Building a Solid Petroleum Network to Increase Profits

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Building a Solid Petroleum Network to Increase Profits

By Bill McCollough, Heartland Payment Systems - 07/08/2011

The convenience store and petroleum retailing industry is, without a doubt, extremely competitive and volatile. Yet, often, the technology that is the lifeblood of the operations of these retail locations remains outdated.

While more and more petroleum marketers are recognizing the need for a sophisticated network, some are slow to upgrade, incorrectly believing a managed network is too costly and too difficult to implement. What those operators may not always realize is that by building a solid petroleum network, they will increase their efficiency, ensure security, save time and money, remain competitive and, ultimately, increase their profits.

There are three main steps every convenience and fuel retail store operator should follow when building a managed network, regardless of how many locations they have. By adhering to this guidance, operators can ensure that their finished product provides them the ultimate solution in security, functionality, manageability, cost effectiveness and value.

Step One: Assess the Current Network
Every convenience store network is comprised of a complex set of devices that can be integrated into a single communication medium to consolidate cost and deliver more content to the operator’s desktop. Once consolidated, the devices can be split into two categories -- payment applications and back office applications -- for greater data control and security.

There are several common convenience/petroleum store problems that every operator grapples with, likely on a regular basis, related to connectivity: For instance, paying for several telecom connections to support operations; dealing with long lines during the busiest hours due to slow processing speeds; being unsure of what is secure and what isn’t; managing multiple devices resulting in lost time and resources; and compromising on service due to lack of bandwidth.

These problems can hamper convenience/petroleum store operations, which rely heavily on speed and security in order to provide service to their customers. However, while these tend to be the most common problems in the industry, each operator should fully assess their specific problems so they can build a network to address those issues.

Step Two: Avoid Pitfalls
Whether building, revamping or simply expanding a network, there are several key factors operators must keep in mind: network security, costs, hardware and circuits and future needs.

-- Network security: With cybercrime running rampant, network security is of the utmost importance. Each operator should determine what security features they need to avoid access from suspect devices such as skimmers and to protect from external threats such as hackers. This is a point where the expertise of a network provider can be crucial.

Secondly, they must ensure the network complies with all Payment Card Industry Data Security Standard (PCI DSS) requirements and that the cardholder data environment (CDE) is segmented from the rest of the network for greater security. Operators should also establish the right firewalls, as well as a system that logs and monitors all network events.

-- Cost: This is often a barrier and a worry for petroleum and c-store operators who are thinking of upgrading their network systems. Before embarking on an upgrade, operators should price out the variety of network options available. They should also calculate the personnel time needed to operate the current network and compare it to the time and resources it would take to operate once all the devices are integrated into a single communication medium.

Operators with several locations should remember that a greater the number of sites requires greater reach, which can only be achieved with a provider with the best regional connectivity coverage. Short-term expenses will often bring long-term benefits.

-- Hardware and circuits: Operators should determine the best hardware for their operations and maximize their resources by using the best circuits available at the lowest cost. However, operators should be wary of attempting to manage too many devices from various carriers as that can decrease the very efficiency an upgraded network was meant to instill.

-- Future Needs: Networks require ongoing additions and changes, whether for technology or security reasons. When building a network, operators should try to anticipate the future needs of their current and new locations. Some of those needs include digital signage, critical tank gauge inventory tracking, loyalty and mobile application, back-office systems, green energy monitoring and public WiFi. It’s also important to remember that more sites require more management tools in order to get the value of lower management costs across bigger operations.

Step Three: Examine All Available Options
One of the most crucial decisions an operator has to make in regard to their network is whether to buy it or build it. If they decide to build, they must be prepared to dedicate a significant amount of time and expense to the initial procurement, roll out and the ongoing expense of maintaining the network, not to mention the added expense of managing multiple broadband carrier invoices each month.

If the operator decides to buy, they will typically spend more in the short term but can actually save over the long term, as well as benefit from better overall functionality. Any operator unsure of their needs and trying to determine whether to buy or build a network should seek outside guidance before making an investment of this magnitude.

There are several methodologies and options available to operators who are upgrading or building a network. Each of these options has its pros and cons, so it is necessary for operators to examine them fully:

-- Do It Yourself: The main reason operators may choose to build a network themselves is for cost-saving purposes. In today’s consolidation environment, many operators are trying to do more, managing multiple sites while being budget conscious and sometimes short-handed. The obvious drawback of this option is that there is no one else to assist the operator when problems arise. Additionally, by devoting their time and resources to this complex project, operators are removing themselves from the other tasks required to run their business.

-- Outsource Portions of the Network: This option combines an enterprising operator with a network provider who will assist the operator with certain functionalities, such as security across all sites. This option provides a certain system of checks and balances, but depending on the provider’s services, the operator may not be able to receive the necessary and crucial support their operations may need on a day-to-day basis.

-- Managed Network Solutions: Finally, operators can opt to outsource their entire network building or upgrading operations to a managed network provider that offers capabilities for all network needs across various sites. Additionally, those providers can offer support for payment and back-office applications. Operators choosing to go with a full-service network provider will have to also decide what type of provider will serve their needs best and whether a centralized or decentralized network is right for their operations.

The bottom line is that the convenience and petroleum store industry landscape is changing — fast. New technologies, customer expectations and other factors are influencing how fuel marketers operate. Operators must realize they can reduce their telecommunications costs and build more efficient operations if they invest in new technology.

After all, their bottom line depends on it.

Bill McCollough is executive director of petroleum at Heartland Payment Systems, one of the largest payments processors in the petroleum and c-store industry. In addition to this position, McCollough facilitates a petroleum marketer study group. He is a certified public accountant and received his Bachelor of Science in accounting from the University of Arkansas.

Editor's Note: The opinions expressed in this article are the author's, and do not necessarily reflect the views of Convenience Store News.