Though mobile fuelers have weathered the same uncertainty as everyone else—the price spike of 2008, the recession of 2009—the basic business model, as well as the basic challenges, has remained the same.
Marketing director Merry Nethery of On-Site Fuel Service in Brandon, Miss., ticks off the advantages offered to her clients. “Through mobile fueling fleet owners can take control of their fuel usage, put everything on one invoice, eliminate driver and vehicle downtime, and get immediate tax savings for off-road fuel without having to file for refunds.”
Since shifting in the late 1990s from mobile preventive maintenance to mobile fueling, On-Site has expanded throughout a dozen mostly Southern states with an elegantly simple pitch. If a driver averages 30 minutes for fueling—both travel time to and from the pump, plus time spent filling up—and if the driver earns between $12 and $25 per hour, then the true cost of purchasing fuel at $3.31 per gallon rises to between $3.69 to $4.09 per gallon. “The numbers change,” said Nethery, “but the basic value proposition holds.”
And so do the basic challenges encountered by mobile fuelers. On-Site’s suppliers, many of them major oil companies, sell fuel only on their own terms so that Nethery’s company must often pay upfront for fuel and not recoup the funds until its own customers pay their monthly invoices. “We don’t have a lot of competitors in our territory,” she observed, “and that’s one reason why. It’s a very cash-intensive business.”
On-Site had to cope with the consolidation of major oil companies that occurred in the late 1990s and early 2000s, switching from one main supplier to many. The switch, however, took some doing. “We would arrive at an oil terminal with our 2,800-gallon trucks,” Nethery explained, “and they didn’t know what to do with our ‘toy trucks’ as compared to the 10,000-gallon trucks that usually show up at the rack.”
Then, too, mobile fuelers are something of an oddity in being “a service company that’s delivering a commodity,” Nethery continued. Customers constantly compare On-Site’s gasoline and diesel prices to those they see on the street at the corner station. So the company’s customer education is ongoing—even as it copes, like all petroleum marketers, with volatile fuel pricing, seasonal supply shortages and high credit card fees.
Nevertheless, On-Site and other mobile fuelers have in recent years also faced challenges and opportunities unique to their business. “In the early 2000s a competitor was driving down margins by offering product below market value,” Nethery said. “When they went out of business, we were competing against two established companies.” To stay in the game On-Site hired select employees and drivers from former competitors and then “spent a lot of time modeling our handheld computers after larger delivery companies like UPS and FedEx.”
Establishing those best practices has been the foundation of subsequent success. Nethery recalled On-Site’s early days when sales were tracked manually and documented entirely through paper invoices. But the need to rationalize its operations was turned into an opportunity when the company decided to pioneer the use of digital data collection for mobile fueling.
In the system that On-Site has developed, customer vehicles are pre-tagged with small bar-coded labels and then fueled by drivers equipped with handheld computers. The technology not only allows the company to provide customers with more fuel management tools, added Nethery, “but when companies started paying slowly in 2007, we began sending electronic invoices with the goal of being 100 percent paperless by last year.”
Having an efficient infrastructure in place likewise permitted On-Site to seize an opportunity presented by the marketplace. As the level of fuel prices has generally risen in recent years, mobile fuelers are increasingly stretched by the time lag between purchasing fuel from suppliers and collecting payments from customers. Some have opted to exit mobile fueling. Five years ago On-Site acquired two other companies, at once expanding into 12 states and jumping in annual volume to more than 44 million gallons.
“It was a huge jump,” Nethery admitted, “but we had a proprietary data collection and software system that allowed us to bring greater efficiencies to the operations we acquired.” Thus over the past five years On-Site has pared down from 106 tankers to 66, but is servicing 11,000 vehicles per day as compared to 8,000 in 2005. Among its more than 700 accounts, she said, “We’ve started building relationships with entities like food companies and local governments who can reap the benefits of mobile fueling. For clients who have hourly workers, mobile fueling is the most efficient way to fill up their fleet. They don’t have to gather receipts and they can easily generate reports.”
Internal innovations at On-Site are ongoing as the company continues to respond to the
marketplace. On-Site now gives small commissions to its drivers for every gallon billed, Nethery said, “enabling them to make more money, in addition to their salaries, while improving service. This way, drivers stay motivated to make sure their customers are given the best service, but they aren’t hurt too much financially if they’re sick or go on vacation.”
Since retention of experienced drivers is a key to success in mobile fueling, On-Site is alert to every opportunity for taking care of its own. “For example,” she continued, “we assign local routes so that drivers have more time at home with their families.”
Though On-Site has kept margins low to help its customers, the company was compelled to add fuel surcharges to offset rising fuel and insurance costs. “It helps us retain benefits and a 401K plan for our employees,” said Nethery. But employees appreciate the priority given to their needs, she said, “and so they’re constantly suggesting changes to make our business more efficient.”
In the end, Nethery added, “Customers don’t like surprises. Low turnover is important because customers hate change. So success in mobile fueling is still about that person who’s out there and consistently taking care of the customer.”
