For fuel marketers who have not looked at fuel management systems in a few years, it may be time to take another look. Vendors say the petroleum industry has entered a period of momentous change that has significantly added to the value of automated fuel management. At the same time, their systems have advanced in important ways to stay abreast of fuel marketers’ changed needs.
Interestingly, fuel management system (FMS) vendors who spoke to NPN Magazine each cited a different trend as a leading driver of change in marketers’ need for more control over fuel sourcing, delivery, and inventory.
“In recent years,” suggests president and CEO Matt Tormollen of Houston-based FuelQuest, “there’s been a move toward more private branding by fuel retailers, versus having branded supply contracts. That gives you more ability to do strategic sourcing. Particularly if you’re a regional marketer who straddles several pipelines or fuel sourcing options, you can create a strategic supply portfolio.”
General manager Greg Iverson of TelaPoint, an FMS provider based in Louisville, Ky., for his part explains, “Consolidation seems rampant among fuel marketers.” As a result, adds Drew Fickel, vice president of operations and product development, “The last two years have seen a lot of smaller marketers grow through acquisition from 15 or 20 sites to 60 or more. So they have a broader need to manage multiple fuel sources.”
J. Alexander, president and COO of Mansfield Oil in Gainesville, Ga., believes the proliferation of motor fuels is driving the need to better manage them. “Not so long ago,” he observes, “marketers just had to worry about gas and diesel. Now you must manage a complex set of fuel components, balancing both economic and operational aspects. And you’ll be reporting it to more people whether for taxes, greenhouse gases, or carbon footprints. So fuel management systems will need to think in terms of total BTUs coming from many products.”
Though they cite different trends, all three companies are bringing their solutions to market through a software-as-a-service (SaaS) model that puts automated fuel management within reach of more marketers. The approach allows customers to “rent” FMS software so that, except for the nominal expense of setting up the software to run properly on the host hardware, upfront costs are minimized since no equipment investment is required. Marketers generally pay a monthly subscription fee pegged to their fuel volume or number of sites, and the vendor’s ongoing software upgrades are included as part of the service.
FuelQuest also offers its Fuel Center® solution as an outsourced service, bringing the competitive advantages of fuel management to many smaller marketers who lack personnel and infrastructure to manage complex data on their own. And by early 2012, reports TelaPoint’s Fickel, the company plans to introduce its own outsourcing service “as a way to reach smaller marketers who don’t have the buying power of bigger companies.” With its SaaS and outsourced services, he says, Telapoint “will have tools for users who have one site or have a thousand.”
While FuelQuest’s Matt Tormollen sees many fuel marketers moving toward private branding as a way to increase local brand identity, he notes that all marketers are dealing with
record levels of fuel price swings. The FuelQuest FMS solution differentiates itself from other offerings, he states, in its “ability to connect inventory to sourcing so that they’re no longer two separately managed processes. Ours is a full life-cycle integrated solution that completely integrates everything from source to inventory.”
The objectives, Tormollen continues, are to “optimize the inventory you’ve got in the ground and then connect it to your sourcing system.” Thus, rather than completely refill an empty fuel storage tank and tie down capital, a fuel marketer can arrange delivery of only enough fuel to last a given period of time based on predicted rates of product turn.
Then by taking the additional step of connecting inventory to sourcing, Tormollen adds, “You could set the parameters of your fuel management system to look for a certain price range and then poll your spot-price options within a given delivery radius of the site in question.” As a result, the marketer can make the fuel purchase which best combines price and delivery time, while investigating transportation options that minimize any costs of hauling short loads.
To get started, FuelQuest will consult with interested marketers and, says Tormollen, “work with you to decide the payback period you want, and then set the subscription price so that your fuel management system pays for itself within the time frame you specified and from then on provides a return on your investment.”
FuelQuest professionals then set up the FMS software to run on the marketer’s back-office system. Because of its open architecture the FuelQuest solution can “talk” to other existing systems, such as those for points of sale and automatic tank gauging, so that all systems run in concert. The company’s ForeSite SV™ product monitors inventory levels, orders and sales, while its ForeSite IC™ ensures that once fuel is in the ground no product is not lost due to leaks, theft, meter drift, or other factors. The solutions allow “management by exception,” a boon for busy multi-site managers who are automatically alerted when conditions reach critical levels or unanticipated events occur.
