AID21899: Question: Read the case study – ‘Bharat Petroleum Corporation Limited (BPCL)’ and answer the following questions. https://adhocfilesngasce.s3.ap-south-1.amazonaws.com/academics/1660805631oeUx3.pdf
Question: Explain what activities were carried out by BPCL as part of the Business Blueprinting phase of the project. Was this a plain-vanilla implementation? Justify your answer giving suitable justifications.
From above pdf:
Read below case and write answer.
BPCL was one of the earliest amongst organizations in the energy sector to successfully implement Enterprise Resource Planning (ERP). While there have been some attempts by other organizations to implement ERP, the effort at BPCL was considered significant because for the first time it encompassed the entire operation of an integrated downstream oil marketing company involving nearly 200 locations across the country. This was certainly a bold technological step considering the general bandwidthconstraints prevailing then. As BPCL’s General Manager (Information Systems) put it, “It was a veritable technological challenge inasmuch as we could not get a reference case of running the downstream oil industry transactions comparable to BPCL’s magnitude on a TDM/TDMA VSAT link anywhere in the world.” With this achievement, BPCL also came to be ranked among the large ERP implementations of the country.
The Indian oil industry was under government control until the economic reform process began in the year 1991. After liberalization, the private sector entered several areas within the industry, viz., LPG, lubricants, refinery, and even oil exploration and production. The intention of the Government of India was to completely deregulate the oil industry by the year 2002. Considering the impact of changes experienced during partial deregulation and anticipation of the radical changes in the business environment after deregulation, BPCL undertook a massive exercise for preparing itself to face the challenges.
BPCL has always enjoyed the image of a progressive organization. It is, in fact, the only Indian company to have won the CIO Global 100 award for its use of technology and forward looking human resource (HR) policies. Also, it was the only public sector organization to figure in the top ten best employers in India in the Business Today survey in 2001.
BPCL’s change initiative started towards the end of 1996 with the help of Arthur D Little, Inc. (ADL). ADL’s methodology involved a cross-section of the organization in co-creating a vision for the company, determining its current reality, conceptualizing the gaps between vision and current reality, and finally evolving a change plan to bridge these gaps. Customer focus emerged as the overriding dimension of this exercise and, hence, down the line, the change initiative of the company was transformed into a programme called CUSECS — Customer Service and Customer Satisfaction. In tangible terms, the change plan resulted in restructuring and radical delayering of the organization. It did away with the earlier departmental silos and created six strategic business units (SBUs), viz., Refinery, Retail, LPG, Lubricants, Industrial and Commercial, and Aviation; shared services and support entities such as finance, human resources, information systems, etc. The new structure comprised of four layers, as compared to the previous six or seven. In intangible terms, it involved change processes that would transform BPCL into a learning organization (Senge, 1990)’.
The entire change plan necessitated effective integration and was premised on a massive increase in the information intensity of the organization. It was envisaged that IT would contribute significantly in this and thus began the project for evolving an information system for the organization.
BPCL’s IS plan envisaged the creation of a comprehensive system for supporting the business aspirations of the company. A small team of nine people drawn from the IS and CUSECS programme set out to map the existing business systems (legacy systems) vis-a-vis the future needs characterized by customer focus, resource-optimization, integration, and flexibility. The team concluded that it was imperative to replace the existing batch-process-oriented legacy systems with a state-of-the-art ERP system.
Thereafter, the challenge for the team was to select the most suitable ERP package. As part of the selection process, the IS plan team mapped all the major processes in BPCL and created over 600 process maps with the help of people identified as possessing expertise and conceptual insights in their business areas through a series of process workshops. These workshops were conducted at all the four regional headquarters, viz., Mumbai, Delhi, Chennai, and Calcutta. The team developed a detailed requirement- list and a comprehensive questionnaire based on these processes and wrote a number of scripts in order to capture significant business scenarios. The requirement-list and questionnaire served the purpose of pre-selecting/validating the ERP products for detailed evaluation, while the scripts were used in the final evaluation of the product.
