When the Fuel Must Flow
By David Zahn, [email protected]
If only the world were more predictable, what a different place it would be. It certainly would be much better for businesses that require a steady stream of fuel to meet demand and make a profit. However, real life is chaotic. Therefore, "fuel-centered" businesses must prepare for the unpredictable in order to thrive, or simply survive.
For example, convenience stores sell 80% of all of the fuel sold in the U.S., and roughly 71% of their receipts are derived from selling that fuel, according to the National Association of Convenience Stores. This means that these stores must have steady access to fuel just to stay in business. Similarly, companies and transit systems that rely on their fleets to move goods and people also depend on fuel to remain operational. In this light, it is easy to see how major or unpredictable events can cause fuel supply disruptions that negatively impact profitability or business viability.
Unique and heavily attended mega-events such as the Olympics, the FIFA World Cup, or even the annual Sturgis Motorcycle Rally in South Dakota are "planned exceptions" to everyday life. Yet even with time to prepare, these events still require fuel-centered businesses to perform extraordinary logistical maneuvers to keep their businesses from coming to a complete standstill.
Businesses in high-trafficked areas already understand the impact of large crowds and high demand. Others, at places such as Sturgis, typically have low-demand environments that need to ramp up to meet temporary swells in demand. When a mega-event is taking place, businesses in either scenario need vastly greater amounts of fuel to sell, or to power their fleets as their operations go into overdrive.
Ready or not
For fuel-centered businesses, these planned events have nearly the same characteristics as unplanned natural disasters, such as earthquakes, floods, hurricanes and wildfires. Planned or unplanned, both put a tremendous strain on the infrastructures and logistics systems of fuel-centered businesses.
In fact, natural disasters add even more stress because businesses are typically caught unprepared to meet the needs of their specific, unprecedented circumstances. In addition, natural disasters often threaten, or cut off, the supply chain just when businesses need fuel the most. Such situations are particularly difficult for businesses that require lead time or additional credit to purchase and receive their fuel. Running low or completely out of fuel is extremely costly at any time, but the negative impact it has on profitability, relationships with valued customers, and the community that these businesses serve is even greater during an unpredictable event.
Making a success preparedness plan
Fortunately, fuel-centered businesses can put themselves in a better position to weather the storm of problems that could threaten their bottom lines, or force them to close their doors, as the result of a disaster. They can do so by improving their infrastructures and their logistics systems and by taking a lesson or two from businesses that have planned for mega-events.
Fortunately, it is rare to see fuel-centered businesses run out of fuel at mega-events. These events are so massive from a logistical perspective that organizers plan every last detail and have backup plans for backup plans. Fuel-centered businesses would do well to adopt some of the guidelines that event organizers follow if they want to survive unpredictable fuel supply interruptions and wild demand swings. Those guidelines include:
1. Keep fuel tanks full in anticipation of supply issues.
2. Make arrangements well in advance for secondary and tertiary supply and delivery options in case refineries shut down, supply terminals run out of fuel, or carriers become unavailable.
3. Use demand forecasting systems and other fuel automation technologies to manage more efficiently and cost effectively the supply needs and peak demand periods of the business.
4. Set up credit or financing options to stay ahead of fuel demand spikes with more frequent deliveries when needed.
The more time fuel-centered businesses take to make contingency plans for out-of-the ordinary events, the more likely they will continue operating as close as possible to situation-normal when the unexpected occurs. Unlike their competitors, they will have a plan that helps them to keep focused on serving their customers.
While these preparations do not guarantee a seamless fuel operation, they have proven time and again to decrease problems that would otherwise be crippling. Businesses that have taken the time to create success-preparedness plans for unpredictable events of any kind, including natural disasters, have an edge. Being prepared is likely to lessen the blow of an unplanned event and help keep natural disasters from making a disaster out of their business.
David Zahn, is VP marketing, FuelQuest (www.fuelquest.com), which provides on-demand fuel management, tax automation, and compliance solutions for suppliers, distributors, buyers, and traders of petroleum products and other energy commodities. FuelQuest’s solutions deliver operational and financial value to over 650 customers, including leading global oil companies, international retailers, shippers and government entities. He can be contacted at [email protected].
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