TelaPoint’s Greg Iverson explains that because his company’s SaaS solution is cloud-based, “It’s compatible with virtually any back-office computer system. So when you acquire new sites, no matter what legacy equipment you inherit, you can easily add our system.” The TelaPoint suite of products include SmartReplenish™, SmartBuy™, SmartReconcile™, SmartSchedule™, SmartMobile™, and SmartComply™. Subscription pricing is generally pegged to each marketer’s fuel volume or number of locations.
In particular, notes Fickel, the SmartBuy™ product has recently been refreshed to deliver “the best fuel buys for your needs as it accounts for the prices of fuel, transportation, and more. It gives you the tools to minimize or maximize inventory as needed. If your core business is fuel, then even a penny or two per gallon is huge, maybe the difference between success and failure.”
Like other FMS vendors, TelaPoint touts the ability of its products to be rapidly deployed at a low upfront cost, while featuring an open architecture that “talks” to existing back-office systems, offers dashboard-like visibility of data, and allows management by exception.
“You determine how you want to manage your tanks,” relates Fickel. “Maybe you want to identify high-traffic versus low-traffic fueling sites. So when you login to the system, you only see tanks that are at critically low levels—for example, all tanks with less than 12 hours of product remaining in the ground.”
Meanwhile, adds Iverson, the TelaPoint solution aids marketers in managing multiple fuel supply sources. “In the past, you might have been able to get the product you needed by going to just one terminal,” he explains, “but now you might have to get ethanol from one source, biodiesel from another source, ultra low sulfur diesel from another source, and so on.”
Mansfield Oil has been in business for more than half a century and, as a fuel wholesaler and distributor in its own right, has long experience with fuel management systems for its own needs and those of its end-user customers and dealer network. Last fall the company brought its Web-based FuelNet solution to market as a standalone product.
“We see an opportunity to provide a fuel management solution that meets some needs in the industry,” reports Alexander. “In our view, most current products are more about monitoring and less robust when it comes to predictive capabilities. Also, many vendors develop fuel management systems to support their own hardware and equipment. We’ve come to market with a solution that provides high usability, a user-friendly dashboard interface, and an open format that can ‘talk’ to just about anything.”
In the petroleum industry generally, observes Alexander. “We’re seeing fuel marketers increasing their corporate communication abilities, especially at the host level versus just at the site level. Our fuel management solution piggybacks onto your ability to communicate between your sites and your headquarters, while giving you a dashboard view of your fuel.” Thus, Alexander believes that yet another industry trend—the move toward greater site-to-host connectivity and communication—is adding to the value proposition of FMS solutions.
The Distributor Side
With its long experience as a fuel distributor, Mansfield Oil has built into its FuelNet standalone product a number of features attractive to other distributors. Thus, while fuel retailers may be the more visible component of the marketing sector and attract more attention from FMS vendors, Mansfield is also cognizant of the unique needs of distributors and jobbers.
Alexander admits that, because FuelNet is a recent entrant to the FMS market, Mansfield Oil is focusing in early 2012 on tweaking its product. “For example,” he relates, “we’re looking at how to ‘reskin’ the FuelNet website so that it can also be configured to reflect the user’s corporate image rather than look like us.”
Given the increased site-to-headquarters connectivity being built by many fuel marketers, Alexander predicts that radio frequency identification (RFID) will become “one of the next big pieces in fuel distributing, especially as vehicles are tagged and then automatically identified when they arrive to pick up or drop off deliveries.” A fuel management system useful for distributors, wholesales and jobbers, then, will need to accommodate RFID data.
Mansfield Oil’s FuelNet accommodates other components, from mobile refueling to diesel exhaust fluids, of interest to fuel distributors. And the company is “positioning itself for the future,” says Alexander, “by making investments to manage not only increased usage of today’s alternative fuels, but to be ready when compressed natural gas becomes a viable transportation fuel.”
