Purchasing overhaul transforms fortunes at Hindustan Petroleum

Increased competition was eroding the bottom line at Hindustan Petroleum Corporation Ltd (HPCL) when the organisation decided to embark on a transformation programme.

The state-owned enterprise is a Forbes 2000 and Global Fortune 500 company with a turnover of around $30bn, but globalisation was changing its business.

The transformation programme involved a cross-functional team covering refineries, zones, regions, plants, terminals, legal and finance. 

The work included making procurement – HPCL has an annual spend of $1.6bn – a centre of innovation and collaboration. This led HPCL to win Best Process Improvement Initiative in the CIPS Asia Supply Management Awards.

A study of procurement uncovered a transaction-oriented function with limited strategic focus, leading to lowered efficiency.

Among the improvements that came about as part of the transformation were tenders floated with a price band, which led to more competitive bidding by vendors.

The work also resulted in a digital platform for procurement, which reduced tender cycle times by 35% and increased responses by 30%.

HPCL procured 33% of goods and services from SMEs in 2016-17, surpassing the Indian government’s target of 20% for the first time.

In 2015-16 procurement achieved savings of 1.5%, worth $63m.

A new Annual Procurement Plan led to reduced transaction loads due to consolidation of activities and central processing, resulting in a 50% cut in procurement man hours.

Average tender cycles were reduced by 32% compared to the historical average. Vendors reported improved experiences with new processes, a reduced number of tenders and query resolution.

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