What impact will coronavirus have on fuels and lubes distribution? Specifically, how will it impact petroleum and bulk product logistics.
The mandate to Shelter In Place and keep social distancing is coming to your town. Making that transition is not easy when you have an essential business that involves physical goods distribution. Warehouse personnel must load your trucks, and drivers have to make deliveries.
Other critical personnel, such as dispatchers and office staff, should be able to work from home if you have the right connectivity (VPN network access, IP-based phone system).
If you need help or have questions about setting up WFH, feel free to ask us. We can provide technology suggestions and help you work with a local resource since we’ve had a Work From Home (WFH) infrastructure for 10+ years.
This is our perspective on US logistics, not the free fall of oil prices.
BizSpeed’s take on the coronavirus impacts on logistics:
WFH highlights the limitations of paper-based dispatch and delivery – If your delivery process is paper-based, dispatchers need to be present to assemble trips and distribute orders to drivers who must interact with each other and warehouse workers to complete their routes. During the delivery route, customers must accept proof of delivery documents. At the end of the shift, the back-office staff must physically handle the paperwork to re-key orders into the billing system.
Routing and dispatch + a mobile app will be the cost of doing business – A piece of paper can only be at one place at a time. When your operation transitions from paper to electronic documents, you can centralize and reassign dispatching work. Now you can avoid situations where a depot can only be dispatched by the local dispatcher, who is unable to work because of illness. Centralizing dispatch gets the tribal knowledge out of dispatchers’ heads and into a live system that can adapt as needed.
Lower order volumes require increased delivery efficiency – The effort to distribute product MUST be more efficient to maintain margins when business is down. When business is booming, it’s easy to make unprofitable deliveries because they’re averaged in with more profitable ones. Now that delivery volumes are down 20% or more, the margin for error is smaller, so you have to ensure you’re optimizing routes and maximizing truck capacity. Also, when you’re using a modern routing system, you can get the needed metrics to take action against unprofitable deliveries.
Increased need to monitor and forecast tanks – Target your Keep-full (VMI) tanks for delivery efficiency such that your average delivery is 70% of the tank capacity. If you don’t record your delivery metrics, and tank monitor data in a tank database for tank forecasting, you’re likely to be making inefficient deliveries. Deliveries cost a minimum of $100/stop, plus loaded transportation at $1.75/mile. Unneeded stops will increase your costs and erode margin. Use tank forecasts to hit the 70% efficiency mark so that you can strike a balance between customer service, transportation costs, and profitability.
Importance of streamlining the Order To Cash (OTC) cycle – Paper-based dispatch and delivery are inherently inefficient and slow. To get paid faster, you have to shorten the order to payment cycle. Our most efficient ExxonMobil distributors have reduced their OTC to 2 days versus the industry average of 20 days.
Inventory control is critical as theft will increase – The worst scenario is the combination of a bad customer and a bad driver. The financial stress on drivers and customers can increase the temptation for theft. A higher likelihood for theft means you MUST have better processes to track inventory that goes on the truck, know what is delivered to customers, and what is retained. If you’re delivering fuel, you MUST have better BOL integration and tracking so you can match BOLs with electronic DTN transactions. Tracking customers deliveries using meter integration on bulk products and auditing meter totalizers will track all inventory transactions, including retained products electronically for audit reports.
Spotlight on inventory and demand forecasting – Demand forecasting has a direct impact on inventory and carrying costs. Under normal circumstances, demand and inventory forecasting can be relatively straightforward. With so many of your customers working from home (WFH), the ability to make informed inventory purchases is critical to conserving capital. Similar to the tank forecasting capabilities, our system can use the delivery history to forecast demand for procurement.
It’s hard to forecast the impact of coronavirus. Some industries, like travel and hospitality, will continue to face lower revenues until we’re past the social distancing and stay at home requirements. Other sectors, such as manufacturing, may move back to the US or increase domestically, which will increase demand for bulk materials moving forward. All of these factors will play into price instability for the foreseeable future.
Companies that are agile and able to respond with better customer service and logistics efficiency have an opportunity to increase margin and gain market share as the economy recovers. If you’re interested in being agile, we’d like to work with you.