This is the third post of a 5-part series on driving operational efficiencies in fuels, lubricants and chemicals distribution, based on our 15 years of work in the logistics industry.
To reduce distribution costs effectively, it is essential to focus on increasing tank delivery efficiency.
You should aim to have 70% tank delivery efficiency. Liquid tanks typically have a 90% max fill capacity, and most customers maintain a 20% safety stock. That creates a target fill rate of 70%.
Best in class distributors forecast all tanks, not just monitored tanks. By doing so, they can improve delivery efficiency up to 30% by increasing drop and order sizes to fill your truck.
An important measure for delivery efficiency is understanding the amount of product that trucks return to the depot. Improving drop size and optimizing orders across all tanks and trucks can increase truck utilization by 30%. You want to minimize the return of trucks with 10-20% retained product, as this indicates poor optimizing. Best-in-class distributors monitoring 90% of their tanks get 30% better truck utilization and return with no retained product.
Forecasting tanks without monitors can be challenging, particularly if they are slow-moving or have variable usage. Nobody wants to risk a runout by not having enough product on the truck to replenish the tank. However, simply repeating the same order quantities without adjusting for delivery history and transportation costs can decrease efficiency.
Tank Forecasting for Enhanced Tank Delivery Efficiency
Tank delivery efficiency represents the percent of tank capacity you deliver. For example, a 500-gallon tank can take 450 gallons and has a 100-gallon safety stock. The target delivery quantity is 350 gallons, which is 70%. An average delivery quantity of 250 gallons results in a delivery efficiency of only 50%. However, the best-in-class distributors aim for a 70% target.
Challenges Faced by Bulk Distributors
Bulk distributors face various challenges, especially when they do not have a mobile solution to address questions like:
- What’s my tank delivery efficiency across all tanks?
- How many tanks do I deliver to (including customers managed)?
- What are the capacities of each CMI/VMI tank (customer/vendor managed inventory)?
- Which tanks should be monitored based on data?
- Should I replace an existing tank with a larger/smaller tank for better efficiency?
Mobile Delivery App Solution
To address these challenges, a tank forecasting solution combines data gathered through a mobile delivery application. This involves collecting essential information during delivery, such as tank capacity, if the tank was delivered in full, reasons for incomplete fills, delivery history, stick readings, and connections between monitored tanks and related products. This data is then used to create an accurate and comprehensive tank database for forecasting all tanks.
Tank forecasting utilizes data analytics to incorporate a tank’s delivery history and key metrics, including:
- Smoothing, which prioritizes recent deliveries over older ones
- Related tanks that may impact usage trends
- Average delivery quantity over the last 12 months
- Average delivery quantity over the last 40 days
- Min/Max delivery quantities over the last 12 months and 40 days
- Standard deviation (variance) in delivery quantity over the last 12 months
Combining tank attributes and data analytics with machine learning provides a significantly better prediction of usage trends. Smarter tank forecasting increases drop size, reduces miles driven, and increases the truck’s utilized capacity. The statistics shown are a sample from before and after with forecasting:
Tank forecasting optimizes delivery frequency and volume, resulting in increased profits, especially on tanks with recurring deliveries. Tank delivery efficiency benefits the entire operation by enabling distributors to deliver more orders using their existing fleet.
For example, a 15% increase in delivered volume for a tank with a monthly consumption of 500k gallons saves 200 stops per month and $275k per year.
Step 3: Tank Delivery Efficiency with Tank Forecasting
Implementing tank forecasting is the third step to best-in-class bulk logistics. Tank forecasting enables the other components in our 5-part series to drive logistics efficiency and customer service:
- Part 1: Route optimization – better routes, centralized dispatch
- Part 2: Driver delivery app – paperless, route compliance, driver efficiency, consistent workflows
- Part 3: Tank forecasting – order generation for ALL tanks (monitored and non-monitored)
- Part 4: Inventory control and visibility – track truck inventory, prevent cross fills
- Part 5: Customer service – email advanced ship notifications, proof of delivery, driver on the way
To improve your delivery efficiency, you need tools to make data-driven logistics decisions.
