The Hindu Business Line : IOC to focus on e-procurement

INDIAN Oil Corporation Ltd is putting in place a technology framework to take advantage of e-procurement and bring down its cost of purchase of materials.

"To bring in new channels like electronic tendering and reverse auction, we at Indian Oil are in the process of putting in place a robust technology framework. Once in place, we are confident that the e-commerce solution would provide us competitive advantage in the fast changing environment," the IOC Chairman and Managing Director, Mr M.S. Ramachandran, said on Sunday.

Although Web-based technology is at the core of e-procurement, its success depends on several factors, chief among them being appropriate leadership, policy and legal framework, awareness building and training and change in organisational culture and mindset, Mr Ramachandran said at a seminar on public procurement jointly organised by the Indian Railways Institute of Logistics and Materials Management and Confederation of Indian Industry (CII).

IOC had started hosting notices inviting tenders on a dedicated Web site four years ago. Since February this year, the company has institutionalised reverse auctions as part of its standard procurement process. It has also started a Web-based document exchange system through a pilot project on e-tendering, he said.

In addition, the petroleum refining and marketing company had engaged Tata Honeywell for a supply chain management package that would be in addition to the company's enterprise resource planning (ERP) package.

"We have set up an exclusive group for optimising the hydrocarbon supply chain across the company. An integrated planning model will help us identify the right combination of crude oils to be procured based on prevailing crude oil and product prices," he said.

Different crude oils yield different combination of petroleum products and refining companies need to match the raw materials with the demand for different finished products to avoid being saddled with some products in surplus and a shortage of others.

IOC is also actively hedging its refining margins after being allowed by the Government to do so. "Hedging is different from speculation. We lock our refining margins through hedging contracts. If we generate surplus margins, we have to part with the difference, but if we are unable to recover the margins that had been agreed to, we get compensated. This helps us insulate ourselves from the vagaries of oil prices," Mr Ramachandran said.

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