Article Report

A STUDY ON ERP IMPLEMENTATION AT IOCL AND ITS’ ACCEPTANCE BY IOCL OUTLETS IN INDIAN METROS

Article Report

Done by

ABHAY SINGH Register No. 07MBA003

Under the Guidance of

Dr. B. MURALI MANOHAR, M.Com., M.B.A., M.Phil., FDPM (IIM-A)., Ph.D Professor & Placement Coordinator MAY 2009

VIT Business School fostering innovation

VIT UNIVERSITY (Estd. u/s 3 of UGC Act 1956)

Vellore - 632 014, Tamil Nadu, India

ABSTRACT 1. ERP Implementation procedures and critical success factors European Journal of Operational Research 146

Year -2003, Page-241–257, Hankamer School of Business, Baylor University. In todays world all the company are going to words new generation with implementation of Enterprise resource planning in their industry. ERP systems are highly complex information systems. The implementation of these systems is a difficult and high cost proposition that places tremendous demands on corporate time and resources. At present success rate of ERP in Indian market is approximately 20 to 30 percent. Many ERP implementations have been classified as failures because they did not achieve predetermined corporate goals. The region is that people is not ready to accept the Change management. They are not ready to change their previous work culture. Because it is very difficulty that after working of 10 to 20 years in any environment its very difficult to change with some other new management. And with a complete new technology. This article identifies success factors, software selection steps, and implementation procedures critical to a successful implementation. A case study of a largely successful ERP implementation is presented and discussed in terms of these key factors. •

Pre evaluation screening.

•

Package Evaluation.

•

Project Planning.

•

Gap Analysis.

•

Re-engineering.

•

Configuration.

•

Implementation Team Training.

•

Testing

•

Going live.

•

End user Training.

•

Past Implementation.

. The story of the success of ERP systems in achieving the stated objectives is mixed. Some companies have had very successful implementations while others have struggled. Empirically investigates and identifies key differences in the approaches used by companies that managed their implementations. This research provides significant implications for industry managers engaged in large-scale enterprise system implementations. Our survey results suggest that understanding new

requirements for ERP implementation such as functional coordination is more critical issues than understanding technical features of ERP system.

1. ERP Managing the implementation process European Journal of Operational Research 146 Year-2003, Page- 302–314, Kelley School of Business, Indiana University, 1309E. Tenth St.,Bloomington. Over the past fewyears, thousands of companies around the world have implemented ERP systems. Implementing an ERP system is generally a formidable challenge, with a typical ERP implementation taking anywhere from one to five years. The story of the success of ERP systems in achieving the stated objectives is mixed. Some companies have had very successful implementations while others have struggled. This paper empirically investigates and identifies key differences in the approaches used by companies that managed their implementations ontime and/or on/under-budget versus the ones that did not using data collected through a survey of US manufacturing companies that have implemented ERP systems. Logistic regressions are used to classify on-time and on/under-budget firm groups based on the survey responses and to identify the significant variables that contribute to on-time and on/ under-budget implementation performance. The results indicate that many different factors ranging from pre-implementation planning to system configuration influence performance, which managers should be sensitive about when implementing major systems like ERP.

2.

Impediments to successful ERP implementation process

Emerald journal, Vol. 11 No. 2 Years -2005, page- 158-170, Business Process Management Journal, Findings of this journal is that most of critical impediments are from functional coordination problems related to inadequate support from functional units and coordination among functional units, the project management related to business process change, and change management related to resistance of users. In this study, impediments are categorized based on project phases,

and differences in the impediments the organizations faced between less successful and more successful organizations are found.

This research provides significant implications for industry managers engaged in large-scale enterprise system implementations. Our survey results suggest that understanding new requirements for ERP implementation such as functional coordination is more critical issues than understanding technical features of ERP system.

