Optimizing supply chain performance under uncertainities at BPCL

Abstract

Bharat Petroleum Corporation Limited is one of the leading petroleum refining and distributing companies in India. The company refines crude oil through Mumbai Refinery and Kochi Refinery. To optimize operations and to realize maximum value for corporate; BPCL has started a new department – Supply Chain Optimization (SCO) Center. The work of the center is to ensure that all supply chain activity related decisions starting from crude procurement to final sales of crude products are synchronized so that maximum profitability is achieved. Instead of every business unit focusing on local optimization, SCO plans to achieve total optimization. Different crude oils under different processing give different yields. Uncertainties in demand of products and availability of crude oils add to the challenge of achieving optimum product mix and crude oil mix. Thus the decision of choosing a certain crude oil mix based on estimated demand mix is stochastic in nature. Term crude and spot crude are ordered at different times with different information available. Hence the problem becomes an optimization problem where decision making happens at different stages of the procurement process and we are trying to maximize the Net Corporate Decision. The study uses the concepts of dynamic programming to address this optimization problem. Some of the concepts of dynamic programming are introduced which will be used to study the decision making process. Scope of the project not being exhaustive we have simplified some of the complexities in actual decision making process. We have also considered demand to be deterministic. In the end we have discussed limitations of our model. The study aims to provide an indicative model for solving multi-stage planning problems faced by BPCL in particular and refineries in general.