Finding Answers in Your Data

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As energy marketers automate their operations with sophisticated back office software, they accumulate reams of data that contains essential truths about their operations. With business intelligence (BI) software, companies can explore and parse their data systematically to develop valuable insights that they can use to help improve business processes.

One example of BI software is the Brite application developed by Angus Performance Advisors (APA), a division of Angus Energy. Oil & Energy recently reached out to Bob Levins, the developer of Brite, to learn more about how managers can use BI to improve company operations.

Oil & Energy: Please provide a quick overview of BRITE.

Bob Levins: BRITE is a web-based business intelligence solution, delivering timely and accurate financial and operational performance information via a combination of customizable dashboards, views and reports in support of achieving the dealer’s strategic goals.

BRITE utilizes many sources of data to create a complete view of a dealer’s business including their back-office system, on-board computers and various costing and weather services. The abundant amount of data analyzed is necessary to present to the dealers their MTD and on-demand views of their profit plan, margins analysis, delivery and service performance, customer gains & losses, asset management and weather.

It can be said that the scope of the BRITE solution is limitless beyond the initial implementation of the base version. As each subscriber has their own database, the option for custom work is always available. The base version of BRITE is designed to support the core fundamental disciplines that have been adopted by most of the successful dealers in our industry over the years. Having said that, APA knows it is the management team and their respective styles that separate one company from another. To accommodate this uniqueness, BRITE has been carefully designed to allow for custom views of the same data or additional data sets.

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Make Your Numbers Count

O&E: Please give some examples of the kind of analysis that BRITE enables for the fuel dealer.

BL: BRITE’s Margin Analysis plays an extremely important role in the daily life of a dealer. Our industry, in all categories, has become less forgiving regarding mistakes and poor business practices. Forecasting, protecting and monitoring margins, down to the product, trade class, price agreement and customer transaction level has now become mandatory. Because of the dealer’s need to protect program gallons sold, with both options and/or wet barrel commitments, any reported margins at the customer level would be suspect without including the financial impact they have on the cost, at time of delivery.

The existence of credible margins down to the customer transaction level, on a daily basis, allows the dealer to quickly analyze yesterday’s delivery postings, scan for and possibly identify any issues that may be of concern and correct them immediately. It is not uncommon to find errors totaling thousands of dollars that might have gone unnoticed in the past, or at least for several weeks. Also, having your margins segmented down to the price type level (cap, fixed and variable) allows the dealer to pull the levers on price when volumes are down but the month-end goals still demands achievement of the forecasted extended gross margin.

Another example would be in the area of service and the Excess Service Calls Report. If I were to tell you that 20 percent of your customers represent 50-plus percent of your unscheduled service calls in season and that many, if not most, of them have service contracts, would that give you reason for concern? If the cost of your annual contract is $300 and the average cost of a service call is $140 (you should know yours), then simple math will show that you have roughly two calls-worth of revenue to service that customer for twelve months of coverage, before having to dip into their oil margins. You will most likely include an annual tune-up in the contract, leaving you enough dollars for one more service call. So, on the surface, the dealer should be concerned about any customer who has had more than two calls, starting with contract customers. Most dealers, when they first review this report, may not be pleased with what they see, but right before my eyes I see an immediate increase in collaboration among managers wanting to investigate further. This is what business intelligence is all about.

O&E: Please explain how the fuel dealer can use that analysis and reporting to understand and improve their processes.

BL: I believe that if not there yet, a dealer should adopt a more proactive approach to the business, beginning with the financial aspect. In the past, it was customary to wait until you produced your P&L two weeks into the following month and then look back and wonder what you could have or would have done differently. Today, the dealer must be looking forward, forecasting what the desired results should be for every month. These results should include at a minimum, liquid product volumes, unit margins and extended gross margins, by product, down to the price agreement level.

In addition, the dealer should forecast service revenues, customer gains & losses, and finally payroll expenses, which ties heavily into your operational expenses. Once the dealer has all of this in place, as the month progresses, it becomes the responsibility of operations (management and staff) to meet or exceed on the goals that have been set while delivering the products and services effectively.

Measuring the dealer’s actual transactions against that which is forecasted for the same time period, month-to-date, is key to month-end trending, discovering issues and correcting them immediately, while hopefully preserving the desired month-end results. As this culture evolves, and everyone understands what is expected of them and their departments, internal collaboration will increase and business processes will be adjusted as necessary to conform to the goals of the company.

O&E: Can an energy marketer reduce their risk and threats to profitability by better understanding what is really happening in their business?

BL: Absolutely. I always preach to dealers that they should “know their numbers” and understand, when they see a specific metric, whether that value appears reasonable or not. When I say know your numbers, I am referring to knowing what makes up their costs of doing business within each department, then applying this information down to a level by which they can measure a degree of pain resulting from any inefficiencies that may be uncovered by the reporting.

For example, how much does it cost to make a delivery or perform a service call? What does it cost you to acquire a new customer? All numbers that can be arrived at via some simple P&L calculations, along with your monthly activity counts. Once these costs are known and the abuses are being reported, it becomes much easier to recognize the business processes that may be broken or are not being followed, the employees that may need more training or discipline and perhaps suggested technology that can be employed to improve the dealer’s ability to grow without having to add resources.

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