Underground Connections

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Underground Connections

By Mitch Morrison - 06/07/2002
When grocery shopping, most families buy no more than the refrigerator and cupboards can hold. If only buying gasoline were so simple. Petroleum marketers and convenience store retailers face a common conundrum -- how much product to order.

Fuel managers scan countless data and tap suppliers' expertise, they peruse the latest wire services covering the Middle East and mark their calendars for when to transition to summertime fuel, they gauge customer behavior and peer at competitors' prices.

A headache? Petroleum procurement and Tylenol often share the same breath. "It's a constant battle we struggle with," noted Jim Howard, manager of retail maintenance at Amerada Hess Corp. "Either you're running out prematurely or you're giving product back to the [terminal]."

Neither of which is good thing. "There's an obvious cost to product run-out and there's a cost to product returns." His assessment arrived shortly after roughly 20 Phoenix Circle K stores ran out of gas in one day. The incident was attributed to Phillips' main distribution terminal, which was drained of regular and premium unleaded gasoline as it struggled to switch to summer-grade gasoline.

Such nightmares could disappear, fuel jobbers and operators hope, as new fuel management technology enables marketers to forecast demand, track supplies and prioritize deliveries so that sites thirsting for supply are first to be quenched.

It is no longer enough for fuel management specialists like Intelligent Controls Inc. (INCON), Veeder-Root Inc., Caldwell Systems Corp. and TelaPoint deliver variations of services that do more than identify leaks and report existing inventory levels as required by the Environmental Protection Agency (EPA).

New tools permit petroleum managers to poll multiple locations simultaneously from remote destinations. In some cases, it is the vendor itself that does the tracking and daily reports. In others, it's a sophisticated convergence of software and hardware that empowers petroleum operators to control the data without aide of a third party.

"There's a growing need to have the loop fully automated, from what's underground to the supplier to the terminal to the trucker back to the retailer," said Tom Osborne, director of communications at the Society of Independent Gasoline Marketers of America (SIGMA). "There are points within the system that are already electronically formatted. What we're starting to see is the entire [supply chain] coming together.

"Real-time decision-making is the direction automation is moving toward," Osborne continued. "It's not going to replace the human element.

You still are going to have to decide whether to send that truckload of fuel to an individual station."

For Amerada Hess, the company is deriving benefits not envisioned when it rolled out a comprehensive program less than two years ago aimed at obtaining instant reports concerning underground leaks and alarms. Employing INCON's System Sentinel Anyware, the Woodbridge, N.J. operator and supplier of some 1,200 locations sought a solution that shifts accountability from individual site managers to corporate headquarters.

"Before we started the program," said Howard, "each individual site manager was responsible for managing leak detection. Our goal was to bring the compliance issue back to headquarters and automate the system as much as possible. When you take the human element out of it your data becomes more accurate -- no transpositions, no misidentification of sites.

"The managers' core competency is selling merchandise, not recording inventory levels of underground storage tanks," he added. With the System Sentinel Anyware rolled out at virtually all 850 company-operated locations and heading to dealer sites, Hess sees the tool not only enabling compliance of federal underground storage tank mandates, but dramatically upgrading how the company coordinates deliveries and determines inventory needs.

The software, for one, allows Hess vendors, truckers and other partners to access real-time inventory at store locations so that when tanks at particular locations near empty, responsibility could fall on the supplier - and not the store manager -- to respond. "If we have 100 sites in Pennsylvania, the system will project run-out points and suggest when to re-supply," Howard explained. "Based on the manual method, you'd get a physical call from the site telling you what the inventory level is, and usually the information would be old. Here, we're giving [suppliers] up-to-the-minute data so that the proper amount is delivered to each location and the supplier can prioritize deliveries."

In Abilene, Texas, Skinny's Inc., a Fina-branded operation with about 80 locations, began automating its underground storage tank inventory management two years ago when it contracted with the Caldwell System's Site Tel, a remote monitoring software that lets operators access delivery forecasts, tank tests, volume and inventory history and alarms.

Each night, the latest inventory tallies from all sites reach corporate headquarters, reporting overfills, alarm alerts and overall compliance. "When I get in to the office in the morning, I have before me a status report of every alarm at every tank," said Gary Dickerson, Skinny's compliance manager.

