MM6043 e-Portfolio: Replenishment of Petroleum

1. Executive Summary:

The current conventional method of monitoring the level of inventory of the petroleum in the 8 petroleum tanks is labour intensive and therefore lowers the productivity and efficiency of the staff. Furthermore, issues of measurement inaccuracy may result in supply shortage or excess. Therefore, the auto-replenishment project was initiated to automate the inventory monitoring activity and to enable triggering for replenishment at the correct quantity and at the correct time.

The adoption of high technology measuring instruments was intended for monitoring the petroleum level of all the tanks across the plant. This would enable the provision of a real-time data of the inventory level with much greater accuracy. With wireless enabled equipment installed, the real-time data can be updated into the system. Subsequently, this would help to reduce errors encountered with the manual entry method and may optimize the capacity of each petroleum tank.

The project was activated in January 2011 with a target completion date set at 31 January 2012. The budget set for the automation of measurement system was at S$ 740,000.00. We had earlier identified some potential risk that may delay the progress of the project and the contingency plan to mitigate those risks i.e. software integration, vendor shortlisting selection and the Go-Live (System Online) date. However, eventually, the real challenges came in the form of hardware failure due to power adaptor being damaged at the hardware installation stage.

We successfully completed the project on 10 January 2012 , 21 days earlier than target date. Total cost of implementation is at S$ 727,512.50, it is well within the proposed budget. The project team has also accomplished all the in-scope work defined at the start of this project. The system is currently ONLINE.

Moving forward, the automation will set the path to implement e-Kanban system to allow auto-triggering of order to the suppliers whenever inventory level of petroleum reaches the re-order point. Further expansion of the automation system can be implemented as a company world-wide movement i.e. global operations.

2. Resource Summary:

Please refer to the below chart for information on the team members who implemented this project.

Chart 1. Organizational Breakdown Structure

Project manager	Oversees and in-charge the whole project progress from start to end
Procurement team	Request for quotation, liaise with contractor’s sales engineer
Engineering Team	Work with and supervise the vendor project team through the installation of measuring instruments , start-up commissioning, set the project testing performance and software programming requirement
Logistics	Ensure timely and correct delivery from vendors
Finance	Consolidate & calculate the man-hours of project team spent on this job

Table 1. Overview of project team member’s role and responsibility

3. Project Background:

As part of the strategic movement to maintain the competitiveness of our company, a SWOT analysis was done (refer to Diagram1 below). Some of the opportunities identified was to implement some form of automation in measuring the inventory level of the petroleum tanks as a company world-wide movement. This would be a move out of the manual measurement that was considered as labour intensive activity which could lower the productivity and efficiency of the company as a whole. Manual measurement could also lead to measurement inaccuracy.


	STRENGTH		WEAKNESS
	- A global leader in Petroleum.		- Company relies too much on manual work resulting in order inaccuracy, frequent stock-outs.
	- Closure of fiscal 2010 with $100 million in sales, a 10% increase from the prior year.		- High employment turn-over rate.
			- Skills know-how and product knowledge are lost due to improper documentation and knowledge transfer.

	OPPORTUNITY		THREAT
	- To expand on other commodities i.e gases, industrial solvents.		- Availability of other cheaper lower-grade substitute products.
	- To incorporate and work with existing or new vendors on e-kanban system.		- Governments impose higher import-export tax to foreign registered companies.
	- To implement the efficient automated measurement system in other sites as a company world-wide implementation		- Due to global warming, government has become more environmental conscious and might be keen to adopt greener fuel alternative.

Diagram1. SWOT Analysis

A feasibility study was conducted from September-November 2011 to analyze the possibility of moving out of the manual measurement method to monitor the inventory level in the petroleum tanks. Implementing an automation in inventory management was found to be able to contribute towards better efficiency as real time data of inventory can be achieved, in addition to the accuracy offered by the proposed measurement system.

The feasibility study provided suggestions on the implementation of automated measurement system. The measurement system would need to be able to communicate wirelessly through a common gateway, which then will communicate to the PC terminals (refer to Fig1). On the PC terminals, users should be able to easily navigate the system to check for the level of inventory and the detail specification of the inventory being monitored (refer to Fig2)

IMAGE IS REMOVED FOR CONFIDENTIALITY

Fig 1. Overview of the system architecture of the new measurement system

IMAGE IS REMOVED FOR CONFIDENTIALITY
Fig2. Sample of graphical representation of the new system

The team has defined the objectives to be met for implementing the automation of the Petroleum Replenishment System (refer to table 2.)

