Few will disagree that the past few years have brought some real changes for petroleum marketers. Long gone are the days of single price changes and plentiful supply. Market volatility is now an everyday occurrence. For those in markets where supply can be particularly tight, a supplier being out of product or a marketer running out of allocation is something that is expected.
And as a slow recovering economy continues to concern consumers, no one is surprised that consumer behavior has changed perhaps forever. Americans are not only more conscious of the price they pay at the pump for gasoline, but also are not as loyal to any single gasoline or convenience store brand.
Perhaps the biggest challenge to both petroleum marketers and retailers is the growing presence of someone bigger than themselves. Acquisitions are occurring on a regular basis. Large c-store chains continue to buy smaller ones even as large marketers buy into markets for expansion. With size comes strong buying power with favorable contracts and supply.
Efficient and Profitable
Never before has the need for small to midsize companies to be efficient and profitable been so critical. But it is possible, and I’d like to share the tale of one marketer in the Southeast who has been focused on just this for the past two years.
Being primarily a branded distributor in a world in which brand no longer carries the cachet it used to, he set down a path of improvements for his company to become a stronger competitor. A primary consideration was partnering with his customers to make them stronger competitors as well. His goals were simple but well planned and ultimately well executed.
Sharpen Inventory Management:Well versed in managing his own company’s inventory levels, he realized that sharing this expertise with his retail customers would help them be more profitable. He set about engaging customers to allow him to monitor their tank levels, often reducing their cash flow investment in fuel inventory. With better insight into their inventory levels, he could take smarter advantage of market swings and offer customers additional margin improvements.
He now watches the market and has implemented automated dispatch and truck technology to ensure that when plans change, his drivers are well informed. This technology has more than paid off in better communications and execution throughout the company’s fuel operations.
Improve Pricing and Margins: More optimized fuel buying, even for branded stores, meant better margins all around. But more was needed. When suppliers offered higher discounts for shorter terms, these could be shared with customers. He wisely recognized that shorter terms mandated faster, accurate customer billing. His next steps were to leverage the truck technology he had previously implemented and combine it with receiving real-time bills of lading (BOL). Within minutes of completion of loading at the terminal, his office now receives electronic BOL data. It merges with order data from the truck system as drivers complete their deliveries, then feeds into his accounting system to automatically generate customer invoices.
Now even holiday weekends don’t throw a wrench into the process. With few exceptions, customers are automatically billed on the same day of delivery seven days a week. Customers receive invoices faster, giving them time to arrange payment. Invoices are more accurate so disputes have been eliminated.
As one might expect, this tale has not been without bumps in the road. Big changes uncovered areas that were indirectly affected and needed improvement. Some of these changes took gaining real buy-in—from customers and some within the company—and not all were easily convinced. It wasn’t an overnight miracle, but the results are impressive. Improved cash flow and stronger margins combined with healthier, more satisfied customers who are now better positioned against larger competitors combine for all the makings of a “they lived happily ever after.” And who doesn’t like a good fairy tale?
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