By Goutam Mangaraj
EXECUTIVE SUMMARY This paper showcases Wipro s thought leadership around the enterprise-wide fuel Terminal Benchmarking area, which is an industry trend that has emerged over the past few years. The paper articulates Wipro s point of view around the business drivers for benchmarking, the process for benchmarking, some important KPIs and finally an IT solution to enable this process. The IT solution that Wipro proposes is detailed in one of 1 our earlier papers, i-terminals
TABLE OF CONTENTS 1.0 Introduction to Benchmarking...4 2.0 Benchmarking of Fuel Terminals Business Drivers...4 3.0 How to benchmark fuel terminals across the enterprise?...5 3.1 Benchmarking Process...5 3.2 3.3 3.4 3.5 Tools & Systems...6 Roles & Responsibilities...7 Benchmarking Components (Indicative List)...8 Sample Graphs...11 4.0 Critical Factors for a Successful Benchmarking...1 2 References...13 About the Author...13 ABOUT...14
1.0 Introduction to Benchmarking Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Benchmarking involves management identifying the best firms in their industry, or any other industry where similar processes exist, and comparing the results and processes of those studied (the "targets") to one's own results and processes to learn how well the targets perform and, more importantly, how they do it. The concept of "best practice benchmarking" or "process benchmarking helps organizations to evaluate various aspects of their processes in relation to best practice companies' processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices and help them achieve business excellence. The benchmarking process for storage terminals has been there since a long time but it lacked a systematic approach. With the advancement in IT tools and technologies, now the benchmarking efforts can be more cohesive, more aligned towards vision and mission of oil storage and distribution companies. There are several challenges, which are faced during benchmarking exercise, viz. disparate data sources resulting from silo IT implementations, more efforts spent on collecting and compiling data rather than on validating and analyzing them, no standardization of existing processes across corporation, data quality issues, lot of time consuming manual efforts, no standard process for opportunity capture and follow through, etc. 2.0 Benchmarking of Fuel Terminals Business Drivers Current Scenario Snapshot The benchmarking process will help the companies to find out their current standing i.e. what is their performance at this point of time vis-à-vis desired level Improve Terminal Performance Once a target is set for certain KPIs, then over the period of time those indicators could be closely monitored against set targets and subsequent steps can be taken to enable them meet those targets hence resulting in improvement in terminal performance Savings in terms of Money & Efforts - Once a centralized benchmarking effort is done, then it results in lot of cost savings as there would be no need to carryout separate localized efforts on benchmarking process. Further, it would result in lot of savings in manpower efforts to generate inter terminal comparison reports Drives Knowledge Management Energy industry has a perennial issue of ageing workforce but once benchmarking is done, then the various efforts which are taken to improve the performance metrics would be captured and the same can be referred in future on need basis. Efforts aligned to Company Strategic Goals Benchmarking will channel the performance improvement efforts towards target companies vision/strategic goals such as incident free work place or maximize shareholders returns on investments (profit maximization) etc. Framework for Comparing Apples-to-Apples Benchmarking efforts provide a platform to compare performance of different assets in different location on similar platform, i.e. it allows users to bring all terminals to common comparison platform by correcting the different data sets with respect to corresponding applicable inflation rate, exchange rate and purchasing power as per applicable country scenarios. 4 www.wipro.com
3.0 How to benchmark fuel terminals across the enterprise? 3.1 Benchmarking Process Identify Processes: The first step in benchmarking is to identify various processes (functions), which ought to be included in the benchmarking process. All the processes which, when monitored on a continuous basis, can result in big fat payouts or quick gains on a sustainable basis should be included. An effort cum returns matrix can be prepared to arrive at the best-case scenarios that should be picked under benchmarking efforts. For example continuous monitoring of maintenance function can lead to prudent maintenance strategies resulting from optimum spare parts inventory, similarly continuous monitoring of operations function can lead to identification of over capacities of inventory space thereby leading to rationalization of tank storage space. Determine KPI s: Next step involves identifying the key performance indicators that capture the major performance outputs of the selected functions/processes. Generally, Pareto rule (80-20) is applicable to most of the industries. 