him when he comes for loading. The fork lifter in order to finish off the work quickly, damages the product while lifting two pellets simultaneously. This results in increased loading time due to replacement of the damaged. It is also an unsafe practice. There is as such no regulation on the arrival and departure of the contract laborers. They come and go as per their own wish. There is improper distribution of laborers. It is observed that during shift change, the movement of all the trucks comes to a standstill so as to let the employee vehicles move freely. Moreover the processing of loading and invoice also stops due to shift change. This factor is unavoidable.

RECOMMENDATIONS
Supervisor should be there when trucks are getting loaded so that laborers work properly and damage and loading time can be reduced. Laborers sit idle until all the material is brought to the loading point. Supervisor should force them to start loading as soon as the first pallet or crate has been brought to loading point. The overall performance of warehouse depends on staff at warehouse but there is lack of co-ordination between dispatch staff. Warehouse person already have their dispatch plan. So they know about their daily work well in advance. The warehouse person should bring material at loading point in the morning before the truck comes for loading instead of bringing material after the truck comes. This would save time. The warehouse department should keep themselves informed about the no of arrival of trucks 1 day in advance so that the laborers can be managed easily and the work can be carried out without any delay. This would also help the labor contractor to place the no of laborers required on a particular day. There lifting of 2 pellets by the fork lifter should be avoided which would avoid any damage. Proper food facility should be provided to the contractor so as to increase the efficiency of the laborers. The forklift truck can directly be taken near the truck to be loaded so that the product can be directly paced inside. This would save time and less number of laborers are required. This procedure has been successfully implemented at RIL at Hajira. But for this the warehouse

infrastructure should be modified for the smooth operation of the forklift truck. LIMITATION OF STUDY Used vary small sample size i.e. only four days out of 30 days of May. Time period of study was during general shift hours i.e. between 8a.m. to 5p.m. So could not observe the activities till 10p.m.

BIBLIOGRAPHY

1. Annual Report of HPCL of 2010-2011. 2. CRISIL, research on HPCL (2010) viewed on 12-5-2012. 3. www.crisil.com/Ratings/Commentary/CommentaryDocs/lubart.pdf 4. Dawson, Catherine, 2002, Practical Research Methods, New Delhi, UBS PublishersDistributors 5. www.hindustanpetroleum.com/