Retailers' Bottom Line Improves With Fuel Management

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Retailers' Bottom Line Improves With Fuel Management

By Melissa Kress, Convenience Store News - 06/14/2011

JERSEY CITY, N.J. -- There are many tools available to convenience store operators to give their business an edge, and one area that may often be overlooked is fuel.

In a CSNews Online Webinar sponsored by FuelQuest Inc., "Learn How Retailers are Managing Fuel as a Competitive Advantage," 36.3 percent of participants said they were using fuel as a competitive advantage. And those respondents may have learned firsthand that fuel management not only gives operators control over their fuel operations, but oftentimes results in major savings.

Brookshire Grocery Co. has been in business since 1928 and opened its first fuel station outside one of its stores in 1999. Today, explained Rachel Gee, director of fuel operations, the company sells 150 million gallons of fuel across three states annually. Of its 153 grocery stores, 80 of them have fuel stations on site. At first, she said, Brookshire outsourced its fuel management, but in 2004 company executives decided to bring it in-house.

After months of researching the best way to do that, Brookshire opted to go with FuelQuest software in 2005. This move to bring fuel management within the company pushed Brookshire out of "years spent in the red with operations," Gee said.

Two essential steps to a successful fuel management system, she explained, are system integration and inventory management. It is key for the company "to see inventory volumes at all our sites at all times," she said, adding that the Web-based software also allows Brookshire the ability to log on from anywhere at any time to conduct passive polling.

Since bringing the operation in-house, Brookshire has also had the ability to collect usage data it can track for forecasting, Gee said, adding that this was a missing piece of the puzzle with outsourcing. The company's in-house fuel management system also enables Brookshire to stay on top of environmental compliance, and cost management in procurement and logistics.

And in turn, the company has experienced several advantages: adaptability, control, flexibility, integration and accessibility, Gee said. "The software has kept us on the cutting edge of technology and one step ahead of our competition," she added.

The investment in fuel management has paid off. In a seven-month period, Brookshire saw total savings of about $1 million, she said. Of that ROI, 64 percent came from operational savings and 32 percent came from inventory cash flow savings. The operational savings included diversification of supply and freight, lower labor costs, best practices and invoice reconciliation.

"I know many of us don't really like change, but most of the time change is necessary for growth," Gee explained.

Brookshire also added to its savings -- an additional $750,000 in the first year – by becoming a licensed distributor. Of those savings, 70 percent came from state discounts and 30 percent came from cash flow savings.

David Maggied, manager of transportation at MAPCO/Delek US Holdings, agreed that fuel management is integral to a successful business. MAPCO Express has more than 400 convenience stores spread across seven states and sells more than 450 million gallons of fuel a year, he said. The company has taken control of its fuel operations through load optimization, supply sourcing, load timing and freight cost control.

"Through implementation, we have really taken control back of our fuel," Maggied said, adding that it is not a step one, step two process, but rather "one big synergy."

On the road to successful fuel management, the company has implemented several supply sourcing strategies, including same day vs. prior day contract mix, contract "catch-up" on weekends and rack opportunities. Maggied also explained that capturing real time data – such as midday price changes—also plays an important role. "If you cannot see the changes as they are happening, you just will not be successful," he added.

MAPCO Express also follows several load-timing strategies, such as load shifting. This includes creating advantageous delivery windows and remembering that pushing loads off is easier than pulling extra loads, Maggied said. He also stressed that companies need to look at the big picture.

Brookshire and MAPCO Express are just two examples of fuel retailers using fuel management to get a leg up on the competition, and keeping that advantage. "Our goal is to drive costs out of [fuel] operations," explained David Zahn, vice president of marketing for FuelQuest. The Houston-based company helps retailers accomplish that by giving them tools for order management, inventory control, financial management, fuel network supervision, environmental compliance and inventory management.

"Managing it like it is an asset gives you greater capabilities on how you compete at the pump," Zahn said. "And for many, that translates into how you compete inside the store."