20% of the KPIs could be responsible for 80% performance output of the processes; hence those 20% KPIs must be included for monitoring purposes. For example Gate to Gate time, Maintenance cost per m3 of fuel handled, FTE cost per m3 of fuel handled, etc. Configure Alerts/Warnings: Proper alerts (High-High, High, Low, Low-Low) should be configured so that the deviations of KPIs from the target benchmarking efforts could be captured before they become potential threats for bottom line erosion. For example The tank level-monitoring alert can be fixed at 95%(High-High), 90%(High), 20%(Low), 5% (Low- Low) Measure KPI s: Next step involves monitoring of KPIs at frequent interval of time to identify opportunities to enhance operational efficiency. Different set of KPIs require different set of data fetching rates, e.g. some KPIs can be monitored on minute-minute basis, some hourly basis, others on weekly or monthly basis. Perform Actions: On observing any deviations from predetermined targets, assigned users should perform remedial actions as well as document their learning for future reference by other colleagues in similar scenarios. The objective is to have optimum number of terminals to perform in first quartile. This can be achieved by equipping employees with tools and technologies which will allow them to operate in concurrence with best standards, procedures and controls, follow good maintenance practices to achieve high asset integrity, excellent HSSE performance, and outstanding customer service, in synchronization with stable financial performance. These processes will result in sustained improvement of business performance over a period of time. Monitoring and improvement of the KPIs is a continuous process that has to be carried on till there is a need to drastically change the existing benchmarking processes in order to match current changed business scenarios that make existing processes irrelevant. Identify Processes Perform Actions Improve Performance Determine KPIs Measure KPIs Configure Alerts 5 www.wipro.com
3.2 Tools & Systems 1 Our earlier paper (i-terminals) had emphasized on the importance of terminal benchmarking for achieving overall improvement in performance of terminal operations. Further, using the solution (i-terminals), the data can be captured from different IT systems like Operations data (Terminal Automation System), Inventory data (Tank Farm Management System), Quality data (Analyzers/LIMS), Maintenance & HSSE data (in-house Oracle/SQL based systems), and Sales, HR & Finance data (ERP Systems) and then converted into valuable information in form of dashboards, KPIs, alerts, etc. Dashboards Lost opportunity Gap Analysis Charts Alerts Trends Monthly Reports Daily Reports Analytics i-terminals 6 www.wipro.com
3.3 Roles & Responsibilities Head Quarter Level Manager Arrange training sessions Decide consistent KPIs to monitor organization wide performance status Identity Best & Worst scenarios in various terminal operations Share findings with Terminal & Geo - level managers Plan issue focused projects to identify and eliminate inefficiencies Geography Level Manager Compare published results for respective terminals in that geo Indentify areas of inefficiencies Drill down to causes of inefficiencies Take steps to remove / reduce those efficiencies Terminal Level Manager Understand use of tool and train appropriate resources Validate terminals related data with various functional departments (Assess data quality, correct inconsistencies) Allow results to be published 7 www.wipro.com
3.4 Benchmarking Components (Indicative List) HSE Incident free working hours Number of Recordable Injuries Amount of Spill Volume Quality Number of Off specs Quality Giveaway Quality Loss Energy Electricity Consumption Quantity Water Consumption Quantity Other Utilities Cost Operations Opening Versus Closing Stock Capacity Utilization Ratio Mode Wise Volume receipt Finance Labour costs, Contractor Costs M&R Cost, Salary & Overtime Costs Depreciation Benchmarking KPIs - Data Sources Relationship Diagram Gate to Gate Time HSE Energy Consumption Terminal Automation System Oracle/ SQL Server ERP/ Oracle/ SQL Server (Indicative Diagram) 8 www.wipro.com
Let us consider the benchmarking of terminals based on gate-to-gate timings for each terminal. For this purpose, we have divided the entire gate-to-gate time into distinct activities and sub-activities that take up a truck s time at a terminal. 1. Entry queue 2. Entry Process 3. Staging Process 4. Parking & Waiting 5. Loading Process 6. Post Loading 7. Exit Sr. No Activity Sub-activity KPI Calculation Remarks 1 Entry Queue Entry Queue Time in minutes Periodic Survey waiting to enter (Average value) terminal gate Manually input into a form 2 Entry Process Truck / Driver Validation Time in minutes to validate truck / driver Formula: {Start time of activity no. 5-4 - 3 -Start time of activity no. 2} Start time of activity no. 2 = Card swipe time in TAS at entry gate reader Start time of activity no. 5 = Card swipe time in TAS at staging reader 3 Entry Process Reach Staging Area Driving time to staging area Periodic Survey (Average Value) Manually input into a form 4 Entry Process Stage Queue Time Time waiting before start of staging process Formula: {Start time of activity no. 5-3 - Start time of activity no. 2} Start time of activity no. 2 = Card swipe time in TAS at entry gate reader Start time of activity no. 5 = Card swipe time in TAS at staging reader 5 Staging Process Stage Load Time taken to stage a load Card out time - Card in Time at staging reader Available in TAS 6 Parking & Waiting Drive to Parking Area Time taken to reach parking lot Periodic Survey (Average Value) Manually input into a form 7 Parking & Waiting Wait at Parking Area Waiting time 9 www.wipro.com
