Energy and utilities

Company

Petrotel-Lukoil Refinery is a Lukoil member, one of the largest oil and gas international companies, vertically integrated, representing 2.2% of the global oil production.

In Romania, Petrotel-Lukoil Refinery has a tradition of over 100 years in crude oil processing. During all this time, it experienced many development stages, expansion capacity and product diversification. After Lukoil took over the majority of shares in 1998, an ample modernization program was developed in order to transform the enterprise into a performant and effective refinery.

The upgrades made in the recent years concerning the technological facilities enabled to obtain fuel – gas and Diesel gas according to the quality requirements imposed by the European Union which implicitly led to pollutant reduction in the environment. The total value of the investment made between 2003 and 2012 exceeded 420M dollars.

Challenge

Within the Petrotel Lukoil Refinery, the procurement of raw materials, consumables, small and large size equipment, services, investment programs is managed by the Procurement Service that is in charge of organizing and conducting all the company’s bids. Given that, there are more than 10 bids a week, they are divided in two categories in order to streamline the procurement activity: simplified bids, for the acquisitions with a value lower than 25 000 USD and complex bids, for those exceeding this value. There are well-established internal procedures for each category, starting with the bidders’/providers’ prequalification stage and following all the steps to the procurement itself, aiming the quality-price ratio.

Until December September 2012, both types of bids were held in a traditional manner. Bids were carried out manually, and their preparation and progress used to last over 22 days, involving important human resources consumption for data centralization. Often, the internal approval process a major inconvenient, as well as filling in various forms required by the procurement procedure.

Another important goal, aimed by the Procurement Service, was to increase the transparency and to attract a greater number of participants in the bid.

“Increasing productivity, by automating and optimizing the purchasing and sales process of the material resources and goods, as well increasing the company’s transparency were the two primary objective of the project. We decided to start with a pilot project, where we included the bid automation in a simplified form” declared Yurii Erogov, Maintenance and Repair Equipment General Manager Deputy Petrotel-Lukoil.

Solution

The software provider in charge with the procurement system development was identified after a bidding selection where the main players on the business software solutions market participated. TotalSoft was declared the winner due to its experience in the development of eProcurement solutions used both on the national and international market.

Charisma eProcurement has a web interface, which is public and available to all those who want to become the refinery’s providers, and a back-office application based on Microsoft CRM technology internally managed by the Procurement Service.

The solution was customized so as to track the internal procurement procedure of the refinery step by step. Once a contract notice is posted, the providers are notified about the deadline to express their willing to participate in the bid and to submit the offer. The access is allowed after entering a username and a password. Once an offer is submitted, it is taken over by the economic and technical analysis managers. Providers whose offers are validated according to these criteria, who will participate in the bid, are automatically notified by the system about the date and time of the electronic bid.

A new project stage is the preparation of the automatic service procurement process. The qualification characteristics to this kind of bid imply units of measurement and quality evaluation and are widely different from those regarding raw materials procurement.

The next stage is to increase the value of bids to 100 000 USD using the software solution developed by TotalSoft.

Results

Increasing transparency by allowing the providers to register directly on the website which is dedicated to procurement.

Obtaining the best quality-price ratio – price for every purchase made.

Optimizing the procurement process and reducing time for preparing and conducting a bid from 22 days to maximum 10-15 days (including those 10 days provided in the internal regulation of the refinery when the contract notice must be public in order to give providers the opportunity to participate).

An electronic data base with the providers registered in the system was created. It includes a few hundred providers and continues to grow. “We established a partnership with a data base provider offering us lists of companies that specialize in the materials and services we purchase. We introduce these companies in the system and we automatically send them invitations to participate in our bids.”

Tracking providers that did not honor their contractual obligations and that were involved in unwanted events in the past. “Based on the historical data, the system divides the providers in risk categories and warns us if we select a possible provider from a high risk category”.

Paper consumption was removed, as well as the time wasted to collect, centralize and analyze the data.

Nowadays, we are not using paper anymore, we find all the data we need in the system and we can extract information and use them to conduct reports.

An electronic provider archive of providers was created, as well as an archive of purchases that enables to verify any information in the system. “Before implementing Charisma eProcurement, I had to dig into thousands of files every time I wanted to verify the purchase price. Now, this information is just one search away and includes all the details, the purchasing date, the list of the participants in the bid, the offered prices, internal managers etc.”

Case study revised in 2014.