Midnight oil

Filling the car with fuel used to be a painless experience as others took control. However, in an attempt to regulate the local labour market, petrol stations look set to become round-the-clock self service operations. To ensure this mandate can be carried out, the region’s downstream oil & gas industry is investing in IT to automate as many processes as possible.

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By  Vijaya Cherian Published  August 31, 2003

I|~||~||~|A likely government mandate that will encourage the development of self service in filling stations is fuelling IT investment in the region’s downstream oil and gas industry. The directive is part of Arab governments’ efforts to control the expatriate labour market and it will mean the complete automation of business processes in the downstream O&G sector. This, in turn, will boost efficiency and productivity within the industry by minimising manual intervention; it will enable greater control over the delivery and supply of petrol, and it will give a complete unified corporate overview of the business that better enables sales forecasting and promotions. While the goals are lofty, the task is not easy.

Business automation would be a fairly simple affair, if filling stations were merely used by customers to fill-and-go, like in Kuwait. However, in most GCC countries, petrol stations operate as mini-markets with a convenience store, car wash, lube express and tyre change services. In some instances, stations offer laundry and internet surfing facilities as well.

“The trend of supplying only fuel has had to change because oil prices are controlled by governments and the profits are the same. So, like banks, we have to compete on service,” says Muhanna Said Ali Al Harthy, IT projects leader at Al Maha Petroleum Products Marketing Company, Oman.

Jamil Jeitani, general manager of NCR Abu Dhabi, which supplies O&G specific solutions to the region, agrees. “The increased competition in the market is continuously leading to more focus on dry-stock sales in the shop, more competitive offerings for customers and new methods of payment,” he says.
The introduction of each new service or product requires integration with the rest of the company’s systems. However, most out-of-the-box solutions in the market have not been able to meet this challenge upfront.

When Al Maha, for instance, wanted a new system to replace its existing infrastructure, it found that most solutions in the market could not handle data from both its forecourt and convenience stores.

||**||II|~||~||~|“We were using Octane 2000 but we encountered quite a few problems with it such as database corruptions. Also, it could not meet all our specific requirements,” says Al Harthy, who scanned the local as well as international market for a more appropriate alternative.

“In the local market, we found a hardware solution called Ruby, but it was proprietary, expensive, hardware-based and not open. Moreover, it could not help us manage all stations, as some are managed by third parties,” he adds.
The company was equally disappointed with most international proprietary offerings, such as PDI (Professional Data Solution Incorporated), until it chanced upon Radiant, an American solution that had in Al Harthy’s words, ‘the works’.
However, the cost of implementing the software was prohibitive and no local support was available. Unable to find a solution that could meet both its requirements and its budget, Al Maha developed an inhouse solution called petroleum retail automation and management solution (PRAMS) that manages the front and back office operations across all of its petrol stations.

“We worked on it for two years, building it from scratch. We started it as a POS machine and integrated it with our pumps and stations. Gradually, we began adding other smart features to it,” explains Al Harthy.

Today, the solution is being used to manage the company’s fuel inventory in tanks, onsite fuel sales, inventory and sales at convenience stores, lubes and car washes. It is also well equipped to handle any payment format when self service becomes mandatory.

||**||III|~||~||~|Like Al Maha, Abu Dhabi-based Adnoc Distribution has also been gearing its IT resources to enable complete automation of its systems. But, unlike the Oman company, Adnoc has gone for a combination of solutions, such as NCR’s petrol management solution and Oracle’s ERP and CRM packages, and integrated them with an inhouse developed system.

“Most of the best-of-breed packages like NCR’s PMS do not have a link to a financial system. It only provides data output,” says Dr Ali Guidoum, IT manager at Adnoc Distribution.

“It’s up to us to extract this data from the PMS and put it into the Oracle Financials. So we developed a comprehensive in-house solution to automate this process, to handle the data exchange and connectivity between the stations and the head office and the integration of PMS to Oracle,” he explains.

Adnoc, which has expanded on the mini-market idea and developed mini business centres at five of its stations, with rest rooms, pharmacies, restaurants, internet kiosks and other services to cater to travellers, has not only automated its entire internal process but also integrated its forecourt with its convenience store.

“PMS is the enabling system that allows us to do this. Normally, people have to pay for the gas and then go to the convenience store and pay separately for the goods they purchase there. But at our stations, our clients can fill up with gas and then go to the store and pay for both together because our system is integrated at both areas with the NCR PMS,” Guidoum explains.

||**||IV|~||~||~|This integration has also ensured that Adnoc Distribution is ready to switch to self service anytime. “With this, our users can either pay inside or outside. This can only be done if there is complete automation at your station where your pump is linked to the point-of-sale (POS) inside,” Guidoum says.

Adnoc intends to install card readers at its pumps where customers can swipe their cards — either credit or its own smart card called Rahal — to authorise them. However, there will also be a person inside who can accept payment and activate the pump.

Likewise, Al Maha’s system is also ready to accept all modes of transaction, whether self serve, pre-pay or post-pay for self service. But instead of placing one reader at each of its pumps, the company has placed one on each aisle.
“This is cost effective and serves customers just as well because we have built an interface between them. Moreover, this doesn’t slow the system down because a transaction takes about 12 seconds,” he says.

