managing fuel operations

Circle K and Worsley roll out innovative programs to streamline costs and boost profitability.

By John Lofstock, Editor

With fuel prices soaring to record highs, marketers are desperately looking for software solutions that can help them manage the business more effectively. On the fuel supply side, tighter control of distribution could enhance margins and increase overall profitability, so it should be no surprise that savvy operators like Circle K and The Worsley Cos. are rolling out innovative technology programs to streamline operations.

At 138 stores and growing, Wilmington, N.C.-based Worsley was looking for a communications solution that enables all technical applications in its convenience stores to flow through one broadband pipe. After testing several firms, it stuck with TNS Inc., a data communications firm based in Reston, Va.

The decision to go to broadband was a relatively easy one for Worsley, according to Kevin Kolb, the company’s director of information systems. Worsley views the connectivity as an essential part of business in today’s fast-paced market. However, its partnership with TNS was rather serendipitous. While working with Time Warner Cable, the marketer was extremely disappointed with its speed and reliability.

“It just wasn’t reliable and it wasn’t meeting our needs,” Kolb said.

While reviewing the long-term impact cable connectivity would have in vital areas like the POS and fuel interface systems,the company concluded Time Warner was not the solution. Around the same time, a simple cold call from TNS made all the difference.

“They became what appeared to be a big answer to a big problem,” Kolb said. “I’m not sure we had other solutions on the radar so they just walked into the right place at the right time.”

Worsley is in the process of rolling broadband out to all of its stores at an average of about 15 units per week.

“Right now we are using a batch process that requires all stores to dial in for price updates and transmitting reports,” Kolb said. “This is a lengthy and costly process. Many units have to make long-distance phone calls that can take up to an hour per store. With 138 stores, it gets expensive and ties up the phone lines. With broadband, updates are virtually instant and dedicated phone lines aren’t needed. In fact, we expect to be able to reduce the number of phone lines we have at each store further enhancing our savings.”

Another area where TNS is helping streamline fuel operations is by reducing the time it takes to transmit credit card transactions. Using the IP-based broadband connection, payatthe-pump transactions were reduced from five seconds to two seconds versus dialup. However, this system will only apply to stores flying Worsley’s proprietary Carolina Petro fuel brand.

Big Oil brands have yet to embrace broadband connectivity at the local level, even though it is just as fast and safe as the satellite transmissions they provide. Worsley is partnered with ExxonMobil, BP and Shell.

Retailers speculate that Big Oil will be slow to embrace local broadband as a method of communication because it’s a service for which they are charging retailers. IP data is encrypted and KISS compliant and certified. TNS already has established relationships with all the major credit card processors, making for a smooth transition to broadband on in-store debit-and creditcard transactions.

Inventory control
As it looks at other cost-saving measures, Worsley was quick to recognize that a common problem retailers face with manual operations is that they do truck rolls too soon or too late and, depending on which way the cost of fuel is going, that could be a costly mistake. The goal is to top off tanks when prices are increasing and let levels fall when prices are retreating.

Worsley typically relies on a gas station attendant to measure tanks manually once a day, which is not an efficient method.

“Because we are putting tank devices on the network, we can pull inventory data any time of the day, usually less in than a minute. Compare that to the conventional method of using a stick to measure tanks and then manually calling in a fuel order—the time-savings per store is enormous,” Kolb said. “Plus, the automated system is always accurate.

“What you don’t want to do is tie inventory dollars underground. This could further diminish already weak fuel margins.”

Like Worsley, Circle K, now a subsidiary of Canadian marketer Alimentation Couche-Tard, needed to put a system in place to track motor fuel inventories in hundreds of locations-that must convert fuel supplies from summer to winter fuel stocks.

This bi-annual conversion placed a heavy burden on Circle K’s fuel department personnel, who were relying on manual processes for procurement, inventory management and environmental and regulatory compliance. Circle K, which has 2,100 stores across the U.S., required a system that:

  • Reduced administrative paperwork
  • Eliminated manual data entry and the likelihood of human error
  • Decreased labor costs
  • Mitigated compliance risks

Strategy and implementation
About two years ago, Circle K identified its retail solution. It chose to begin implementation of FuelQuest’s Fuel Management System (FMS) Air Quality Compliance module (AQC).

FuelQuest’s FMS software provides Circle K’s fuel team with a transition management, tracking and reporting platform for sites that operate in geographies defined by the EPA and state environmental regulatory agencies. FuelQuest and Circle K were both involved in the implementation of the FMS product and worked together to complete the process last year.

Jim Stout, vice president of sales for FuelQuest, said the FMS and AQC modules are innovative because they provide direct auto-feeds for inventory deliveries.

“Instead of having disparate data feeds coupled with manual data entry, all of these components are integrated into one central database to ensure data integrity for more agile, centralized decision-making,” Stout said. “Circle K has a history of being an industry innovator and this implementation provides unprecedented operational transparency and productivity gains.”

FuelQuest’s FMS product manages and streamlines the conversion in seasonal gasoline supplies at approximately 1,000 Circle K locations. During the transition from summer to winter fuel stocks, FMS tracks inventory levels for all locations to deliver real-time insights into the number of Circle K tanks that have turned over to the appropriate stock in order to avoid environmental penalties. This previously manual entry process required overtime pay and temporary workers, increasing the potential for human error, which could bring fines of up to $25,000 per tank if inventories were not properly converted.

“The solution automated this process enabling unparalleled transparency into Circle K’s business operations and ultimately reduced the workload on the fuel department to enable them to focus on other core business challenges,” Stout said.

End Results
Theresa Denney, fuel distribution supervisor for Circle K, said the chain retailer enjoyed an immediate impact on business after implementing FMS.

“This solution took us light years ahead of where we were,” Denney said.

With the AQC solution in place, Circle K dramatically decreased labor costs associated with seasonal tank turns. The system automated many complex processes so that data did not have to be manually keyed into a third system. FMS not only increased productivity and reduced labor costs, it removed much of the stress on the fuel department that comes with the summer-winter transition.

Circle K also found their employees were more productive, allowing them time to addre
ss other projects.

“FuelQuest’s solution allows us to mitigate operational and environmental compliance risks and rely on cleaner, more accurate data to facilitate better decision-making,” Denney said. “Our locations are now optimizing inventory turns, procurement and logistics, while still ensuring compliance with all federal and local air quality regulations.”

Based on conservative ROI estimates, Denney said Circle K has achieved a hard cost savings of $20,000 per year, not counting potential EPA fines. This saving is based on the cutback of labor overtime hours, and elimination of temporary jobs over a twomonth period when the actual turns are made.

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