3. Assessing risk in ERP projects: identify and prioritize the factors. Emerald Group Publishing Limited, Volume 104, Number 8 Year -2004, page- 681-688, Industrial Management & Data Systems Various figures have stated that ERP systems have become one of the largest IT investments in recent years. The implementation of ERP system, however, is not an easy task. Previous research reports unusually high failure in ERP projects, sometimes jeopardizing the core operation of the implementing organization. The most famous case is FoxMeyer filed for Chapter 11 bankruptcy protection. Further, ERP systems appear to present unique ongoing risks due to its uniqueness. In this study, we used a Delphi method to identify potential ERP projects risk factors, and constructed an AHP-based framework to analyze and then prioritized the ERP projects risk factors. The result reveals that some important risk factors deserve more attention during the implementation of ERP projects. Electronic

4.

Indian Oil Corporation Limited Operation of Haldia Refinery

Report No. PA 9 of 2008 After a preliminary study and collection of background information an entry conference was held with the Management on 6 March 2007 to discuss the audit objectives/ sub- objectives and audit criteria. Test audit was conducted during February to July 2007 covering the Refinery Offices at Haldia and New Delhi. A Discussion Paper containing preliminary findings was issued to Management on 10 July 2007. The audit findings were discussed with the Management in the exit

conference on 19 September 2007. Audit acknowledges the co-operation and assistance extended by different levels of Management at various stages of performance audit.

5.

“Manthan”- Project for implementation of ERP and Re-engineering At Indian Oil Corporation

Limited. Year 2005, Article on Audit Report of IOCL,Govt. of India.

The Company, which decided to implement ERP solution, a state of the art technology, towards its IT re-engineering efforts and spent vast sums of money, had failed to get full benefits of the system. This was a result of deficiencies in planning, monitoring, training and communication of the Company vision to all levels of the organization, which led to delays, reliance on outside experts and lacunae in integration and implementation of the project. The Company also failed to comprehensively assess the risks and frame an effective mitigation strategy for the same. The system is

working

because

of the

expertise

and

involvement

of individuals but

improvements were not ingrained into all the relevant processes of the organisation as a whole. In order to complete all aspects of the re-engineering effort and exploit the full potential of the technology, the Company needs to focus on areas such as training, monitoring the processes and taking and analysis user feedback to plan and improve processes. The Review was issued to the Ministry in January 2005; its reply is awaited. From 30 Minutes to 1 Overall load on the system from customer programs dropped from 55% to 35%. As a result, costly hardware upgrades have been postponed or eliminated. Existing hardware is now being used to its optimum capacity. The entire system is delivering higher performance, with faster response times for online transaction processing across the board. Ramasamy cites examples. “We had on custom report that provided the details about ou r tank trucks in transit,” he says.

6. Indian Oil Corporation Limited Marketing of petroleum products to bulk consumers. Report No. P. A. 9 of 2008, Article on Audit Report of IOCL,Govt. of India The Company credited the DOS share of revenue to the ISRO instead of directly crediting it to the Consolidated Fund of India. Remittances were also not done in a prompt manner and periodical reconciliation of amounts due and payable to the DOS was not being carried out. The Company’s interest earnings were on an average, 50 per cent of its profit after tax, which suggested that the Company was being used as a special purpose vehicle for parking of unutilised funds of the DOS. The Company specific guidelines/procedures for accounts, investments, internal audit, personnel, etc. had not been developed even 15 years after Government of India’s directive. The functional distinction between the Company and the DOS was ambiguous since the officers of the DOS were also executives of the Company. There was no clear chart of delegation of powers and segregation of duties consistent with good

governance, structure and growth of the Company. Owing to ambiguities in the operating environment of the Company, several control weaknesses were observed in the management of funds and contracts in the Company. Instances were noticed of non-adherence to the conditions of contract and absence of appropriate provisions in the agreements; performance bank guarantee/cash securities were not collected, and savings on free period were passed on to customers. Service tax was not collected for hired foreign transponders and service charges were reduced in favour of private customers. The matter was reported to the Ministry in January 2008; reply was awaited.

