Seasons and Cycles

Brian Reynolds, director of fuel solutions, The Pinnacle Corporation

The fuel business is a lot like farming in that it is very seasonal. During winter, marketers are conditioned to live off less volume and smaller margins. The sun brightens, grass gets greener and sales begin to increase – and hopefully so do margins. Summer arrives, days get longer and the driving season begins. Sales go up and margins move around. School starts and sales go down. Thanksgiving comes, sales go up and margins bounce up in preparation for the New Year. That’s why we love the fuel business – it’s so predictable. But lately, the natural order of things keeps changing, and we must make hay while the sun shines.

Times have been good for the fuel business for the past year or so. The recent unpredictable nature of the business has caused more fuel margins than normal. But don’t go out and buy that new Citation X just yet.

This may come as a shock to the un-initiated but the world’s largest and most prolific industry, the petroleum industry, has historically been a technologically-deprived industry. Innovations that are commonplace in other industries haven’t quite made it to petroleum operations.

Refiners have been steadily reducing their services for several years. They sell every drop they make at a profit. If it’s not broke, don’t fix it. And, don’t go looking for refiners to make sweeping changes.

Yet, there are many innovations that prudent petroleum operators should invest in during these unprecedented times of profitability that will ensure continued future profits.

One area of innovation is in petroleum software. A common problem within petroleum marketing operations is with invoicing reconciliation. Historically, there has been a running battle between accounting, dispatching, and refiner invoices. Everything must match in order to perform accurate billing, unless one would like to spend his day doing credit and re-bills.

Automating can minimize mistakes, reduce the workload and accelerate the process. A common task that previously took many hours to accomplish can now be done in mistake-free moments. Automated systems will identify discrepancies which allow operators to see errors and make corrections immediately.

Another innovative process for wholesalers is bidding. For jobbers who bid loads of fuel on a daily basis, a technology exists that customizes delivered price bids by processing refiner rack prices, and adding in margin, freight, and all taxes and fees. It literally blasts out hundreds of bids to prospective customers and has it in their hands 15 minutes later. This process used to take hours each evening to perform.

As more jobbers are forced to scour the country side looking for product, the need has arisen to have many suppliers. Multiple suppliers necessitate multiple racks and multiple prices coming in each day. This, in turn, can lead to hundreds of rack prices to sort through. Automated systems can put together buying scenarios in seconds that, previously, would have taken hours to do.

The Internet is another area that promises to provide time and money saving techniques. Web-enabling inventory tank monitor information and carrier bill of lading information hold the greatest promise. Portable hand-held devices have all come down in price to the point that truck drivers will soon be using them to provide instant information.

Technology becomes more affordable every year. Server prices have decreased while processing speeds and memories have increased. Systems are far more robust and scaleable than in the past and have a life-expectancy of at least seven years instead of depreciating upon installation. Software choices should be made by how responsive providers are to their customers’ needs and how frequent new releases and upgrades are made available.

The fuel business is indeed a lot like farming – it is dependent on seasons and cycles. With this in mind, we should take advantage of favorable circumstances because they may not last. With winter approaching, we can choose to eat the seeds we have now and have a couple of good meals, or we can sow our seeds and come back and have a bountiful harvest next year.

Brian Reynolds is the director of fuel solutions at The Pinnacle Corporation. A 30-year industry veteran, Brian can be contacted at (817) 795-5555 or via the company’s Web site, www.pinncorp.com.