By John MacKenna
Heating oil and propane marketers can gain important advantages in cost and competitiveness by using tank monitors strategically, according to a veteran monitoring expert at an industry-leading provider.
Hank Smith, Vice President of Independent Technologies, recently discussed the benefits of monitoring during a seminar at the Northeast Propane Show. Independent Technologies sells the WESROC line of tank monitors.
Marketers can drive a better bottom line by leveraging the benefits of monitoring to improve delivery efficiency and improve customer relations, according to Smith. “Some marketers look at monitoring and ask, ‘How can I sell this and generate revenue?’ A lot of times that is not the first approach,” he told the audience. “It’s better to work on the expense side first. The bigger deal is what you can save.”
Bigger Drops, Fewer Trips
Companies can reduce their cost to service an account by increasing the drop size and reducing the frequency of delivery, according to Smith. For purposes of the discussion, he estimated the cost to deliver at $50 and calculated profit per delivery based on various drop sizes. If a company is making a lot of fills to tanks that are 40 to 50 percent full, there is an opportunity to increase drop sizes and improve the profit per delivery. With monitoring, companies can make fewer trips to deliver the same amount of fuel. One WESROC client eliminated 48,000 deliveries in a year, he said.
Most companies have “low-hanging fruit,” according to Smith. Those are the large, valuable accounts or those whose usage might not be perfectly predictable through degree day calculations.
He cited the example of a pizza restaurant that was highly predictable until one night when an employee mistakenly left the ovens on overnight. Monitoring can prevent a run-out in such a situation and make the delivery company look indispensable. A similar situation could occur if a factory with propane forklifts adds a shift, and the usage rate suddenly spikes. Without a monitor, the customer could suffer a run-out that costs them business and puts the account at risk. “You invest a lot to get accounts, and you want to keep them,” Smith said.
One great competitive advantage to be had is the use of no-run-out guarantees, which can be compelling for businesses and owners of second homes. “That sets you apart,” Smith said. “That’s something you can talk to the customer about. If you gain a 10,000-gallon customer with monitoring, that is making money.”
When You Really Need to Know
Companies can also improve their own operations in significant ways. Smith cited an example of a company that has two drivers call in sick on the same day. “This is not going to be a good day for management. If you had something else planned, that is out the window, because you might be jumping in that truck yourself,” he said. “If you knew that instant what was in the tanks of your most valuable customers, wouldn’t that make life simpler?
“What if you have a big ice storm coming and you may have roads shut down. Where do you go?” he asked. With monitors on hard-to-reach tanks, the company can set priorities effectively in advance of a storm.
Some of the hardest tanks to predict are dispensers for barbecue tanks and forklift accounts, according to Smith. He cited the case of a client that who used to deploy drivers on Memorial Day weekend to visit dispenser sites proactively just to prevent run-outs. Once they put monitors on those tanks, management knew where they had to go and where they didn’t, and they could rein in expenses.
Smith said one of the comments he hears from clients is that they sleep really well once they get monitors on their unpredictable accounts.
Mostly Cellular, With Some Satellite
The cost of monitoring tanks has come down as the cost of cellular service has decreased, he told the audience. Most monitors use cellular networks, but satellite-based monitors can be necessary for some remote locations.
When deciding where to deploy monitors and what types to use, marketers should consider geography and customer type. If a customer is very price-sensitive or highly predictable, monitoring might not be cost effective, Meanwhile, summer homes can be great targets because the price sensitivity is often lower. “They might be more concerned with running out,” Smith said. He pointed out that monitoring services can also be extended beyond the tank with additional sensing devices to detect indoor temperature or presence of water.
When selecting their monitors, companies need to be sure that the devices will comply with Federal Communications Commission regulations and will be durable enough for their environment. The devices should also not create a risk of explosion, and they should mount safely and effectively on the tank, he said.