(9.4.

58)
Adopting Latest IT Tools for Inventory Tracking & its Management
in ONGC
Brij Lekh Suthar
ONGC, New Delhi, India

Abstract:
Inventory in any organization consists of namely Basic Raw material, Goods in Transit, Finished
goods, consumable items and Spare parts. As Inventory is crucial in business activity of any
organization and takes about 25 to 30% of cost, its management has become one of the top most
concern for organizations. For effective Inventory management (IM) and it inventory replenishment
based on use, time-to-time Inventory tracking & audit are essential.
Like any other major organization, ONGC also maintains a good amount of Inventory for its business
activities. Due to geographic spread of activities, inventory items are kept at different locations,
sometimes in remote areas & offshore platforms. The multiple locations & large number of items
makes it a challenging task of Inventory Management in ONGC.
Since last two centuries, various kinds of analysis and manual processes have been tried for
Inventory Management and for its major role of tracking & audit. Second half of the 20th Century saw
era of Bar code technology that revolutionized the processes in departmental stores worldwide. Bar
Code technology made the things almost 10 times faster than manual processes. This was used
along with infant technology of simultaneously capturing limited details on items. By the turn of
century, another technology called Radio Frequency Identification (RFID) was developed where items
lying at short distances or in containers can be tracked without opening them and thus further making
the operation nearly 10 times faster over Bar Code technology and also feeding data to networked
Servers, Databases and ERP platforms for truly IT enabled online & real time system for business
use.
The author discusses how RFID devices (called smart tags or Electronic Product code (EPC) tags
and its readers) can be used at major locations and for fast moving items and thus making inventory
tracking and whole gamut of Inventory management processes in ONGC very effective. The author
discusses technology of RFID tags, RFID Readers, Networking of LAN, WAN, centralized RDBMS, IM
enabled ERP application, Internet, Intranet, web and how users can access their required data from
different places using different access technologies.
The author discusses complete process right from generating smart tags for items, storing, moving
in/out of items from Stores, tracking at next/ destination locations, automatic capturing & data update
at central server and generation of alarms on pre set conditions. The author further discusses how
use of RFID can make the inventory tracking and capturing of data faster leading to effective inventory
management & substantial cost reduction.
The author has given calculation for designing RFID based Inventory tracking system in ONGC for
almost 400 locations, cost implications and benefits to organization in terms of increase in
productivity, profitability & building online & reliable database associated with SAP. In the end, author
has given recommendation & conclusion. Bibliography & references on the subject are also given.

Keywords:
Inventory Management, Inventory Tracking, Inventory Audit, Stock Month, ABC Analysis, UPC, Bar
Code, EPC, Smart Tag, RFID Tag, Active/Passive Tags, Inductive /Capacitive Coupled Tags, 64/96
bit Information, RFID Readers, LAN, WAN, RDBMS, SCADA, SCM, CRM, ERP, Electronic
Warehouse, Robot.
1.0 Introduction:
With the advent of industrialization, many processes were developed and adopted to give business
leverages. In the last two hundred years, many manual systems based on scientific studies were
developed for Invitatory management. Twentieth Century saw development of Electronics & IT

systems. The first system based on Electronics and IT used was Bard Code Technology. The
inclusion of radio propagation along with coded identity brought a new technology called RFID (Radio
Frequency Identification) which can be used with materials or livings bodies.

2.0 Evolution of Bar Code Technology:

Bar Code technology goes back to the day on June 26, 1974 when at 8:01 a.m., a customer at
Marsh's supermarket in Troy, Ohio, USA made the first purchase of a product with a bar code. It was
a 10-pack of Wrigley's Juicy Fruit Gum. This began a new era in retail that revolutionized the
processes in departmental stores worldwide and gave companies an efficient method for inventory
control.
Bar Code technology works on UPC (Universal Product Code) system and has fingerprints made of
machine-readable parallel bars. It has advantage to both customers and suppliers. In order to keep
up with inventories, companies must scan each bar code on every box of a particular product at
checkout line. Bar code is a read-only technology, meaning that it cannot send out any information.

