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Case study: IOCL saves time using a B2B Exchange approach

Celebrating its golden jubilee this year, Indian Oil (IOCL), the country's largest oil company, in terms of sales turnover, has crossed many milestones. The company and its subsidiaries account for 48 percent of petroleum products market share.

The company carries out regular oil exchange (buying and selling of petroleum products) with other companies - an essential feature of companies in the petroleum sector. Petroleum products are also purchased and sold to other marketing companies on sale and purchase basis. "The manual settlement and reconciliation of huge volumes of oil products between companies was far from being optimal," says S.S. Soni, executive director-IS, Indian Oil.

Due to constraints in collecting documents from across the country, ad-hoc deposit was exchanged on due date on a monthly basis. The actual settlement was carried out on the 25th of each month after settling all anomalies in product quantity and billing. "In case of discrepancies, dispute settlement became a long drawn process wherein the concerned parties had to trace back all the documents emanating from a transaction in support of their claim," says Soni.  A direct result of the ensuing delays is that a substantial financial amount is left unrealized translating to losses. So much so, that these delays were even criticized by the auditors of the companies concerned.

Soni knew that it was time he did something. "Linking our ERP systems with the companies that we conduct oil exchange with seemed like a good idea," he says. Built on open source, the first phase saw the automation of ERP systems of IOCL and BPCL, where transactions worth over Rs 35,000 crore were involved. Once BPCL's management was convinced of the project's feasibility, a common platform was implemented for B2B exchanges.

But, convincing IOCL and BPCL's managements and other departments to adopt the B2B approach was a huge challenge. "After the implementation of the inter-company integration, we needed to train employees in about 50 locations, but the results were rewarding," says Soni.

Automating the billing and stock transfer process saved about 90 percent time and reduced the amount of effort. Because of which there are no errors in data entry and settlements are faster and more transparent.