FRAMINGHAM, Mass. -- For a retailer to maximize fuel income and traffic for inside sales, it is vital to have both a great procurement team and a street-pricing team working in a collaborative and coordinated fashion.
For procurement, the essential variables are:
- Build optionality into the book as much as possible. That means multiple suppliers, multiple terminals, multiple trucking vendors and a portfolio of contracts—index, posted, mercantile differentials and fixed.
- Maximize credit lines with suppliers and be set up at multiple terminals.
- Understand transportation costs, including pipeline, barge and trucking.
- Understand blending economics, including Renewable Identification Number (RIN) economics.
- Focus constantly on the impact events that affect regional supply, including refinery outages, pipeline interruptions, strikes, turnarounds and terminal outages or constraints, especially during Reid vapor pressure (RVP) change season. React quickly.
The procurement director’s job is not to forecast prices or speculate. A top performer keeps the system supplied at all times, and purchases better than index or on par with the competition.
For the director of street pricing, the essential variables are:
- Establish weekly volumes for every site and use daily price adjustments to maintain that volume.
- Price to the competition on a real-time basis, taking into account facility and location.
- Maximize contract sales through a fleet program, loyalty program or internet sales.
- Use social media to “ping” customers for purchases during the 10 a.m.-4 p.m. slow period.
A director of street pricing is measured by maintaining and growing site volume, and by equal or better retail margin results for the market area.
Both the procurement director and retail pricing director should be cross-trained in each other’s function, along with any supporting clerical professional. The important function for overall fuel performance is possessing the best information systems and data. Sources for these include Oil Price Information Service (OPIS), Platts, GasBuddy, and fuel pricing systems such as Kalibrate and PriceAdvantage.
The key attributes in the team are always information, intelligence, speed and diligence.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.