3.0 The RFID Technology: The RFID technology was developed in the second half of
Twentieth Century, as a solution for US Air force, for identification of Aircrafts. It was also used for
tracking cattle, cows and railroad cars. The technology was further introduced in airlines for baggage
tracking & identification. Today, RFID major users are Wal-Mart, the U.S. Department of Defense and
Albertsons.

Fig 1: Bar Code on a Can

Fig 2: Chip on a RFID Tag (Enlarged)

3.1 RFID System Components:

The RFID Technology has main components of RFID Reader (also called Interrogator), RFID Tag
(also called Chip Transponder) and Middleware. The RFID tags which stores identity of each products
based on EPC (Electronic Product Code) are called smart labels. RFID tags are intelligent bar codes
that can talk to a networked system to track every product. These tags store information like part no.,
serial no., vendor, order date, receipt date and location (store) etc. Thus each asset will have a unique
identity. RFID reader transmits RF energy which energies & trigger the RFID Tag. The Tag in turn,
sends back its identity or stored data to Reader.

3.2 Type of Tags: The tags are mainly two types. Active Tags and Passive Tags. (i) Active Tags:
They have their own miniature battery or power source with 3-4 years life. (ii). Passive tags: They do
not have any battery or power source. The tags can also be classified based on data stored and
read. The tags can be (i). Read only (ii) Read-Write tags and (iii) Write Once Read Many (WORM)
tags. Generally Read only have factory stamped ID code which are very secure and can not be easily
tampered. Active & Passive Tags can be further classified into Inductively coupled & Capacitively
coupled RFID Tags. The Tags are available in various frequency bands falling between 125 kHz to
2.45 GHz. Generally, tags are available at 13.56 MHz. Many tags are available in UHF 865-867 MHz
band which is good for walkthrough Gate Antennae attached to readers. The Tags can be read from
few Centimeters and to a distance of few Meters using Walkthrough Reader & Antenna. If connected
with radios, it can be read from any long distance. The Tags attached to GPS (Global Positioning

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System) can provide location of the Item along with its ID. Different Tags store Information in 40/64/96
Bits.
In India, the RFID solution is available from Gemini, TCS, HCL, Skandsoft Technologies etc. The
price in India varies from Rs. 20 to 3000 per piece for different type of tags. The major International
solution providers for RFID are Oracle, Retek, WebMethods, i2 Technologies and Retail Pro etc.

3.2.1 Inductively Coupled RFID Tags:

These tags have been used for years to track everything from cows and railroad cars to airline
baggage and highway tolls. They have three parts. (i). A tiny Silicon microprocessor (ii). Metal coil
made of copper or aluminum wire. It is wound into a circular pattern on the transponder. This acts as
Antenna for the tag. The tag transmits signals to the reader with can read at distance. (iii).
Encapsulating material: The glass or polymer material is used to wrap around the chip. The tags are
having cost from around $1 for passive button tags to around $200 for battery-powered, read-write
tags in international market. These tags are powered by magnetic energy generated from Reader.

3.2.2 Capacitively Coupled RFID Tags:

These tags are comparatively cheaper than Inductively coupled tags. They use a small amount of
silicon instead of Coil to perform the function. These tags have three parts: (i). Silicon microprocessor.
The chips are as small as 3 mm2. They store 96 bits of information, which is sufficient to allocate
trillions of numbers assigned to products. (ii). Conductive carbon ink: The special ink printed on tags
paper material acts as the tag's antenna (iii). Paper: The carbon-ink electrodes are printed on back of
paper on which silicon chip is attached. The use of paper makes it low-cost, disposable tags. These
tags can be easily bent, torn or crumpled and are more flexible. Their price is as low as 50 Cents.
These tags are powered by electric fields generated from the reader.

