How Two Retailers Regained Control Over Fuel
Truenorth removes roadblocks; Hy-Vee sets stage to add more fueling sites
OAK BROOK, Ill. -- Two Midwest retailers--one a veteran jobber, the other a large supermarket chain--both found the ability to control the many costs associated with managing a fuel business and optimize profits through one software package. The retailers shared the many benefits in a CSP CyberConference, "Fueling Business: How Retailers Can Gain At the Pump."
[To view an OnDemand replay of the "Fueling Business: How Retailers Can Gain At the Pump" CSPNetwork CyberConference sponsored by FuelQuest, please click here. The program is free for retailers and wholesalers; others, $49.]
Truenorth energy LLC, Toledo, Ohio, owns, operates or supplies more than 320 c-stores in Illinois, Michigan and Ohio, including 100 of its own truenorth sites. Together, the Shell-branded locations sell 384 million gallons of fuel annually. As Mickey Conway, vice president of trucking with truenorth explained, the chain implemented a fuel-management software package as the most recent chapter of a longer-term continuous-improvement initiative.
"The key benefits are: We have enhanced communications up and down the chain; all of our employees are involved in creating and maintaining improvements; and we are also all involved in identifying and removing roadblocks to performance," Conway said.
Truenorth had already implemented various technological solutions for ensuring tank compliance and automating inventory and dealer ordering, as well as used on-board computers in its fleet and dispatch software. At the same time, "We felt we were leaving money on the table, that we weren't getting the biggest bang for our buck," said Conway. "We challenged ourselves to figure out a way to improve our truck utilization, our fuel-dispatch operations and dealer cash flows to allow the organization to remain and continue to be profitable."
In November 2011, truenorth implemented FuelQuest's Fuel Management System (FMS) and ForeSite inventory-management software. FMS is an on-demand, web-based system that automates all aspects of fuel management. ForeSite monitors fuel inventory and delivers instant alerts when orders do not meet changing demand conditions at the site.
For truenorth, benefits have included:
- The elimination of 45 extra loads from its delivery schedule, increasing working capital for the company and its dealers thanks to optimized inventory. "We're not taking a full load of regular there when the guy's not going to sell it for seven days," Conway said. "You can set levels in the program and deliver when needed and in quantities needed." ForeSite enables truenorth to poll its sites several times each day to tailor its deliveries by location. The company has also been able to downsize its truck utilization.
- Within six months, the ability to grow loads by an average of 100 gallons each. "This doesn't sound like lot, but multiply that by 125 a day, times 365 days [a year]; that's a pretty significant amount," said Conway.
- Within four months, was able to cut two dispatcher positions, leaving truenorth with four dispatchers to oversee 400 million gallons each year.
- Cut training time for dispatchers by 300%.
For the future, truenorth plans to integrate its on-board computers with the FMS system and is examining FuelQuest's tank-compliance and integrated tax solutions.
Meanwhile, Hy-Vee Inc., a 235-store supermarket chain based in West Des Moines, Iowa, opened its first fuel locations in 1997 and today has 99 such sites. The retailer took fuel management in-house nine years ago and implemented FMS at that time to not only simplify the process but also counter price volatility and set the stage for growth.
"We are committed to expanding our number of fuel sites at existing and new locations," said co-presenter Joe Weber, fuel purchasing specialist. "To do so, and at same time grow fuel margins, Hy-Vee decided to take a greater ownership of the fuel supply chain--that means establish an internal fuel desk with automation technology. Additionally, we were determined to manage our overhead costs and capital expenditures for our fuel department, a team comprising of two individuals at that time."
Hy-Vee was seeking a system to manage basic but time-consuming processes--simple blocking and tackling such as tracking and forecasting inventory, monitoring deliveries and collecting and reconciling invoices.
"It sounds complicated, but our business was already complicated," said Weber. "It was clear we needed an automated system that would simplify our process, real-time analysis because there are a lot of moving parts that were always changing."
Through application of FMS and ForeSite, Hy-Vee has seen:
- Improved dispatching, enabling the retailer to triple the number of sites its dispatchers oversee overnight, from 30 to 99, but with reduced labor costs. Hy-Vee has three full-time dispatchers now, but plans to expand its fuel site count by 20 to 30. "We may not need another dispatcher," said Weber. "Because the automation process continues to improve with FuelQuest and ForeSite, that extra labor is not needed."
- The optimization of inventory levels by site. The ForeSite software tracks and forecasts inventory and orders, and monitors deliveries, allowing Hy-Vee to gain real-time insight into delivery status. "With new and improved forecasting capabilities, you can really fine-tune every site, every location, every tank into what works best for that location," said Weber, noting Hy-Vee was able to trim 100,000 gallons of inventory from its secondary tanks alone.
- Reduced time reviewing inventory levels. When FMS was first installed nine years ago, it took nearly an hour for Hy-Vee to review inventory levels. Through upgrades to the software, and the addition of the new ForeSite module, the task takes only 5 to 10 minutes, and can be repeated multiple times each day. "We went from polling a few times each day in FMS, and are now up to 16 times a day in ForeSite," Weber said.
- Reduced run-outs and retains by double-digit percentages, shortening the time frame between viewing the site data and delivery time and reducing short-load fees by about 50%. In addition, with improved forecasting capabilities, Hy-Vee has been able to eliminate two extra short loads fees each week.
- Cut labor associated with invoice handling. Through FMS, Hy-Vee has enjoyed greater visibility of fuel and freight costs by automatically importing invoices and prices from its six common carriers. It also has sped up the order and invoice-reconciliation process, trimming three to four hours per day in labor by eliminating the need to print and sort invoices.
- Improved lifting error detection. Thanks to the faster delivery and invoice reconciliation, Hy-Vee slashed the number of days required to catch lifting errors from three to four, to only a day to a day and a half. "This frees up more time to audit for other discrepancies, which saves us several hours per day," Weber said.