While the team was preparing itself for an objective evaluation of the ERP products, it was the SBUs and the supporting functional entities that had to own it up. “Sheer expanse and intrinsic complexity of ERP packages in itself posed a formidable challenge but the bigger challenge lay in enrolling all the stakeholders in the selection process” said one IS team member. A series of educative workshops were conducted for the SBU/Entity heads and their teams on aspects ranging from basic concepts to architectural specifics of ERP products. These presentations were later extended to a wider cross-section of people in the organization.
After deciding upon the possible ERP vendors, each vendor was asked to give presentations to an identified set of over 100 people from different businesses. The objective was to make key people understand the working of ERP systems, clear their doubts, and create a felt need in them and eventually make them commit themselves to ERP implementation in their respective businesses. Through this process, each business came out with its expected quantitative as well as qualitative benefits, which formed the basis for project approval. A detailed technical selection process was undertaken to find the ‘best fit’ ERP package for current and future needs of BPCL. SAP R/3 software was selected for implementation. The selection process of SAP R/3 is discussed in Annexure 1. The estimated quantitative benefits totalled Rs 42 crore per year. The contributors to these benefits in terms of SAP modules and business processes are given in Annexure 2.
The top management decided to name the project for implementation of SAP R/3 as project ENTRANS, a short form for Enterprise Transformation. The name signified the top management’s vision of a totally transformed organization — a new BPCL. “The unique thing about BPCL’s ERP implementation is that right from its conception, it has been a business initiative. We just performed the necessary catalytic role;” paradoxically, this expression of pride came from the Head of IT in BPCL. Although during the software selection phase, on account of criticality of technological issues, IS had to don the role of a process-anchor, the implementation phase was led by a non-IS person. The person who eventually came to head the project was Mr Shrikant Gathoo, an HR professional. The notable feature of the IS plan team was that it had only ten persons from IS, the remaining 60 coming from various businesses.
A Project Steering Committee (PSC) was constituted with the heads of all the SBUs, Finance, HR, and IS as its members. The mandate of the PSC was to validate decisions taken by the project team, take decisions on interface (inter SBU/ Entity) issues, identify and solicit decisions from the Apex Council (that comprised working members of the board of directors) on issues with wider strategic /organizational implications, provide resources, and review the progress of the project. The PSC met at least once a month and as and when the issues demanded resolution.
BPCL planned to implement almost all the modules of SAP R/3 as given in Annexure 3.
The implementation was conceived in two phases. The first phase comprised the Conceptual Design and Planning (CDP) while the second phase covered Detailed Design and Implementation (DDI). The necessity of assistance of an external agency — a SAP Implementation Partner having relevant expertise and experience — was generally conceded.
Price Waterhouse Coopers (PWC) was selected as the implementation partner through a bidding process for the CDP phase. PWC was mandated to complete the CDP phase within six months. The scope of the CDP phase is given in Annexure 4.
“Most of the CDP phase was done without the actual software in place. We got the software and thought that we would look at the product and start designing the processes. But, we learned that it was not possible. This was because to see end to end of a process you needed to really configure the product, which was not possible in the limited time frame of six months,” said KB Narayanan, a member of the ENTRANS team who worked in the CDP phase.
The CDP phase helped to bring in the stakeholders to discuss many important aspects that were needed for the detailed design such as the organizational structure (in SAP) or the unit of measure for petroleum products. It catalysed a considerable buy-in of the company and provided time for many preparatory tasks such as capacity planning, network planning, authorization management, system landscaping, printing methods, etc. which benefited the implementation immensely in the long run.
SAP India was chosen to assist BPCL in the DDI phase through a bidding process. A note on the selection of the implementation partner for the DDI phase along with the deliverables is given in Annexure 5. SAP provided 24 consultants headed by Mr Vijay Motwani and deployed its ASAP (Accelerated SAP) methodology. The project team evolved a broad implementation schedule of 24 months.
