By Brian Reynolds, Simmons Corporation
Retail general merchandise inventory receiving has become an exact science. Handheld barcode scanners have made receiving inventory in the back of the store a much easier and reliable way of determining the accuracy of a delivery. Individual units can be handled, accounted for and quickly stocked for sale. Counting inventory is easier than ever and POS systems can automatically provide reorders. The number one top line inventory expense is for all practical purposes invisible and nobody touches it, and it doesn’t scan. This is, of course, fuel.
Think about it for a moment. The fuel delivery, storage and dispensing process for all practical purposes really is invisible. Fuel comes in a truck, and you can’t see inside the tanker. It’s transferred from the truck using a black hose that you can’t see through. The fuel is stored in a tank buried underground that you can’t see. It’s pumped into a customer’s fuel tank that can’t be seen, and the customer can only verify the amount with a meter on the fuel dispenser and on an automotive gas gauge that reports percentage of full in non-numerical fractions, with a needle pointing at lines that don’t represent any known quantities. The best part of all is petroleum marketers are billed based on amounts that use the same process only in reverse. Pretty cool, huh?
Some may say, “Well, we do have Automatic Tank Gauges.” To compound this particular type of inventory product delivery, let’s say a fuel transport truck shows up at noon on Saturday and 16 hoses are going full blast. What good does it do to perform a “before and after” sticking with the ATG? Wouldn’t that information be worthless for verifying a delivery against the BOL?
You might be able to argue that using metered sales numbers from the POS one could figure out the delivery. For argument’s sake, I’ll acquiesce and go with that thought. Then I would rebut by asking how long it took the drop to commence after the ATG “before” numbers were taken. I would also ask how many dispensers had already started pumping moments prior to the drop. If 16 hoses are pumping 8 gallons a minute or so, 100+ gallons could have already been dispensed that the before sticking doesn’t take into consideration. The same thing would occur when the drop ends. Easily there could be a 400 gallon margin of error that can’t be accounted for using conventional ATGs. What happens if the meters are off on each dispenser? The 2 cubic inches per hose, while still legal, can further acerbate the margin of error.
Back in the day, operators could climb on top of a fuel tanker and do a “before and after” manual visible inspection. However, for over 30 years that practice has been abolished for procedural and government regulatory reasons. I recently saw an OSHA warning sign that said, “Always wear proper hearing protection when reaching for objects on high shelves.” I’m sure the OSHA safety inspectors that might come walking in at any time, particularly in West Texas where the wind blows 30 mph on a nice day, would frown upon climbing up a petroleum transport trailer! At least the hearing protection might keep you from getting dirt in your ears.
The fuel is invisible, so what? It’s also expensive and margins are unpredictable. Margins, that’s where I am going with this story. Margins are tight and so are profits. Yet our industry routinely spends billions of dollars each year on fuel inventory with a very loose process of accounting for it.
Even the EPA has accepted that “loose” is an acceptable accounting process by allowing for a margin of error of +/- 1% of the throughput plus 130 gallons per month.
Technology today has the ability to account for a fuel delivery with every dispenser pumping at maximum capacity and to do so accurately. This same type of technology will also determine flow rates and the accuracy of each meter in real time speeds. This process is known as Continuous Fuel Monitoring.
CFM technology will absolutely use older existing ATGs and produce extremely accurate tank volumes. CFM systems also capture totalizer numbers from the POS or pump controller and provide flow rates and detect for meter drift.
Profits are tight in this current economy. Year-to-year sales numbers for many retailers have not grown. In fact, many retailers are seeing declining sales. Many CEOs have started to look within and are taking “search and destroy” mentalities in the fight against shrink. If sales are flat lining, aggressively reducing shrink is a logical shift in strategy to increase profits. With fuel being the undisputed top line inventory expense for most petroleum marketers, significantly reducing fuel shrink would seem to make sense. Installing a CFM system has the ability to produce an extremely quick Return on Investment. An ROI of less than 12 months is something that many retailers experience due to the fact that most CFM systems are software based and do not require replacement of existing hardware such as the ATG.
A typical CFM installation has the ability to identify almost every category for fuel shrink, such as:
- Short delivery
- Meter drifts
- Fuel theft from the UST or directly from the dispenser
- Fuel system leaks
Seeing is believing, and with the statistical charting provided with a good CFM system, a graphical representation of fuel inventory will provide a clear view of deliveries, inventory, individual hose sales, meter drift, leaks, cross drops and losses due to theft or a short delivery. Future fuel losses can be greatly minimized depending on the operators desire to eradicate fuel shrink.
Brian Reynolds has been a petroleum marketing professional for over 40 years. He began career as a youth working in family owned petroleum marketing company in Cisco, Texas. Reynolds was a pioneer in the field of high volume supermarket fueling. The business model invented has been one of the most copied in high volume supermarket petroleum retailing for the past 20 years. He is currently a major account representative at Simmons Corporation for continuous fuel monitoring, regulatory environmental compliance and automatic tank gauges.