In the current economy On-Site’s focus is on increasing the density of its coverage in the 12 states it already serves, rather than geographic expansion. As the mobile fueling industry has developed, Nethery noted, “Not many local companies, and not many national companies, do mobile fueling exclusively.” And though regional companies have emerged, she added, “There are only a handful of major players in our territory.”
Where Size Matters
About the time that On-Site was entering the mobile fueling business in the late 1990s, Dan Abrams discovered he had retired too early and was eager to launch a new venture. He recalled growing up around his father’s Massachusetts oil business and “how my dad would sometimes do onsite refueling in the 1940s and 50s.”
Though mobile fueling was becoming more accepted in the 1990s, the industry was fragmented. Local companies often provided the service as an add-on to their main fueling business, but few performed the service exclusively or leveraged economies of scale.
In 1998 Abrams founded Diesel Direct of Stoughton, Mass., and in time expanded across New England and as far south as Virginia. When markets further south were covered by other mobile fuelers, however, Abrams last year purchased a Northern California company that now gives Diesel Direct a foothold for eventual expansion along the West Coast. Altogether the company is active in ten states, operates more than 100 delivery trucks and specialty vehicles, and annually delivers more than 50 million gallons of fuel to a client base that includes many Fortune 500 firms.
“This is a business where size matters,” Abrams said, “and the opportunities for growth are great. I think for the time being that the direction in mobile fueling will continue toward more consolidation.” If new acquisition opportunities come its way, Diesel Direct is prepared to move. With the recent recession and the prospect that fuel prices may be trending upward, he said, “a number of mobile refuelers may sell out, or commercial fuelers may dispose of their onsite refueling divisions. But for specialists like us who know how to do this business, the best days for mobile fueling are still ahead of us.”
In the past, commercial fuel marketers might enter mobile fueling either as a defensive measure to keep customers from going elsewhere or to keep their delivery trucks busy at night. But the recent recession, Abrams said, has corroborated his philosophy that commercial fueling and mobile refueling are two distinct businesses. While competitors have suffered significant declines, Diesel Direct has seen substantial growth.
The basic value proposition of mobile fueling is accentuated rather than not diminished during tough times, Abrams reported. “This recession is no different than those in the past,” he said. “Our receivables actually get better. That’s because when we begin a relationship with a customer, we’re strict on making sure bills are paid. A customer who’s shut off for nonpayment can’t operate his business.”
Diesel Direct works hard to ensure that the only reason customers leave is due to credit problems, not because of service complaints. Since its inception, the company has leveraged information technology to keep clients satisfied. Customers’ vehicles are bar-coded, scanned by the Diesel Direct delivery driver, the information captured by an on-board computer and the data downloaded in real time to central office computers even as the transaction occurs. Invoicing, recordkeeping and tax reporting are fast, accurate and available online to fleet owners.
This is not an easy feat since fuel deliveries are made at night, in all kinds of weather, often by drivers wearing gloves. Hardware is exposed to extreme temperatures. Computer screens must be readable day or night and not dulled by the UV rays from the sun. Nor are off-the-shelf software solutions generally available. Then too, said Abrams, “We deal with so many different clients, both large and small, that our system must be adaptable to make it work for the customer.”
Most vital of all, however, is the human element. “We hire people with integrity as the highest priority,” said Abrams, “as well as people who are looking for a career, not just a job. But what makes it all work is our commitment to training. It takes a lot of money but I’m a firm believer in it. We’ve even built our own fueling simulators and training devices for spill containment, and we’ve produced our own training films on fuel delivery and equipment operation.”
Despite its far-flung operations, driver training is standardized. The company’s Diesel Direct University provides training both in classroom and field settings and covers all diesel products and hazmat regulations. Then drivers continue to attend monthly safety seminars. Delivery trucks are furnished with tools and supplies to mitigate minor mishaps, while all branch offices have on-duty supervisors with emergency response equipment.
The company’s expertise in diesel products—including ultra-low sulfur diesel, off-road diesel, winterized diesel and biodiesel—also permits Diesel Direct to advise its customers on which fuels are best for their needs. “Our customers aren’t in the fuel business,” noted Abrams, “and so this a value-added service we can provide.”
By the same token, product knowledge comes in handy should fleet owners experience vehicle problems and try to blame the fuel. In such cases Diesel Direct is prepared to conduct forensic testing. “We protect our reputation with our quality control department,” he said, “so we can show them our fuel didn’t cause the problem.”
Generating New Business
Based in Fort Lauderdale, Fla., SMF Energy Corporation (formerly Streicher Mobile Fueling Inc.) has also grown from small beginnings to its current coverage of 34 locations that service some 4,600 customers in eleven Sunbelt states. And while the basic appeal of mobile fueling has carried the company to its present position, CEO Richard Gathright acknowledges the recent recession has taken a toll.
Since fuel consumption is directly correlated to business activity, Gathright noted, “We’re on a touch point for many industries. If business was improving for them, demand from our historical customers would be increasing. But since that’s not the case, the conclusion—based on our customers—is that the economy isn’t improving.” SMF’s volume dropped 14 percent between late 2008 and spring 2009. But since then the company has largely recouped by adding new customers and more locations from existing customers.