3.3 The Middleware and SAP Interface:

The middleware is a software which helps in collecting readers data and pass onto to repository i.e.
RDBMS or latest ERP solution. It can be deployed in a Centralized or Decentralized database
approach. The middleware when connected to ERP solution can be very useful in supply chain
management, customer relationship management, product life-cycle management and supplier
relationship management.
The middleware can be interfaced to a network, called the Object Naming Service over Web which
collects information from Smart Cards. This database retrieves information about each product
interrogated by Reader. The information on labels is written in a Product Markup Language (PML)
based on the eXtensible Markup Language (XML). The system allows all computers to communicate
with any computer connected in a similar Web servers atmosphere, over Internet.

4.0 Uses of RFID Technology:

Today, the RFID used in aerospace, retailing, baggage tracking and inventory tracking etc. It is very
useful in tracking Capital, Stores & Spares items thus helping in fast replacement or repairs during
preventive and breakdown maintenance. The RFID can be used to track a product movement from
purchase to trash can. It helps in reducing labor costs, increasing productivity, improving space
utilization, achieves near-perfect accuracy in processes and more-efficient operational processes.
In supply Chain environment, it tracks every phase of product movement at different stages. It
provides total visibility in Supply Chain environment for better decision-making, reducing safety stock,
reducing shrinkage & spoilage and total Inventory Management (on FIFO basis ) to reduce scrap and
reduction in misplacing of items.
The RFID can be used in detailed Audit trail for reducing in stock-outs, better Customer Service,
measuring performance levels objectively, employee accountability, traceability and reduction in cost
of Inventory Cycle Counting, Efficient Consumer Response (ECR), Vendor Managed Inventory (VMI),
and Collaborative Planning Forecasting and Replenishment (CPFR).

5.0 Merits of RFID Technology over Bar Code Technology:

Though, Bar Codes are cheaper than RFIDs but they have many disadvantages. The Bar code once
printed can not be changed. It can be removed easily. The Bar code, with time, and due to

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atmospheric effect or in magnetic area looses its information. The Bar Code can be affected in rain,
humidity and can be easily scratched. Bar Code requires Line of Sight with reader and can be
scanned one by one in proximity.
Whereas, the RFID reader does not require Line of Sight, can read from a distance (as per type of
tags) and proximity scanning is not required. Moreover, the ID of hundreds of items can be read by a
Reader in just a fraction of second. The RFID tags can be paced in atmosphere of humidity, high
temp up to 200o Fahrenheit and in mud. The reader can read items placed inside wooden, plastic
boxes etc. RFID Tags are fixed on items with permanent adhesive gluing/ surface mounted. The data
stored on smart labels can be changed, updated and locked The Tags provides data even when they
are scratched/ torn but the Bar codes do not work in these conditions.

6.0 Standards of RFID Technology:

The RFID technology follows EPCglobal standardization. With these standards, for retails, an
Electronic Product Code Network can be built worldwide with full open operability. EPCglobal has
earlier specification called Class 0, Class 0+ and Class 1 tags that can store a 96-bit Electronic
Product Code. It is used by Albertsons. EPCglobal has latest standards EPCglobal Gen 2. The tags
used worldwide are ISO-15693 compliant.
EAN.UCC (Uniform Code Council) uses standards such as Reduced Space Symbology (RSS), Global
Trade Item Number (GTIN), and Global Location Number (GLN). In retail, many standards pioneered
by National Retail Federation, the Association of Retail Technology Standards (ARTS), the Uniform
Code Council, and the Voluntary Inter-Industry Commerce Standards are used.

7.0 Oil & Gas Industry and use of RFIDs:

In Oil & Gas Industry, equipments are mostly placed in open, rain, humid, high temperature, oily and
muddy environment. The equipments are liable for scratch and are required to be working in tough
conditions. In such conditions, Bar Code technology can not be used. The solution provided by RFID
can be easily used without fail. It can be used on Capital items, stores & Spares. In field, it can be
used on instruments, valves, actuators, pressure joints and manifolds etc. RFID technology, used for
oil & field items tracking, helps in reducing maintenance time and improves productivity. It provides
authentic Information for items lying in yards i.e. PTYS (Production Tools Yard Store), DTYS (Drilling
Tools Yard Store), Regional store, Jetties etc.
More over, change in Temperature and Pressure also can be measured using these tags. A person
needs not to go near such situation to monitor changes. Here, a particulars tags called SaviSensor
Tag sends a real-time alarm to a fixed or mobile RF reader and notification of the temperature or
humidity change can be escalated via a web application, cell phone or email through middleware
attached to the readers.

