Re-engineering materials management: A case study on an Indian refinery

Materials management function is always a major concern to the management of any industrial organisation as high inventory and an inefficient procurement process affect the profitability to a great extent. Problems multiply due to a very current business environment in India. Hence, existing materials planning and procurement processws and inventory management systems require a re-look with respect to a changing business environment. This study shows a radical improvement in materials management function of an Indian petroleum refinery through business process re-engineering (BPR) by analysing current processes, identifying key issues, deriving paradigm shifts and developing re-engineered processes through customer value analysis. BPR has been carried out on existing processes of `̀materials planning and procurement’’ and `̀ warehousing and surplus disposal’’. The re-engineered processes for materials management function trigger a few improvement projects that were identified by the group of executives who took part in the re-engineering exercise. Those projects were implemented in an integrated framework with the application of the state of art information technology tools. Introduction Materials costs constitute approximately 60 percent of the total working capital of any industrial organisation. There is a great deal of evidence of loss of productivity due to inefficient materials management. The common issues that are associated with materials management functions are: receiving materials before they are required, causing more inventory cost and chances of deterioration in quality; not receiving materials at the time of requirement, causing loss of productivity; incorrect materials takeoff from drawing and design document; subsequent design changes; damage/loss of items; failure on installation; selection of type of contract for specific materials procurement; vendor evaluation criteria; piling up of inventory and controlling of the same; management of surplus materials; and any one of the above or all of the above, or combinations. The research register for this journal is available at http://www.mcbup.com/research_registers The current issue and full text archive of this journal is available at http://www.emerald-library.com/ft