Fueling a car gas tank with gasoline.
Make sure your station never runs dry by leveraging your experience within the market alongside technology that can back up your instincts.

Each June and July, thousands of Europeans pack their bags, pull out their maps (albeit, smartphones) and begin planning their summer holidays. Some of this travel may not require traversing across the continent, but on occasion, it does. With an influx of traveling during the summer months, two scenarios unfold simultaneously: an increase of traffic at fuel retail sites along the way to the end destinations and a decrease of fuel consumption along non-touristic sites.

In today’s petroleum marketing environment of high competition and minuscule margins, station operators should focus on data to drive their operations. When ordering fuel based on “gut feeling” or “years of experience,” station operators disregard emerging or stable trends within the market, which can lead to a myriad of challenging situations. Let’s evaluate.

Scenario One

You’ve been a part of the petroleum industry for years. You’ve never encountered an issue you haven’t been able to solve. As summer moves in and traffic to your station begins to pick up, you place an order for fuel in an attempt to fill the tanks on site. Only, once the truck arrives to drop the fuel, you realize the amount you ordered doesn’t fit your tank – you’ve overestimated your fuel need based on your initial reaction to the summer traffic. And while the traffic at your store has indeed increased, it wasn’t to the extent of fuel consumption that you predicted. This error, based on gut-feel, has now cost your business exponentially. Not only are you paying for the increase in transportation costs, but the additional fuel you ordered now needs to be stored somewhere – at your expense. This again causes another additional cost. Rounding out this endeavor, you remember that the fuel has now been taxed for the additional time since leaving the terminal. This is not the ideal situation, and one that could’ve easily been avoided.

Scenario Two

As summer business begins hitting your station, you’re confident that the increased traffic this year will taper off before needing to place a new order of fuel. Only, your past “experience” from years within the industry has proven you incorrect, this time. Instead of plateauing as it’s done in the past, there are more customers than ever before – your station isn’t able to supply the fuel demand. You run out, forcing you to close pumps. Not only is this catastrophic for your fuel margins, but it has an impact on your store as well. Consumers are less inclined to stop at your convenience station for grab-and-go purchases since they can no longer fill-up on fuel while they buy supplies. In turn, this disrupts the balance of your orders for in-store items.

Overcoming “Experience” and “Feeling” to Leverage Consumer Demand

There are simple solutions you can implement to ensure your fuel supply never runs dry. Some station operators work on the Vendor Managed Inventory concept (VMI), where the fuel supplier takes responsibility for maintaining an agreed upon inventory for your tanks. This model may seem appealing – determine an amount, let the supplier maintain it in your tanks – but you still run into the issues of idle stock, and the financially unviable situation of continuously maintaining those full tanks.

There’s good news. You can still use your experience and gut-feeling to improve your station. Your initial thoughts were always on the right track – increased traffic, order more fuel – they just missed their mark in execution because it’s difficult to accurately predict trends as they’re occurring. Leveraging a forecasting algorithm helps eliminate incorrect orders, ensuring you keep enough fuel to accommodate demand while in turn, never running dry. This algorithm is especially crucial during changing seasons, such as holidays. Once implemented, you achieve practically zero runouts, while generating zero excess product returns.

For station operators looking to thrive in today’s economy, it’s important to utilize technology to back up the years of experience and those gut-feeling impulses for your business. Take the competitive advantage to maximize your margins – leverage the right solution for your business today.

Did You Know: Your Source for PDI News provided by PDI, the leader in enterprise management software for the convenience retail and petroleum wholesale markets. Discover how PDI can help you thrive in today’s digital economy.