Sr. No Activity Sub-activity KPI Calculation Remarks 8 Loading Process Drive to Loading Bay Time taken to reach loading bay Periodic Survey (Average Value) Manually input into a form 9 Loading Process Connect Truck Time taken to prepare vehicle for loading Periodic Survey (Average Value) Manually input into a form 10 Loading Process Enter Load Details Time taken to enter load details Product flow start time - Card-in time at bay Available in TAS 11 Loading Process Load Product Time taken to load product Product flow stop time - Product start time Available in TAS 12 Loading Process Disconnect and Leave Bay Time taken to disconnect truck and leave Card-out time - Product flow stop time Available in TAS 13 Post Loading Drive to Document Printing Station Time taken to drive to document printing station Card-in time at document printing station - Card-out time at loading bay Available in TAS 14 Post Loading Collect Documentation Time taken to collect document Card-out time at document printing station - Card-in time at document printing station Available in TAS 15 Exit Exit Terminal Gate Time taken to exit terminal Card-in time at exit gate - Card-out time at document printing station Available in TAS The above KPIs would then need to be normalised to account for differences in vehicles sizes, average number of products loaded per load, average number of compartments loaded per load, average quantity loaded per load, etc. 10 www.wipro.com
3.5 Sample Graphs Maintenance & Repair Costs / Throughout Terminal Opex/Throughput Investment Analysis Terminal Capex/Throughput Opportunity Loss Terminal Maturity Scorecard 11 www.wipro.com
4.0 Critical Factors for a Successful Benchmarking Assign responsibility at every level (Terminals, Geo, HQ): This is the basic activity that will lay a foundation of a successful benchmarking effort. Please refer section 3.3 for further details of what kind of responsibilities can be assigned at different levels. Open information sharing culture between different functional departments: Every Company must focus on having an open culture of information sharing between various departments. In the initial period, the employees may be little hesitant as now their colleagues in other department would know how they are performing on day to day basis but once they realize it s importance in company s future growth then they will be more than willing to do henceforth. Right IT tools (I terminal solution): It is very important to have right IT tools, which will help the organization in benchmarking activities. IT tools like I Terminal solution can address most of the loopholes existing within a company with respect to information sharing and benchmarking efforts. Further, these tools are deployed easily and quickly, with attractive RoI proposition. Identification of valuable KPIs for each functions: After identifying the functions which, when monitored continuously, can result in big payouts or quick wins (as per the adopted strategy) then all the associated important KPIs which facilitate to do so must be identified. Monitoring of wrong KPIs may result in unsuccessful benchmarking efforts in the long run. Stable feedback mechanism: The IT tools must facilitate feedback mechanism so that the performance indicators can be evaluated on a regular basis. All the KPIs should be crosschecked in regular interval to find out whether they are still relevant with respect to current business scenarios or they need to be changed with respect to changing business needs. Near real time availability of information: Availability of information is quite important to understand the current business state but the duration of availability can play a spoil factor in the sense that if a current piece of information could have been made available to the business before 2 hours then accordingly some decisions could have been taken to avoid a huge business loss which currently seems inevitable. Thus benchmarking should be done in such a way that information is available stakeholders on near real time basis such that it facilitates decision making within opportunity window. 12 www.wipro.com
References Interviews with Wipro Industry Experts Interviews with Oil and Gas Professionals Wipro Industry Research http://en.wikipedia.org 1 i-terminals: - http://www.wipro.com/industries/energy/energywp.aspx For more information on this paper, please contact Goutam Mangaraj at goutam.mangaraj@wipro.com Visit Wipro at www.wipro.com About the Author Goutam Mangaraj Goutam has over 6 years of experience in the IT services industry, with dedicated focus on solutions for the Oil & Gas industry. He has comprehensive knowledge of business processes involved across Oil & Gas downstream value chain viz. refinery operations, terminal & depot operations, downstream supply chain and retail operations. He has worked in several technology projects in various capacities for Oil Retailing Giant, Global Petroleum Super Major, World Class Refinery, Large Integrated Petrochemical Major etc. He is currently working as a Consultant within Wipro's Smart Solutions Competency Centre. He is qualified software professional and holds a M.B.A in Oil & Gas Management. 13 www.wipro.com
ABOUT Wipro is the first PCMM Level 5 and SEI CMMi Level 5 certified IT Services Company globally. Wipro provides comprehensive IT solutions and services (including systems integration, IS outsourcing, package implementation, software application development and maintenance) and Research & Development services (hardware and software design, development and implementation) to corporations globally. Wipro's unique value proposition is further delivered through our pioneering Offshore Outsourcing Model and stringent Quality Processes of SEI and Six Sigma. 14 www.wipro.com