It was decided that, initially, pilot implementation would be carried out at a couple of locations/business areas. On the criteria of business and IT-readiness, proximity to project team (Juhu, Mumbai), and salience of processes involved, three sites were identified: Refinery, Wadilub Lubricants Plant, and a Lubs C&F Agency at Pune. The SAP modules implemented during the pilot implementation were FI, MM, QM, PP, SD, PM, IS oil, and CIN (Annexure 4). Many teething problems were experienced at the pilot locations. For instance, at Wadilub, the staff observed that many simple tasks in the earlier system had now become tedious involving many steps and demanding longer working hours than before. They tended to take short cuts but soon realized that the system would not allow it. Likewise, many of the informal processes of the past needed formalization in SAP. For instance, the container suppliers used to directly despatch the containers to the third party blenders without making Goods Receipt (GR) and Goods Issue (GI). Even while making the receipt of finished products from such supplies at Wadilub, the system would not physically receive because it did not have any issues of such materials. This being a pilot implementation, many configuration problems were also encountered causing a lot of anxiety among the staff. It was accentuated by the premature redeployment of five management and 11 clerical staff from the plant. It was commonly felt that the stress on the staff after implementation of SAP was more as compared to working in the old system.
Notwithstanding these difficulties, Mr Vairamohan, the Plant Manager, recounted the benefits from the pilot implementation saying, “SAP system imposed strict discipline among the staff to follow certain sequence of operation, as a result, there is no suspense issue at Wadilub today. We are able to get many logistics information such as material inventory, product despatches, and pending indents.” He felt that the benefits could be further leveraged if the plant processes are automated.
SAP’s ASAP methodology for implementation consisted of five distinct phases, viz., project preparation, business blueprint, realization, final preparation, and go live and support. However, in BPCL, the whole project was divided into a pilot phase and a rollout phase. All the SBUs went live at one or two locations and only after their stabilization, the remaining locations were added. The main anxiety during the roll-out was the network support because the tenuous links to most of the BPCL locations could not support the on-line SAP transactions. The network plan of the IS was delayed because of the nonavailability of satellite transponders. IS took many contingency steps like reconfiguring mails, providing ISDN links, implementing ad hoc reservations, etc. and supported the roll-out schedule. Later, when the second subnet and the leased line network was implemented, the network withstood all demands of the roll-out.
The typical roll-out was preceded by certain preparatory tasks. A team comprising ENTRANS, Business, and IS would visit the location and ascertain its readiness for the roll-out in terms of hardware, software, and connectivity. The training of the users would be conducted at the suitable location. The actual roll-out team will then go to the location and execute cut-over to SAP R/3.
In order to provide continued support to the users who had gone live on SAP, a new structure called Centre for Customer Support and Excellence (CCSE) was formed within ENTRANS. A crossfunctional team of 15 people representing expertise in all the modules of SAP R/3 manned this centre. The centre was expected to look after all the crucial areas in SAP environment, viz., master files, authorizations, processes, and maintenance of SAP system.
Besides, it was mandated to perform many other important tasks that are connected with the maintenance and running of the SAP system, viz., performance management (response times), changes in SAP software, testing and getting acceptance for all changes, data archival, upgrades of hardware and software, documentation, and communication to all the users. The centre was also expected to take new initiatives like data warehouse, internet enablement of processes, supply chain management, etc. CCSE was supposed to operate as a central help desk to all the SAP users and would periodically interact with the business co-ordinators who were identified at all the locations to arrive at the best possible solution for the end users. The CCSE at BPCL was already operational.
Management of Change
ERP implementation in a large organization like BPCL poses many obvious technological and project management challenges. Every organization, therefore, consciously prepares itself for facing them. One challenge that is not so obvious in the beginning but becomes most formidable at the end is that of change management. BPCL recognized it as the foremost challenge and dealt with it right from the conception phase in the most elaborate manner. It had an advantage of successfully managing a change of similar magnitude in the recent past during the CUSECS project. The same methodology was employed again. A note on the change management methodology is provided in Annexure 6.
Right from the beginning, change management issues were considered to be of utmost importance. Apart from training, various motivational workshops were conducted throughout the organization in small groups. This was done to maximize employee participation and acceptance of the change process. Six full-time coaches were appointed for taking up the change management process. These coaches further trained a few others to work as part-time coaches. The role of these coaches was to facilitate the transition of employees into their roles in the post- ERP organization. They went in for an in-depth discussion and clarifications on all the issues concerning the employees. The employees were concerned that there would be a large scale reduction of workforce. Their fears were allayed by an early announcement by the Chairman that there would not be any downsizing on account of SAP implementation. SAP implementation was bound to change. every role in the organization and the management was committed to equip each employee to take up that role. There were special communication exercises conducted all over the country on these issues that included the workmen and their trade union leaders.