8.0 The Inventory Management in ONGC:

Inventory Management is termed as systems and processes that identify inventory requirements, set
targets, provide replenishment techniques and report actual and projected inventory status.
In any organization, Inventory is required because (i). It is always necessary to maintain a certain
amount of stocks. (ii). The procurement of several material takes considerable long time and it is not
practicable to match the process exactly with the incoming flow of material (iii). Certain amount of
reserve stocks is required to protect against sudden rise in demand (iv). Inventory works as a cushion
between procurement and process.
In any organization, Inventories may block considerable amount of capital as high as 25 % to 30 %. It
also requires constant expenditure to the organization by way of interest on the capital as well as cost
incurred in carrying the inventory. They have financial implications to the organization in the terms (i).
Cost of ordering. (ii). Cost of carrying inventory (iii). Cost of stock out and (iv). Cost of over stocking
for the Inventory.
In ONGC, with the implementation of MMI (Material Management Inventory) module in SAP, it is
found that Capital Items On Stock (CIOS) and Capital Items In Transit (CIUT) have reduced to 50%
over the last 1 year. CIOS and CIUT as on 31.03.2005 were Rs. 118.09 and 6.68 Crores (Total Rs.

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124.77 Crores). But, CIOS and CIUT as on 08.02.2006 have gone down to Rs. 72.44 and 4.62 Crore.
(Total Rs. 77.06 Crores). This gives reduction of CIOS & CIUT to 45.65 & 2.06 %.
But, on the other hand, Stores and Stock-Months have gone up over the same period[1]. The Stores
and Stock- Months, as on 31.03.2005, were Rs. 1185.41 Crore and 9.14 months which have
increased to Rs. 1524.21 Crore and 12.92 Months on 28.02.2006 respectively.
Similarly, Spares and Stock-Months have also gone up. The Spares and Stock-Months, as on 31.03.
2005, were Rs. 619.52 Crore and 21.81 Months which have increased to 654.51 Crore and
26.77 Months on 28.02.2006 respectively.
This is an awakening sign that there is increase in overall Inventory for S&S (Store & Spares), both in
terms of value and Stock Months. Also, large no. of non moving items has been noticed. The study
has led to the conclusion that Inventory carrying cost has increased and there are multiple codes for
the same item. This indicates blocking of heavy funds for non productive assets.

8.1 Warehouses and Regional Stores in ONGC:

In ONGC, till date, WMS (Warehouse Management System) and Regional Stores have been following
manual processes of accepting items, identifying, issuing, recording in registers, maintaining logs and
keying data in system. Todays process can not solve problems such as overstocking and delays
because an item may not be available at a local warehouse at a given time. This makes repair and
maintenance of large equipment tedious and leaving large machinery in the repair shop for lengthy
period. Moreover, with unpredictable demand, it is difficult to sustain the correct amount of inventory
which leads to tying up extra fund in non productive things.
ONGC also have a different Inventory situation. (i). It works in all disciples of upstream activating
leading to storage of all kind of Capital, Store & Spare items. (ii). With this, a large amount is used in
maintaining Inventory. (iii). Due to a lack of visible information flow, demand becomes unpredictable
and variable. (iv). The total numbers of Items in ONGC inventory reaches to more than 10 Lakhs. (v).
The other issues is that, a minimum inventory is always maintained at remote & operational sites
located in very far flung area spread across the country , on land and offshore.
It is anticipated that with time, the Warehouses in ONGC shall also be based of use of Electronic
controlled trolleys and robots for picking and placing items at designated placed. The movement shall
take place based on data fed into a computer by an operator.