INTRODUCTION The Indian Oil Corporation Limited. (Company) has an annual turnover of Rs.1,30,203 crore (2003-04) and commands 51 per cent share of petro product market of all the PSUs of the country. Its operational infrastructure consists of 10 refineries having 7,575 kms of pipeline and marketing network of 22,465 retail outlets. In 1996 the Company felt a need for IT re-engineering as it observed that over the years several need based modules were developed leading to creation of islands of information which lacked integration across the Company. Towards this the Company appointed M/s Price Waterhouse Associates (PWA) (April 1997) after limited tendering as Consultants to the IT re-engineering project (Manthan). The scope of the project broadly included developing a corporate IT strategy, formulation of design parameters for core integration of functional modules to be used at all the units of the Company from Board room to the refineries and upcountry sales offices, developing the required system architecture, determining the needs for upgradation and addition of hardware and software, integrating the existing modules as well as new modules and standardisation and implementation of the integrated system across the Company. The project was to be carried out in four stages, namely, Conceptualisation and Design, Development and debugging, Trial

Implementation and Stabilisation and Standardisation. The project was to be completed in 29 months (i.e. September 1999). Under the project, the Company, on the advice of the Consultants, selected SAP R3 along with the associated oil and gas specific software IS-OIL and CIN as the ERP solution for customisation and implementation across the Company, integrating important functions such as Finance and Controlling, Human Resources, Production Planning, Sale and Distribution, Material Management, Plant Maintenance, Project System and Quality Management. This was to be supplemented with ‘add-ons’ i.e. additional software solutions, which could be seamlessly integrated into the ERP environment. The ‘add-ons’ addressed vital functions such as demand forecasting, distribution planning, crude selection and refinery planning.

TEST RESULT STATISTICAL TOOLS USAGE THROUGH TESTS (Chi Square):1.

Chi-Square Tests

Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases

Value 81.034a 70.663 5.426

4 4

Asymp. Sig. (2-sided) .000 .000

1

.020

df

50

a. 5 cells (55.6%) have expected count less than 5. The minimum expected count is .72.

Table 1. Show Value of Chi Square Test

Inference-

From the above table no. 1. its Shows that the Chi square value is less than .05, so hypothesis is rejected which states that there is correlation between the Training program provided by the company people and change management taken place in the outlets of IOCL. According to it, there is effect of training on the change management.

2.

Chi-Square Tests

Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases

Value 18.452a 20.190 .188

4 4

Asymp. Sig. (2-sided) .001 .000

1

.665

df

50

a. 6 cells (66.7%) have expected count less than 5. The minimum expected count is .50.

Table 2. Show Value of Chi Square Test

InferenceFrom the above table no. 11. A,B its Shows that the Chi square value is less than .05, so hypothesis is rejected which states that there is correlation between the Order tracking & present

service provided by the company. According to it, present service is good compare to pervious one so the order tracking is also going in the right way

REVIEW OF EARLIER STUDIES. Journals and Magazines 1. Enterprise resource planning: Implementation procedures and critical success

factors. Elisabeth J. Umble, Ronald R. Haft, Department of Management, Hankamer School of Business, Baylor University, European Journal of Operational Research 146 (2003), Page no.-241–257. 2. Enterprise resource planning: Managing the implementation process.

Vincent A. Mabert, Ashok Soni, Department of Operations and Decision Technologies, Kelley School of Business, Indiana University, European Journal of Operational Research 146 (2003), Page no. 302–314.

3. Impediments to successful ERP implementation process. Yongbeom Kim, Sanjay Gosain, Robert H. Smith School of Business, University of Maryland, Business Process Management Journal, Vol. 11 No. 2, (2005), Page no. 158-170 4. Assessing risk in ERP projects: identify and prioritize the factors.

