Rising to Fuel-Buying Challenges
The past few years have been interesting ones for petroleum marketing and the downstream industry as a whole. The petroleum industry is historically slow to change, but a surprising number of things have changed and are continuing to evolve. Some have been forced by the U.S. and/or global economy, but much of the change is being driven by the need to grow or be more competitive.
To get an insider’s perspective on some of those changes, Telvent DTN recently conducted a survey of our customer base, and more than 1,000 suppliers, marketers and retailers responded. Would these different groups agree on which challenges they face in today’s market? What it would take, in their opinion, to remain competitive over the next few years?
Behind the Results
- Are You Innovative? (That means better or more effective processes, technologies, ideas or change in thought process that add business value or transform how you do business). A bit surprising for the petroleum industry, 38% considered themselves either innovative or very innovative, 36% somewhat innovative, and 15% innovative only in certain areas. More marketers and retailers felt they were very innovative than the suppliers did, who graded themselves most frequently in the “somewhat” category. Because change and adapting is critical, that’s good news.
- Three Biggest Challenges? When asked the three biggest challenges they were facing, suppliers and marketers were in agreement on the two biggest ones: increased competition for business and profitability. The variation came in the third-biggest challenge: For suppliers, it was increased regulatory requirements; for marketers and retailers, it was decreased demand and volume. This is where the real need for rethinking how you do business comes into play.
- What Will Make the Biggest Difference? When asked what they believed will make the most difference in staying competitive over the next several years, suppliers, marketers and retailers were completely on the same page. The No. 1 answer was competitive pricing, but when stacked with the top three, improving operational efficiency garnered more overall votes. Following as the thirdmost- popular vote and ranked not far behind was using technology more efficiently. Perhaps most surprising was that less than 8% of the respondents selected technology as their primary responsibility. Another strong response for some was growth by expansion—a trend that many of you may have experienced in your markets.
- Significant Trends? Other trends surfaced in the survey on how fuel is being bought and sold today. More than 70% of suppliers, marketers and retailers believe there is a continuing shift from the volume of branded gasoline being sold to more unbranded product. To replace declining branded-fuel volume, suppliers are looking for more committed volume and to match competitive opportunities. This seems to be supported by the trend with the second-highest amount of votes: a shift to more gallons being sold on contract vs. posted rack. Large, medium and even small marketers are buying more gallons on contract. But a word of caution: Be educated about the choices that you make before you enter into that commitment. Find the right partner, the right volume and the right basis for your commitment.
Finally, consider the third-most-popular answer for staying competitive: using technology more efficiently. How well are you using the technology that you have? Does it add real business value or has it transformed how you do business? What technology is out there that will help you respond differently and more profitably to the challenges in the market? Technology can play an important role in sharpening your fuel buying, helping you to be more educated in the market where you play and broadening your viewpoint on how you source fuel.
The time has arrived to be innovative in the way you think about buying fuel, and the commitments you make to your suppliers and your customers.