OIL INDIA LIMITED
DULIAJAN
(For Internal Use Only)
Ref. No. ERP(A)/398/05 Date : 19/11/2005
ALL HEADS OF DEPARTMENT
Sub : Enterprise Resource Planning (ERP) in OIL ,Changes in Processes & Practices - Material Management
Implementation of ERP in OIL is in progress and the system would “GO-LIVE” in all locations of OIL except RP and BEP w.e.f. 01-12-05. There would be several changes on existing business procedures/practices of the Organization in the ERP environment. Few of the key changes in the business procedures/practices pertaining to Material Management in the ERP system are mentioned below :
(1) Reservation (Material Requisition ) –As of now, material requisitions are pre-numbered and in book form (Hard copy) .In the ERP environment material requisition will be called Material reservation which will be available in the system only. Reservations have to be entered in the system. After entering the requirements the system generates a no. for the reservation. The system generated nos. are applicable across the company. For example, if the reservation no. say 20000001 is generated by the Drilling Dept. at Duliajan, the next no. 20000002 may be generated by Guwahati Pipeline. Similarly, immediately if suppose, Digboi prepare the reservation then the number will be 20000003. In short, there will be no predefined number ranges for each dept/location in the ERP environment. Project team have already designed print layout for reservation. After taking out the print out from the system, the document is to be sent to the stores after dully signed as per authority assigned by the HOD to take the material as per reservation.
(2) Goods Issue Slip (GI SLIP) : Print out of the Goods issue slip will be available from the system itself and can be used as a proof of issue.
(3) Departmental Godown (Storage Location): One/more than one departmental godowns (SLOC) have been created for almost all the departments as per the requirement of individual department. These SLOCs are created so that
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stock position of all items including non-stock items are visible across the organization and materials can be tracked up to actual consumption. Departments will be responsible for issues, receipts, transfers and physical verification at these storage locations. These departmental SLOCs will be part of MM system of SAP-ERP. These SLOCs are being denoted alpha numerically with description in the system. For example :
a) DE17 denotes Duliajan Transport Field Eligible SLOC
b) DN76 denotes Duliajan Electrical Operation Non-Eligible SLOC
c) MN88 denotes Moran Medical Non-Eligible SLOC
d) RE10 denotes Drilling –E2000 S7 Rig Eligible SLOC
(4) Creation of Purchase Requisition (Indent) for both Materials Services and release of Purchase Requisition: In the ERP environment, the purchase requisition (PR) for non-stock materials (including spot purchase indents), capital items and services has to be entered directly into the system by the user department. The PR thus generated will have a system generated no. The PR has to be released in the system. Various release strategies are already created in the system as per delegation of power (D.O.P). It may be noted that as per value, nature of items, type of procurement etc. release strategies will be popped-up in the system. We have already designed print format for the Purchase Requisition (PR). Besides in the system, the user dept. will also be required to take a print out, and after duly signed, the same will have to be forwarded to Materials/contract department. The PR printed from the system will have only short description of material.
(5) Direct Charge Materials: At present direct charge materials both capital and non-stock (revenue and special revenue) are not codified. But in the ERP environment, all direct charge materials would be codified. No procurement/issue will be possible without a material code in ERP environment.
All non-stock (direct charge) items as per the list received from the various departments and about 24000 non-stock items (pertaining to spot purchases) as per the list available in the Materials Dept. have been codified.
In the ERP environment, if a department intends to raise a purchase requisition (indent) for direct charge materials for both non-stock & capital items then they have to first check the exact materials from the materials master to prepare the purchase requisition. If the item is not available in the materials master then the department have to make a request to the central cell to codify the item by providing relevant data in soft form as per the format already provided to all the department/spheres. The non-stock items and capital items are prefixed with 99
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(range from 99000001 – 99499999) and 0C respectively for easy identification in
the materials master. However, stock items have the same Material Code (Group Index No.) in the ERP environment also.
(6) Direct charge (Non-stock) Material: Presently direct charge material is deemed consumed at GRN stage. In the SAP-ERP environment, direct charge (non-stock) materials will be received in user storage location and then the materials from the departmental storage location (SLOC) have to be issued via reservation (Material Requisition) for consumption and posted in the system. The stock will be visible across the organization.
(7) Issue of Stock material – As of now, material is directly charged to consumption when issued from central warehouse (MM Godown) to user department. In the SAP-ERP environment majority of materials will be transferred from central warehouse to user department storage location via STO (Stock Transfer Order) created by the user deptt. in the system. When it is actually required to be used, it will be issued and posted in the system against reservation (material requisition) created by the user dept. on their own SLOC. Thus, the material will be tracked till it is actually consumed.