9.0 Deployment of RFIDs as Pilot Project in ONGC:

Four years back, ONGC tried for Bar Code technology, on experimental basis, at one location. As
ONGC has activities connected to hazardous nature and it is only RFID which can give complete
solution. To cut down on high inventory & inventory carrying costs, the measures suggested are: (i).
Standardization of equipments (ii). Proper checks at the time of PR generation and PO placement (iii).
Non utilization of indented items to be recorded in Individuals Annual Appraisal Reports (iv).
Streamlining of preventive maintenance (iv). Forecasting of requirement/ demand (v). Bench marking
for inventory control process (vi). Adoption of latest Inventory Tracking tools i.e. RFID (vi). Interface of
RFID to SAP system and incorporation of warning system for breaking the preset limit.
Inventory tracking and management is very crucial for accountability, planning, replenishment and
faster access of items for maintenance & audits etc. It is envisaged that instead of directly &
simultaneously implementing the RFID system in ONGC at all the work Centres, at first,
implementation can be done as a pilot project at a convenient Regional Store i.e. Baroda and an
operational site .i.e. CPF, Gandhar. Once this pilot Project is completed and based on experience
gained, in phase II, it can be implemented at all the 20 work Centres of ONGC covering around 405
Store sites for offices & operational sites as stipulated in SAP system of ONGC.
During the implementation, it will be ensured that the personnel authorized to move equipment to/
from the stores/ warehouses and sensitive places like explosives sites shall also be issued tags with
various details (employee code no., etc.) programmed on it so that no unauthorized person can enter
the area. Similarly, all the personnel (apart from material) sent to offshore shall also be provided RFID
for tracking & management of manifest.

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10.0 Enterprise wide RFID implementation and SAP integration:

In ONGC, SAP system is already working. The RFID system implemented with suitable middleware
and interfaced with SAP system using SAP connectors can be a big boost in total equipment
Management, database managements, Process Management and Inventory management & Audit.
The system shall help in planed procurement, cutting undue stock piling of inventory and better
utilization of resources which are tied up in the large Inventory in ONGC.

Fig. 3: RFID Readers

Fig. 4: Schematic Diagram for RFID-SAP Interface

11.0 The completion of Business Management cycle the SAP, the SCADA and
the RFIDs:
By implementing RFID, ONGC shall fulfill all the three vertex of triangle for its corporate management
system & processes using SAP, SCADA and RFID on a robust Networking of LAN & WAN and
Communication Infrastructure. Having implemented all the best IT tools of SAP, SCADA and RFID for
its Business Processes, it shall enable ONGC to take further mileage on International Business arena.

12.0 The implementation cost and ROI:

The expenditure in one time implementation of RFID system in ONGC shall be below 2 % of the
annual cost of Inventory. The detailed calculation is given in Table 1. Once the system is
implemented, the ROI to ONGC can be achieved in just one year taking into account, the cost of
stock piling of redundant items, spoilage, reduction in duplicate inventory, tracing of items in time and
restoring the items and cutting operational down time to Rig, Platform etc. With the large requirement
of RFID tags, the cost of each tag will come down due to large production and economy of scale. The
provision shall be made for recycling of tags with new IDs, once items are used.
Apart from directly saving of cost, the other direct & indirect benefits to ONGC can be summarized as
follows: (i). It shall help ONGC in achieving a totally automated solution requiring minimal human
interference and reducing human errors. (ii). It will enable 24 x 7 tracking and monitoring of tagged
items and its tracking again at next location/ destination. (iii) It shall provide Real-Time information on
current stocks. (iv). It will automatically create logs to audit material movement across time and space.
(v). It will provide ONGC, a totally non-intrusive and hassle free system. (vi). It will help in accessing
information from anywhere since the ONGC has country wide networking system including its
remote sites. (viii). Due to online database on Equipment/ inventory, it will eliminates the deliberate /
intentional misuse of items by disgruntled employees. (ix). It shall help in generating on-demand
customized reports of items issued and their usage thus eliminates labor-intensive paperwork like
preparing issue-notes, creating, maintaining and recording log registers etc. (x). It shall ensure
operational efficiency by providing greater visibility to operations data. (xi). Moreover, it shall provide
added security layer for authorized movement of store material and usage and generation of alarms
on pre-defined limits.