At FuelQuest, Tormollen states that “addressing the distributor side of the fuel marketing business is a focus for us in 2012.” Fuel management solutions for distributors, as compared to retailers, must account for a number of added considerations. For one thing, retailers must source their fuel in order to stay competitive at street prices, while distributors add their own value to the fuel they sell end users and thus mark-up product according to several factors. For another, distributors seek not only to minimize fuel costs but also delivery costs.
“So for distributors,” says Tormollen, “effective fuel management entails integration of sourcing plus transportation plus inventory.” Further, because he perceives “a trend among distributors in providing more value-added services to end users,” FuelQuest designed its ForeSite SV™ dashboard product so “distributors can differentiate their service and increase customer loyalty by offering a private-label branded version to your customers. You can provide a transparency into fuel operations that gives them greater confidence that the product they need will be delivered when and where they need it.”
Expanding the Market
Tormollen believes the fuel management systems have “moved beyond the early-adopter stage but are still in what I would call the ‘early-majority’ stage.” For FMS solutions to reach the next level of market penetration, he says that products must be brought to market in a way that expands the potential number of users.
FuelQuest’s increased focus this year on fuel distributors is one aspect of this strategy. Another is marketing its Fuel Center® outsourced service to small and midsize retailers, many with 50 sites or less. One story Tormollen cites is United Express of Lubbock, Tex., the private-branded fuel and convenience store unit of United Supermarkets. The nearly century-old firm
launched its first unbranded retail fuel site in 1996 and later expanded to 20 branded sites. But wracked by price volatility and thin fuel margins, by 2007 the chain was no longer profitable.
The next year, a two-store pilot of Fuel Center® was so promising that, with United’s branded fuel contracts set to expire, the company decided to go unbranded. Confident that it now had the capacity to strategically manage its fuel sourcing and inventory, United set up a network of fuel suppliers so the company could enjoy competitive pricing advantages and leverage spot pricing opportunities that occurred throughout the day.
United Supermarkets operates some 50 locations covering 30 communities in north and west Texas. After establishing its own branded fuel offering, the company opened its first c-store in 2010 under the name United Express. Further, United Supermarkets became a licensed fuel distributor and now takes advantage of arbitrage opportunities in fuel trading, thereby adding another avenue to increase its fuel operations profitability.
At the smallest end of the size spectrum, single site owner Manish Sthanki of the Lucky Deuces Convenience Store truck stop in Duson, La., had operated with a handful of suppliers and only manual processes to manage fuel inventory. Yet his desirable location on Interstate 10 put him in competition with much larger multi-site retailers. Unable to do more on his own, Sthanki outsourced his fuel management to Fuel Center® in hopes of gaining the cost advantages of data-driven fuel purchases from a more diverse supplier network.
Lucky Deuces signed a five-year agreement to outsource its supplier portfolio management, fuel inventory management, order placement, invoice and inventory reconciliation, and automated payment notifications. Within a short period, Sthanki enjoyed fuel cost savings of nearly 5 cents per gallon. As a spinoff benefit, inside sales increased as better pump prices drew more customers into his store.
FuelQuest’s Fuel Center® now manages some 800 million gallons of fuel per year. And for its part, TelaPoint has also recognized the growth potential for outsourcing services and plans to introduce a product early this year.
In addition, reports Greg Iverson, “We see a trend toward mobile consumption of fuel management information.” Two years ago TelaPoint introduced its SmartMobile™ product that allows drivers to receive and transmit information wirelessly in real time via a mobile handset. Site inventory levels can likewise be accessed from equipped mobile devices. Through mobile communication to delivery vehicles’ on-board computers, fuel marketers can boost speed and productivity through real-time dispatching and data capture for billing purposes.
“Now we’re working on mobile apps,” reports Drew Fickel, “so that fuel marketers can view data on a mobile phone—with a display that makes sense on a mobile phone. So if you’re a retailer, you can see inventory information, supply options, delivery status, and critical situations at any time. If you’re a distributor, you can respond instantly to end users who want reassurance that a delivery is going to be on time.”
Mansfield Oil’s Alexander acknowledges that fuel marketers today are bombarded with appeals for every kind of electronic solution to every kind of operational need. “But with price volatility now averaging swings of 5 cents a gallon, up or down,” he points out, “the impact of your buying processes on the bottom line is magnified. Multiply that impact by your fuel volume and the value proposition of fuel management systems is clear.”