The company, he said, is looking at the forecasting program, which draws from past sales to project future need. "It would automate our fuel ordering process," he said. "Now, each site goes through their tank inventory every day and look at last week numbers. Then they try to guess when they're getting close to selling out."

Instead of store to headquarters to supplier, the Site Tel system, said Dickerson, will allow inventory levels and replenishment issues to go directly from underground tanks to the Fina suppliers.

"If we go into the quagmire of the industry," said INCON marketing manager Dave Volin, "everything was done on an individual basis. You just stuck a stick underground to see if there was inventory, then you reported it to your boss who reported it to headquarters and that was that." Volin isn't talking about the era of "I Love Lucy" and "Father Knows Best."

He's even talking about the recent period of "Silver Spoons" and "The Cosby Show." While all operators of gasoline were required to install electronic monitoring systems with probes and sensors, it is only recently that software capabilities and wireless communications are dovetailing.

The result is the elimination of hand reports, dangerous games of "Telephone." Instead, jobbers and equipment contractors are immediately alerted when a clients inventory is below a certain threshold or when an alarm goes off in the underground storage apparatus. "The step we're now undertaking is for retail chains not to rely on phone calls or faxes to get their inventory reports or to rely on store-level data," Volin said. "The goal is to install software at headquarters where data of all store locations is presented in displayable form and where forecasting and automatic replenishment can take place. This is where the ROI [return on investment] is. And the fact that you'll be in compliance with all EPA restrictions can be an enormous savings."

Additionally, by reducing run-outs and send-backs, real-time, ongoing monitoring affords operators to reduce deliveries and ensure more accurate replenishment ordering, as well as eliminating errors between the order and the actual delivery, fuel inventory vendors and distributors say.

While a chain of 40 stores could spend as much as $20,000 to $25,000 to have its entire operation outfitted with fuel management hardware and software, less costly alternatives exist.

Keystone Petroleum Equipment Ltd., a full-service petroleum contractor out of Mechanicsburg, Pa., has recently installed new fuel management systems at Pennsylvania outfits Giant Food Stores Inc. of Carlisle and York-based Shipley Stores Inc.

By using Keystone or other third-party applications service provider (ASP), retailers can pay as little as $14.95 a month while Keystone absorbs the costs for hardware upgrades. "For a large chain it pays for them to have full control and to run it themselves," said Doug Kasay, Keystone equipment specialist. "But those who can't afford it, you can still get compliance reports, real-time inventory, remote tank access and delivery forecasting for the equivalent of 50 cents a day."

What retailers shouldn't do, said Joe Caldwell, founder of Caldwell Systems, is go with an exclusive fuel management system that cannot interface automatic tank gauges with dispenser equipment. "You don't want to be spending lots of money on expensive interfaces in order to get daily inventory reports," he said.

Rather, retailers should link their inventory system to a backroom PC, with re-writeable software to accommodate changing priorities. "It shouldn't matter whether you have a Veeder-Root or an INCON system. For $600 you can get software and it's tied to the tanks, to the serial port and delivers you real-time data." As for his program, Site Tel is joined to retail locations via modem and can easily run on the central office computer or onsite backroom PC. The "enhanced" software then auto-dials or polls all tanks and accrues data by site.

Closing the Loop
While retailers upgrade their tank management positions, those on the front-end -- refiners, fuel marketers and jobbers - are doing the same. Supply chain software specialists like SAP, i2 Technologies and Aspen Technology have developed comprehensive planning modules addressing planning and transportation forecasting. Their systems have improved transit routes to retail destinations, shipping and inventory levels.

One upstart company founded by a former petroleum marketer and experts of supply chain management is developing software to address the final loop in the downstream fuel process -- the delivery. From jobbers picking up product at terminals to delivering to assorted retailers, problems often arise from closed access roads that undermine routing plans to mistaken orders.

"If you want to track a $10 package, Federal Express or UPS will be glad to tell you where in the delivering system it is. But for a 1,000-gallon delivery, there's no bar code or tracking system in place to tell you where that driver is," said Erik Charles, sales director at Extend Global Inc.

The year-old San Diego company was created by former RAD Energy Corp. CEO Adam Draizin, David Gamboa and Bill Miller, founders of Petrolsoft Corp., which they sold to Aspen Technology. "The supply chain technologies do a good job with order optimization," said Charles. "In military terms, they're the generals. We're the field coordinator, the critical data link carrying out the mission to completion."