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Hardware &
Software
No.
Readers &
Antennae Per
Site
Tags Per Site

Software Per
site

Installation,
Commissioning

Particulars

Handheld
Fixed
Walk
through
Passive
Plastic
Base Tags
Passive
Tags for
Metal
Bodies
Active Tags
RFID
Middleware
(Medium @
40%, Small
@10%)
SAP
Connectors
(Centralized
System)
10% of H/W
and lump
sum for
S/W

Major
Stores
22
2
4
2

Medium
Stores
49
1
2
1

Small
Stores
334
1
2
1

Total
Units
405
427
854
427

5,000

2,000

100

2,000

1,000

20
1

Rate Per
Item (Rs)

Total Cost
(Rs)

60,000
75,000
175,000

25,620,000
64,050,000
74,725,000

241,400

20

4,828,000

100

126,400

135

17,064,000

50
1

100
1

36,290
75

1,500
1,350,000

54,435,000
101,250,000

1,125,000

1,125,000

25,000,000

25,000,000

368,097,000

TOTAL
Table 1: Estimates for Implementation of RFID in ONGC

If ONGC decides, the system can be extended in Real-Time to vendors and other external partners
for cutting lead time in supply.

13.0 Conclusion:
Though RFID technology have been tried and used by major corporates in the Europe and Americas,
but the technology is still new in India. The technology has been tried in a limited way by few
corporates or subsidiaries of MNCs and Courier companies.
Days are not far away when, in addition to items, humans shall be required to carry RFID tags for
entry in to public places i.e. Bus Stands, Railway Stations, Airports, etc. without which, the entry shall
be restricted.
ONGC being Indias largest corporate in market capitalization and being technology savvy, it is right
time that ONGC adopts latest technology of RFID for better tracking of its whole gamut of inventory ,
cutting cost on duplication of inventory and reduce down time by providing faster availability of needy
items at right time.
The adoption of RFID in ONGC shall help in completing triangle of all the management processes of
automation by SAP, SCADA, and RFID on a robust networking & communication linkages.
The company which adopts technology as front runner only becomes global leader in business.

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Glossary:
ARTS
CIOS
CRM
DTYS
EPC
ERP
GLN
GPS
GTIN
IM
IUT
LAN
MIT
MMI
NMI
PTYS
RDBMS
RFID
RSS
S&S
SCADA
SCM
SM
WAN
UHF
UCC
UPC
WMS
Lakh
Crore

:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:

the Association of Retail Technology Standard.

Capital items On stock.
Customer Relation Management.
Drilling Tools Yard Store.
Electronic Product Code.
Enterprise Resource Planning.
Global Location Number.
Global Positioning System.
Global Trade Item Number.
Inventory Management.
Inter Unit Transfer.
Local Area Network.
Material In Transit.
Material Management Inventory.
Non Moving Item.
Production Tools Yard Store.
Relational Data Base Management System.
Radio Frequency Identification.
Reduced Space Symbology.
Stores and Spares.
Supervisory Control And Data Acquisition.
Supply Chain Management.
Stock Months.
Wide Area Network.
Ultra High Frequency.
Uniform Code Council.
Universal Product Code.
Warehouse Management System.
It is equivalent to 0.1 Million.
It is equivalent to 10 Million.

References:
[1]
[2]
[3]
[4]

Project Report on Inventory Management in ONGC by P K Sushama, SE (D); B D Parmar, SE

(D); MC Gupta, SG; B L Suthar, SE (E&T); and R Gambhir, M (MM), ONGC, INDIA. (March,
2006).
www.rfidjournal.com
www.EPCglobalinc.org
www.tcs.com/rfid

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