Following are the major challenges addressed:

1. Challenges of consolidating demand due to distributed spending without specification standardization and item codification.
2. Capability Building – Procurement was not a cadre comprising trained and certified professionals with adequate domain knowledge fit for strategic sourcing.
3. Apprehension within SBUs of losing control over the function.
4. Cumbersome processes followed without SoPs posed issues for switching over to a complete E-platform.
5. Limitations of being part of Public Procurement regulations (GFRs), wherein open tendering has limited flexibility and there is restricted level of collaboration with vendors.
6. Socio-economic obligations of adhering to policy needs for preferential procurement that limits competition.

Innovation has been the hallmark of this project and was instrumental in achieving the end objective of value creation from the supply base. It involved:

Category Strategy: Basis the Past spend pattern, Suppliers profile, Market analysis and Global trends witnessed within the best-in-class companies, HPCL spend is categorized into different buckets, allowing Category Managers to draw the right category strategy.

Innovative short-time / long-time strategies were introduced, such as Change in Share of Business, Global Tenders, Developing Alternative Specification / Material, Life Cycle Costing, and Costing-Based Net Value Realization.

Cost Estimation Cell as Centre of Excellence and Price Banding: Introduced as an innovative tool to break the Vendor Cartel under select categories, CPO could use the Bottom-up Costing tool very effectively for getting a competitive price from bidders at markets, which have historically seen high quotes as results of cartel.

Reverse Auction: The online tender platform was strengthened with additional features, such as Reverse auction, Online collection and refund of Tender fee / Deposits / Retention money etc., to make it an end-to-end online solution. With higher business volumes at stake as a result of consolidation, reverse auction saw a stiff competition among bidders, resulting in very competitive rates being finalized and providing huge saving to the corporation.

Specification Standardization and Uniform Item Codification: Uniform item codification project was executed, wherein more than 1 million past procurement data were scrutinized, cleansed, and standardized to obtain 150,000 Unique specifications with Items codes in Master data format. This was done with the help of domain experts as external consultants.

Vendor Data Base Rationalization: HPCL Vendor Database had around 200,000 Vendor Codes, most of them duplicates created in a decentralized environment by different business units. The Vendor Management team of CPO initiated the activity of cleansing the Vendor base to come out with 96,000 Unique Vendor Codes to facilitate consolidated order placement, vendor performance evaluation and tracking.

Capability Building: Building suitable capability among the workforce is one of the prerequisites for any organization to be successful. The Certification course conducted by United Nations Development Program at CIPS Level II and Level III Certification in Public Procurement for all CPO personnel was the step taken to create a pool of certified professionals in the field of procurement.

Impact Generated

The shift from transactional model to strategic category management led to the following impacts:

1. Establishment of a Cost Estimation cell introduced price banding for categories with structured bottom-up cost estimation method for arriving at Costing and Price Banding. Apart from breaking the threat of Vendor Cartel, a saving up to 10% over benchmark was witnessed in initial tenders itself.
2. Uniform Item Codification project led to standardization of specifications as a prerequisite for demand consolidation across the Corporation. Unique 150,000 items’ codes were created in a structured, standardized format by the item codification team. This enabled Accurate Annual Procurement planning, eliminated ambiguities and queries at bidding stage, provided accurate inputs for analytics, and supported business intelligence.
3. Category-based sourcing strategy, based on past procurement data, annual procurement plan, and detailed supplier market assessment, led to a tangible saving of approximately 10% over past spends, with the larger volume attracting Global Vendor Participation. 70% increase in vendor response was observed in the very first year
4. End-to-end, state-of-the-art E-platform contributed to reduction of the cycle time by 35-40%, while promoting the green initiative of the Corporation.
5. Rationalization of Vendor Database and Unique Vendor Code: This made tracking of project progress easier and also simplified the process of Vendor Performance evaluation.

Scalability and Sustainability
 

Project VIVARTAN is used for all procurements in HPCL. Its implementation shows that these innovative approaches, if replicated in the Public or Private sector, can bring in tremendous value in terms of increased quality, reduced purchase cycle time, increased saving, and discipline in procurement processes. Standardization and codification of items led to ease of consolidation in demand across the company and helped lower the inventory holding cost. The E-platform, which is transparent and secure with rich features, such as Reverse Auction, E-collection / Refund of EMD / Tender fee etc., will also boost the green initiative.

Developing a robust category strategy, based on in-depth supplier market assessment for high spend items, is the direction in which the public sector needs to move. Initiatives like Project VIVARTAN are implemented within the same regulatory framework and vigil or oversight institutions that are often pointed to as determinants of red tape and inefficiency. Evidence of cost savings, efficiencies achieved in time, as well as increased bidder participation, proves the financial and organizational value addition of the project.

Following are the lessons learned as a result of successful implementation of Project VIVARTAN:

1. Establishing an appropriate benchmark by investing time and leveraging global best practices for developing a robust procurement category strategy at the planning stage is essential. Category Profiling and Supplier Market Assessments are the two most important ingredients for development of Category Strategy.
2. Collaborating with Vendors: The Pre-Tender Meets started at HPCL CPO were instrumental in getting crucial inputs, which helped in firming up Specifications, Terms and Conditions, apart from developing the right category strategy for improved Vendor Response and better Value for Money.
3. The E-platform with features, such as reverse auction, E-collection and refund of Tender Fee / Deposits, E-chartering etc. complemented the process efficiency in total.
4. It is important to launch a Certification Program to develop a procurement cadre of certified professionals, with complete knowledge about best practices in public procurement at global level. This effort must be at the professional level with strategic procurement coverage.
5. Strong Management Focus and Support is an important factor for the success of any project of this magnitude. Management commitment towards the project was reflected in formation of CPO project team headed by Executive Director, engaging renowned consultants, and establishing a Steering Committee of higher management for periodically assessing project progress and providing quick policy decisions. These played a vital role in completion of the project as per schedule.