A printout can be taken from the system against STO. After taking out the printout from the system the document is to be sent to Stores after duly signed by the person as per the authority assigned by the HOD to take the material.
(8) Material bifurcation as per Eligible and Non-eligible criteria : Eligible materials are those where OIL receive customs duty, Excise duty benefit etc. for using the material in the eligible area(s) (ML-PEL area) as per Govt. of India guidelines. To get such benefit, the procurement has to be done through International Competitive Bidding (ICB). Similarly ,Non-eligible materials are those where there is no such benefits as per GOI guidelines.
As of now, there is no such bifurcation of material stock with respect to Eligible and Non-eligible criteria. However, in the SAP-ERP environment, Eligible and Non-eligible material will have separate valuation types. For example, valuation type, EL-New represent eligible material and valuation NEL-New represent Non-eligible material. The stock of the eligible and non-eligible material will have to be maintained and issued separately. Therefore, the indenters are required to indicate the valuation types at the time of creation of Purchase Requisition (PR)/Reservation (Material Requisition)/Stock Transport order (STO) etc. all the eligible material have to be posted at eligible SLOC and all Non-eligible materials have to be posted at the non-eligible SLOC. It may be noted that the project team has already created such logical SLOC for various departments in the
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system wherever required. For example, SLOC DE50 represents DJN Drilling Equipment Eligible Storage Location and SLOC DN50 represents DJN Drilling Equipment Non-Eligible Storage Location.
(9) Gate Pass : Gate Pass has to be entered in the system. The printout of the gate pass has to be taken out and signed as per the authority assigned by the HOD.
(10) Special Purchase Order (SPO) : In the ERP environment, Special purchase order is to be created through the system. To initiate Special Purchase Order, Purchase Requisition (PR) is to be created in the system mentioning cost object (a/c. No.). This methodology will be applicable to all the departments like Materials, Civil, Medical and Transport department who have authority to buy material through Special Purchase order as per D.O.P. After receipt of the goods GRN is to be prepared by the departments. However, against procurement of medicines by OIL Hospital, Service Entry Sheet (SES) is to be entered in the system on receipt of medicines.
(11) Contracts – Work Order Creation : At present, work order is done manually. In the SAP-ERP environment, work order creation has to be done in the system by the user department on the basis of the contract. It may be noted that only on creation of the work order, the payment can be done to the vendor (Contractor) via Service Entry sheet (COP).
(12) Service Entry Sheet (COP) : At present, Service Entry Sheet is done both manually (example for small vehicle which are attached to various departments) and through legacy system by the Contracts department. On ‘Go Live’ of SAP-ERP, Service Entry Sheet (SES) has to be created in the system. The SES has also to be released by authorities as per procedure which is already designed in the system. No payment against contract is possible without system Service Entry Sheet. However, the present responsibilities for creation of Service Entry Sheet (COP) will remain unchanged.
(13) Issue of MS/HSD to the Personal Vehicle : The issue of MS/HSD to personal vehicle will be made to the authorized executives against their Salary Codes through SAP-ERP system, However, there will be no need to enter any reservation (Material Requisition) in the system to draw fuel from the company’s own petrol pump .
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(14) Issue of Bulbs to B’lows : To issue bulbs to B’lows the executive concern is to prepare material requisition in the present format only (Requisition Book). After issue of the bulbs materials deptt, will prepare a reservation in the system for the total quantity and post in the system.
Hence, from the user point of view the procedure for issue of fuel to the personal vehicle and electric bulbs to the B’lows will remain unchanged.
(15) Service Entry Sheet for Training & Commissioning Charges: As of now, if training and commissioning charges are incorporated in the Purchase order, Material deptt, raise the Goods Receipt Note (GRN) against the Purchase order only after completion of supply of material, training & commissioning of the equipment.
In the ERP environment, the training charges & commissioning charges will be separate line items. The GRN will be raised by the MM deptt for material portion only. Against training charges & commissioning charges the user deptt. will have to prepare a Service Entry sheet after completion of the above events. To facilitate the above in the ERP environment if training & commissioning are involved along with the procurement of material there should be separate line items in the Purchase Requisition (Indent).
(16) Above changes will be applicable w.e.f. 1st December, 2005 in all the locations of OIL (except RP and BEP) where ERP will go live. The changed processes and practices to be followed in the ERP environment are being explained in detail to the participants undergoing End Users’ Training at Duliajan.
(17) For any further clarification, our ERP MM team at OIL Phone No. 7171 or may please be contacted.
(18) Kindly give wide publicity to the above changes amongst the employees of your department to make the transition from the existing system to the ERP system smooth and effective.
( AN Saikia )
General Manager (ERP)
Copy : CMD
D(ED)/D(F)/D(O)
GGM
All GMs