Specific	* To automate the current measuring method of petroleum by installing software operated measuring instrument which will send alert signal to the system once reach the point of replenishment. * To automate the PO issuing process to Vendors. PO will be issue by the system and send to designated vendors when it received signal from the measuring instrument
Measurable	* Improvement in accuracy * Reduce service technicians * No more stock out
Achievable	* Through suitable and compatible level measuring instrument and software.
Relevant	* To improve overall efficiency of the work process * To improve measurement accuracy
Timely	* Automated Replenishment System must be ready in one year by 31 Jan 2012

Table 2. Objectives of the Automation of Petroleum Replenishment System

4. Project Analysis:

4.1 Scope of Work

The team was to implement the automated petroleum replenishment system by 31 January 2012 and should be within the targetted budget of S$ 740,000.

In order to accomplish the objectives, the team has defined the scope of work to be accomplished. The In-scope of works are as follows:

* Purchase and Installation of level measuring instrument for 8 tanks

* Procurement and installation of wireless equipment and necessary accessories and spare parts

* Procurement,setup and installation of PC and software

* Other activities include

o Overall coordination

o Project management

o Site acceptance test

o Project scheduling

* Documentation

* Training

* Maintenance and troubleshooting

The team defined the following to be NOT within the scope of this project (Out-Scope):
* Automation at a company wide (global) implementation
* Incorporation of e-kanban system

4.2 Critical Success Factors

The team has also defined the following expectations and critical success factors that are significant the sucessful implementation of the project. Internal refers to internal of the project team that implements the automation. External refers to the users who have access and use the system after the system goes ONLINE (GO-LIVE).

Internal	* Project to Go-Live no later than 31 Jan 2012 * Project spending is within the project estimates * Achieve significant cost saving
External	* System is able to provide better measurement accuracy * Reliability of system * Increase in work productivity

4.3 Organization Breakdown Structure (OBS) and Work Breakdown Structure (WBS)

The roles and responsibilities of the project team members, as well as the deliverables and work packages in the span of the execution of the projects are shown in Chart 2 (Work Breakdown Structure) and Diagram 2 (Project Schedule)

Chart2. Work Breakdown Structure

4.4 Project Schedule

Diagram 2. Project Schedule

4.5 Risk Assesment / Challenges Encountered.

At the planning stage, we identified activities that present a potential risk in implementation i.e. causing a delay in schedule, or even increase in spending. Based on the risk of exposure , we have ranked the potential issues and the corresponding plan of action. This identification of potential risk and the corresponding plan of action is shown in Table 3.

Table 3. Risk Assessment identifying the top 3 risk that may impact the project

However, in the course of implementation, we encountered other challenges that were not expected. They are as follows:

1. Replacement of damaged power adaptor due to overcurrent.

Due to the mismatch in the power rating between power adaptor and the equipment used, we had an incident of overcurrent causing the fuse to blow and electronic failure. It took us one week to troubleshoot and isolate the issue before a resolution was in placed. In addition, supplier had to place order for new power adaptor. In total, the schedule was off by two weeks during the hardware installation.

2. Postponement of hardware installation due to wet weather.

We experienced a long and heavy rainfall that forced us to reschedule the installation date. The heavy rainfall caused concerns for workers and engineers safety. The electronics of the equipment may be potentially damaged should there be a lightning strike, before the equipment is properly grounded.

3. Weak wifi signal for communication

We encountered a few incidents of intermittent connectivity between the PC terminals and the measuring instruments. This was caused by the weak signal broadcast from the wi-fi module. To strengthen the signal communication path, we procured and installed 4 extra sets of wireless adaptors.

4.6 Costing

The breakdown of the spending with respect to the work packages / activities are presented in Table 4 below. Overall, the actual cost is still within the budget. We spent S$ 727,512.50 for the completion of this project. The procurement of additional wi-fi adaptors to strengthen the signal communication translated to an additional $S3,000.00 spending under “Components” portion. There was some S$ 14,487.50 savings at the labour cost as we were able to complete the work at an earlier date.

Table 4. Project costing summary

4.7 Return on Investment

We projected the ROI to be at 79%, with payback to be achieved within 7 months.

4.8 Conclusion

The project was completed in 10 January 2012 at a total cost of S$ 727,512.50. No technical issue observed since the system went LIVE. Handover to the Operation has been completed.

5.Next Period Planned Work:

Future activities to be planned:
1. Checkpoint review post GO-LIVE
We will conduct a review after 3 months and after 6 months the system went LIVE. This is to collect some feedback from users and other stakeholders who have access to the system. Also, from the review, we will be able to gain more information to confirm if the projected increased productivity is realized.

2. World-wide Implementation
A world-wide implementation is to be mapped. Information sharing on the success of the implementation will be conducted. Each site is to execute the project with consultation from our team. Implementation will come in stages.

3. E- Kanban system
For completion of the shift towards automation, we will plan to implement e-kanban ordering system.This will integrate the automated measuring system to re-ordering of inventory to the supplier.