These companies are learning lessons from their Kuwaiti counterparts, which have had self service for a long time, but whose current mode of payment defeats the whole purpose of automation. Kuwait petrol stations being all government run do not have mini-markets; customers merely drive in to fill up with fuel and go.

However, Kuwait’s primary setback is its current mode of payment, where customers have to queue up at the cashier’s window to make their payment before the pump can be authorised.

||**||V|~||~||~|“It doesn’t take much time to fill fuel, but there’s always a queue at the cashier’s window to pay and this is a major problem that we are facing,” says Bader Al-Yousuf, IT manager, Kuwait National Petroleum Company (KNPC).
Another issue that KNPC is seeking to address is the abuse of cards by drivers. “There are complaints here about drivers using owners’ smart cards to fill fuel in their personal cars,” says Al-Yousuf.

As a result, KNPC is currently evaluating a Pay@Pump solution, where customers will be able to bypass payment queues at the cashier’s and have card readers or sensors that enable customer authentication and pump activation on the nozzle. This solution will also seek to check abuse by ensuring that cards of owners can only be used to fill fuel in the cars specified by them.

In the meantime, most companies in Dubai have also ensured that they have the requisite hardware and software to switch to self service. Emarat, for instance, already uses the Ruby POS solution and a resource management series from PDI to handle its car wash, lube express, fuel sales and convenience stores. However, it has not enabled the feature to authorise the pumps or automate car washes, despite it being available in the application.

Like Emarat, most companies in the downstream market are banking on a three-year time frame that will follow the government directive to put the final touches to their self service offering.

“There are quite a few things to get done,” says N Krishnamurthy, business consultant for retail at Emarat, which has several petrol stations that are handled by third party dealers. “There are different kinds of dispensers. These need to be able to talk to a common system. Then the card readers should be able to accept any type of credit card, including our smart cards, and the cash register should be able to accept this. Then all the pump controllers should be authorised by the register,” he adds.

||**||VI|~||~||~|Bashir Ahmed, hardware technical manager for Ruby, Marshal Equipment & Trading company LLC, argues that many of the features local operators require are avilable in existing solutions but are simply not used.

“Most end users in the region are not using Ruby to its complete potential because they need additional equipment to interface it with their systems,” he says. “For instance, Ruby is capable of functions like automated car washes and tank gauging. But you need to install specific equipment at the car wash to make this also self service. However, most end users are going phase by phase and they have not yet used this,” he adds.

But even as the downstream market is going from one phase to the next, the fruits of automation are beginning to ripen. For Adnoc, the electronic transfer of data has already meant saving half a million sheets of paper per year.
“Imagine the amount of paper, their transport, their photocopying, their storage and their distribution. All of this has been eliminated because of the electronic transfer of data and it has amounted to huge cost savings,” says Guidoum.

KNPC has also realised huge cost savings by automating its filling stations. “In the past, we had about 15 to 17 persons entering information about the transactions daily. Today, there are no data entry operators. All transactions are done automatically,” says Al-Yousuf.

Moreover, as most filling stations today compete on service, the need for greater inventory control and complete information about sales are become increasingly important to make accurate sales forecasts and give management a complete overview of a company’s operations. This has led to the adoption of barcode scanners at all convenience stores.

“Previously, we never used to do any scanning. But after using this, we are able to monitor the sale of each and every item. This enables us to undertake shelf spacing category management and it also gives us information to analyse our customers better,” says Krishnamurthy.

Al Maha’s Al Harthy concurs. Barcode scanning has helped the company build its data warehouse, monitor sales and analyse buying trends. “We can now see how many people with a credit card buy fuel and also grab a drink from a store, how many people who buy Pepsi that also pick up a packet of chips and accordingly, we can tailor our promotions,” says Al Harthy.

Realising that the cost benefits are piling up, Al Maha has gone one step further and deployed an automatic tank gauging system at its stations. The system not only sends an automated message to the main depot when a station is low on fuel, it also keeps a tight control on how much is supplied and delivered. This allows the company to identify which tanks are suffering from high evaporation rates and take the appropriate action.

“Previously, a station used to give us a call or send us a fax and say they needed fuel. But that whole procedure is now taken care of by the system. We set the threshold for each station and when the level of the fuel reaches that mark, an automated message is sent to our depot requesting more supplies. Moreover, previously, when a truck took the fuel to the station, there was no way of knowing how much fuel was lost en route either because somebody took it or because of leakage,” explains Al Harthy.

Clearly, each company in the downstream oil and gas industry is stepping up its efforts to automate its businesses processes as quickly as possible to stay ahead of the competition. And, where vendor solutions are falling short of providing a comprehensive solution, companies are filling the gaps with their own solutions.
However, it won’t be long before customers begin to demand more. For instance, they may want to use smart cards to draw fuel from any petrol station, just like they can withdraw cash from any ATM today. Disparate solutions developed by different petrol stations may make this process complicated, unless they comply with certain global standards. Although this does not appear to be on the agenda of local companies, the downstream market may have to work together to chalk out a conducive standard if it is to maximise its IT investment.
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