The ability to add new business is a testament to the fundamental value of mobile fueling. “Our business is labor-saving,” Gathright explained. “We provide efficiency to our customers by allowing them to use their driver workforce most effectively. Whether our customers are being challenged by high fuel prices or by a recession, we reduce their overall operating costs. Since fuel is among the top three costs for the companies we service, a recession is a great time to introduce the concept of mobile fueling as a labor-cost savings. The market is demanding efficiency and we offer that.”
Tough times and a changing industry have likewise driven SMF to wring as much cost as possible from its own operations. “We’ve done alright as a company and even grown during the recession,” Gathright said, “primarily because our technology has allowed us to dramatically reduce costs and give our customers added value.”
SMF’s pioneering use of bar-coding and on-board computers has ensured speed and accuracy in deliveries and billing. “And knowing how long it should take our drivers to cover their routes improves our own efficiency,” added Gathright. “At the same time, by using technology so that drivers can focus on service and their jobs are less difficult, we reduce turnover. Together with a strong training program, plus excellent wages and benefits, we're able to maintain a superior driver workforce.”
Gathright believes his company’s regional size, together with a strong balance sheet and financial profile, gives SMF the buying power it needs with fuel suppliers—despite current limits, within the industry generally, on the availability of credit—to continue providing SMF customers the service they expect. “There’s no tolerance for not delivering the service,” he said. “Price without service is zero value.”
On the other hand, Gathright continued, “You can’t be a bank for your customers. If they’re not paying then there’s no value for us in that business proposition. We keep credit under
control by running, on average, 30 days from invoice to collection. Our strict credit evaluation policies have given us very limited bad debt losses and allowed us to maintain strong credit.”
A Suite of Services
Since its founding in 2000, Fleetcor of Norcross, Ga., has acquired and developed a number of major fuel card brands—including CFN and Fuelman—and become the world’s largest fleet card processor. Altogether the company annually processes more than $14 billion in fuel purchases—and Jim Prantl, vice president of merchant services, said that in today’s economy “our customer count has maintained itself, but those customers purchasing less.” Nevertheless, he predicted, “This year appears like it will be better for us than 2009 as the economy continues to stabilize.”
Through it all, FleetCor’s mobile fueling division has been a bright spot. “There’s more demand for mobile refueling,” Prantl said, “especially in certain geographic areas where they might not have a backyard tank or it’s just inconvenient to fuel in a retail environment due to a lack of stations.” The service’s current acceptance, though, can be contrasted with “ten years ago, when mobile fueling was a very hot segment of the business and then it went out of favor,” Prantl said. “I think the reason for the rebound in mobile fueling that we’re seeing is our customers want to partner with vendors that can be one refueling source.”
Unlike other companies that provide mobile fueling service exclusively, Fleetcor gives customers a variety of refueling options within the same company. “Larger customers can use one source for their fueling but have the option to refuel at their own property, use card processing or choose wet hosing—and then we put it all in one report,” Prantl explained.
Though the core of its business is card processing, Prantl continued, “FleetCor offers mobile fueling as part of a turnkey fueling solution because we want to understand customers’ needs for all of their locations. There are certain industries that are a good fit for mobile fueling based on the company and their geography. For instance, a business that operates security trucks doesn’t want their drivers sitting at a gas station.”
Fleetcor outsources mobile fueling services by using technology “that enables us to maintain a line of electronic communication with the customer, and then to communicate with our strategic partners so that they know information such as what type of fuel the customer’s vehicle holds and how much it holds,” said Prantl.
Also among the optimists for 2010 is Jerre McCann, transportation manager for the fleet division of PetroCard in Kent, Wash. “If you listen to economists, 2010 probably won’t be too exciting, but we’ll see modest growth,” he said. PetroCard focuses on the Pacific Northwest and provides fuel management services through cardlock, fleet fueling and mobile fueling programs.
In its market, McCann reported, “Some of the major trucking companies have laid off drivers, and there’s been less construction. So our volume is down.” PetroCard has responded by taking its older delivery trucks out of service, reducing its driver workforce through attrition and expanding its service into northern Oregon. The strategy has permitted PetroCard to go forward without cutting drivers’ wages or reducing benefits such as a 401K plans.
PetroCard’s automated truck systems capture real-time data and make it immediately available for customer. Reports can be configured to meet each client’s needs. Electronic invoices allow PetroCard to accept electronic payments. “Through handheld computers and open-wave wireless technology,” noted McCann, “we keep in constant communication with our customers.” The company is also alert to technology applications that make drivers’ jobs easier and more efficient.
Competing mobile fuelers have responded to the recession by slashing prices. “But we don’t want to erode our margins. So we use strategies that help us and our customers to both save money,” McCann said. “For example, if a customer’s fuel usage is down then we might deliver four days a week instead of five, cutting our operating costs by 20 percent while taking care of the customers and maintaining a good relationship with them.”
Such flexibility is vital for success in mobile fueling. “We’re continually refining what we do in order to be better,” McCann said. “For mobile fueling, it’s not enough just to stay competitively priced. You must know the customer’s expectations and keep abreast of them as they change.”