The final roll-out of implementation of various SAP modules across the organization was smooth. At the time of writing this case, BPCL had already rolled out SAP at 160 locations out of an estimated 200. On the technological front, the project had been quite stable from the beginning. This was a veritable feat considering the sheer size of the project and complexity of certain operational features. Says K B Narayanan, the Head of the Basis team and a member of the IT team, “We have set many things right such as the 64-bit implementation (OS, DB, and SAP), good disk sub-system, choosing the right database, careful sizing of load for the ambitious rollout, network planning, huge training across locations, streamlining of authorizations (for 2500 users) with profile administrators in the business, strict performance monitoring, streamlining of printing jobs across the corporation, etc.” Comparing with some of the past large implementations, BPCL has indeed done exceedingly well in managing IT. However, there are many challenges ahead in terms of managing database growth and performance, backup times, upgrades, archiving, network performance/uptime, implementation of new solutions like BW, CRM, SCM, etc. The implementation process is rated highly successful and is reported to be in the ‘top quartile’ by SAP.
The benefits that would be derived from this high cost implementation are substantial. According to Mr A Sinha, Director (Finance), the benefits expected would amount to Rs 42 crore per year. However, the moot question is how to follow-up the measurement of the benefits.
BPCL’s ERP implementation has distinguished itself in terms of at least two important features: top management commitment and organizational efforts put in for change management. It has already been acknowledged among the successful implementations. But, the question still lingers as to how to define this success. This key question remained unanswered in the minds of the case writers for the following reasons:
• The cost estimates of the project do not cover disaster recovery or networking.
• Many of the estimated benefits could be attributed to networking of the locations and not to ERP.
• Essentially, ERP benefits should accrue through the radical change in processes. There has not been process reengineering in BPCL’s implemen tation.
• The change in process and consequently in roles has been software-driven and not through a radical business review.
• Without process reengineering, ERP provides mere process automation and integration that can lead certainly to downsizing of the workforce. BPCL’s benefit list does not include any man power reduction.
• In order to provide for benefit measurement (project evaluation), there should be benchmarks for the key parameters. In the absence of these benchmarks, benefit measurement remains a big question mark.
• ERP is not a monolith. It comes in a modular form and is amenable to data interface. It provides opportunity to maximize benefits from ERP by strategically optimizing the mix of ERP modules and non-ERP systems. BPCL did not carry out this optimization exercise.
Similar concerns arise in the strategic realm which are as follows:
• What impact will ERP have on the productivity of people?
• A laid down process works opposite to innova tions. Would creativity of employees be killed by process regimentation that an ERP entails?
• ERP may give an illusory impression of reducing the mundane tasks and releasing time for people to engage in analytical thinking. It can release people but not time for the people who remain behind. We learnt that people are more stressed in an ERP environment than before. The data deluge may not necessarily lead to analysis.
• How do we keep the motivation level of people high over a period of time in the face of the danger of human beings getting lost in the cobweb of systems?
• According to the Chairman, there would be no reduction in the workforce. On the contrary, new jobs would be created for employees who had been trained for different roles. This has worked well till date but would this continue in future?
• What would be the role of the 70 odd employees who are now certified SAP consultants? Would BPCL be able to exploit their expertise/knowledge?
• The roles of people tend to get defined in terms of profiles in the system. Would it not engender a narrow outlook in people?
• Does ERP provide process flexibility to organizations? Being intrinsically complex, the ERP systems require very specialized resources and a long time to reconfigure processes. Would it not affect the agility of an organization in the emerging dynamic market?
These and many other questions may never get incontrovertible answers. “The question is not how business will benefit from an ERP but what it will lose if it does not have one. It is like the hygiene factor of Herzberg’s theory,” as one of the case writers commented which perhaps provides an apt answer to these vexing questions.