Shi-Ming Huang, Industrial Management & Data Systems Emerald Group Publishing Limited, Volume 104 · Number 8( 2004) · page no . 681–688.

5. Indian Oil Corporation Limited Operation of Haldia Refinery

Report No. PA 9 of Year 2008, Govt. of India.

6. “Manthan”- Project for implementation of ERP and Re-engineering At Indian Oil

Corporation Limited . Year 2005, Article on Audit Report of IOCL, Govt. of India. 7. Indian Oil Corporation Limited, Marketing of petroleum products to bulk

consumers. Report No. P. A. 9 of 2008, Article on Audit Report of IOCL,Govt. of India.

RESEARCH METHODOLOGY The study would require a combination of primary and secondary research. Primary data would be collected via questionnaires from dealers who are using branded/ Non branded fuel. The study will also involve interactions with marketing managers of various companies & the operators who are working over there at the outlets . Secondary data would be taken to understand the ERP implementation in IOCL, The information will be obtained from newspapers, websites and journals. The study is basically an empirical one based on data collected by primary survey conducted from 50 sample size of IOCL outlets. And the secondary data is collected from newspapers journals. For the selection of the sample a random sampling of IOCL outlets has been taken, Which is dividing the area into three regions on the basis of geographical concentration, namely northern side is Delhi, Eastern side is Kolkata and southern side is Chennai, and considering the various features which might directly or indirectly influence the level of ERP implementation in IOCL outlets. Descriptive Research It is designed for providing further insight into the research problem by describing the variables

of interest and can be used for profiling, defining, segmentation, estimating, predicting, and examining associative relationships. Both qualitative & quantitative data is used in this research. But more focus is given on quantitative data because this research is completely based on it. To begin with a little bit help has been taken from qualitative data.

FINDINGS  Out of the total respondents most of them are not satisfied with the company response before implementation of ERP. It shows that more than half of the respondents are satisfied or highly satisfied and few of them are not satisfied. So over all we can say that they are satisfied with the ERP Implementation.  It is found that out of fifty Respondent most of them are satisfied with the training provided by the company after implementation of ERP. According to the data collected 58 % of the respondents have given their views in fever of satisfaction, 30 % of them are said that they are highly satisfied and 12 % of them have said that they can’t say about it that means they have no knowledge of ERP. So we can say that outlet dealers are satisfied with the training provided by the company.  It is also found that out of fifty Respondent most of them are satisfied with the Change management due to implementation of ERP. In the data shows that 40 % of the respondent has given their views in fever of satisfaction, 48 % of them are said that they are highly satisfied and 12 % of them have said that they can’t say about it that means they don’t know about ERP implementation. So we can say that outlet dealers are satisfied with the Change management.  It is found that out of fifty Respondent most of them are satisfied with the Present Service of

IOCL. That mean most of the outlets dealers are satisfied with current process of order tracking service. In the figure data shows that 60 % of the respondent has given their views in fever of satisfaction, 30 % of them are said that they are Highly satisfied with the order tracking process, and 10 % of them have said that they can’t say about it, that means they don’t know about ERP implementation or maybe they don’t want to share their views. So we can say that outlet dealers are satisfied with the current order tracking process.  From this study it was also found that most of the problem comes from ERP operators because they don’t have any knowledge of system background, & they are not in favor of change management

RECOMMENDATIONS From the above study it was found that the reason of not using the ERP at its fullest level is due to lack of training program, not ready for change management, lack of ERP knowledge.

The Company has to provide proper training to the operators at IOCL outlets. They have to provide training program on the state by state basis, so that all the outlets are to be covered. Provide full information about ERP benefits. To make the dealers and operators aware the benefits of using ERP & also on how it should be used for securing speedy support from the IOCL in performing their day-to-day functions. Outlets owners should take initiative to enforce their people to use ERP Strongly. If owner wants to use the ERP for their benefits then they can enforce their people to use ERP and work according to it.