Leveraging Technology to Purchase Petroleum More Efficiently Or, Why the Petroleum Downstream Needs a Centralized Data Hub

Author: Gary D. Bevers, President. Bevers & Co. - Downstream Petroleum Solutions

All trading partners in the downstream petroleum supply chain need accurate and timely electronic marketing, financial, inventory, and transactional data without which automation of the fuel procurement and distribution process will remain elusive if not impossible. Lack of automation in both procurement and processing orders causes great inefficiencies that in turn slows the purchase to pay cycle – a critical process for a cash driven industry. Marketers, the man in the middle of the Supply Chain, need electronic data files more than ever if they are to cut operations costs and remain competitive. To date, the sources and delivery methods for this information remain proprietary and highly fragmented making gathering even part of the data files difficult, time consuming and inefficient. Though API/PIDX EDI standards have been around for years they have proved too costly to implement for most trading partners. The new, web based NAXML data standards can be utilized by anyone with a Web browser but so far they have only been adopted by a few of the Majors so data access is limited.

The Marketer and the Independent Distribution Channel

The crucial issue in the petroleum supply chain is the growing dependence by Major Oil and Refining Suppliers on an independent distribution channel made up of Trading Partners who are, for the most part, burdened with thin margins, rising costs and a lack of standardized electronic data needed to automate their operations. Most simply can’t afford the typical Supplier EDI solutions to get the critical electronic data they need and many of the large Marketers are “multi-branded” or “unbranded”, so a single Supplier’s web-based eCommerce initiative will not solve, but actually will complicate their downstream communication and data integration issues. The Terminals, Common Carriers and large Commercial and Industrial customers also deal with multiple Suppliers nation wide and thus have the same multiple connectivity and data integration issues ― adding administrative support costs to meet the needs of all their trading partner relationships.

The case for an independent, centralized, web-based Data Hub for the Downstream Supply Chain begins by taking a closer look at the needs not just of the Major Oil companies but of all Trading Partners in this complex, fragmented distribution system. Factor in over 200 Suppliers, 8,500 Marketer/Jobbers, 1,400 Terminals, 800 Common Carriers, 160,000 C-Stores and Dealers and millions of Commercial/Industrial End Users and you can begin to see the thousands of connections needed to manage the millions of data transactions that take place everyday. The problem is complicated by the sheer scale of the downstream supply chain that is supported by hundreds of incompatible applications and user-built spreadsheets in use today.

Common sense and studies conducted by suppliers, technology providers and independent consultants have reached two related conclusions ¾

  1. Most Independent Marketer/Jobbers are not going to log onto multiple Websites to conduct business online and add to their costs.
  2. This requires a centralized, neutral solution to be built, managed and hosted by a third party data aggregator.

The Centralized Data Hub Solution

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The centralized Data Hub will have to be an open access, moderately priced, Independent Marketer oriented and web-based solution for cost-effective access by all trading partners.  While aggregating industry-wide data into a fully scalable, secure enterprise platform, the Data Hub also needs to allow multiple parties to connect simultaneously and share proprietary, password protected Supply Chain information. . However, it’s only by integrating seamlessly with a host of third party applications and all downstream supply chain stakeholders that the goal of a fully automated petroleum supply chain will be realized.

Today’s data solution needs to go much further than simply distributing daily Rack pricing and text messages to an independent distributor channel. It has to provide for near real-time order/dispatch management, inventory “position” management, multiple, data transaction reconciliations and ultimately deliver a cost-effective, collaborative solution for financial settlement between each of the five critical trading partners ― all off of one “rack” lifting and fuel delivery.

To do this the Data Hub must enable two-way, near real time communication of data rich electronic files including: product “Rack”, customer specific and spot pricing, invoicing, EFTs, Credit Card data, structured text messages, eBOL’s, terminal, product, customer and trading partner allocations and terminal lifting reservations. These data communication files must be available in both standardized and “normalized” data formats for easy integration into a wide array of Marketer’s back office and third party applications. Further the solution must address distribution through email, FTP, EDI, WAP, PDA support, as well as import/export to spreadsheets multiple databases and all common file types to meet the requirements and deliver the cost-saving, value-added solutions needed by our complex downstream distribution channel.

What Can You Do Today?

Start with price analysis tools for both competitive street price and wholesale “Rack” prices. This will give you an accurate, objective benchmark to aim for and it will track your results to show improvements. Most back office providers have Fuel Management and Best Buy modules which should include freight and tax tables to show a true “delivered” or “laid-in” price. There are also a few stand alone applications on the market and consultants who can build customized applications or spreadsheets for managing the supplier, terminal, product price offerings.

For access to electronic data, contact your suppliers to see if they can send you EDI, NAXML, CSV or other standardized price file types or for a recommendation for third party data sourcing. Contact your back office provider to see what file types they support and import/data automation modules or applications they have available. Marketers who are ahead of the curve have written their own import data applications and most back office providers have staff or a list of consultants who they recommend for custom projects.

Industry trade magazines, conferences and trade shows are a great way to find out the latest and greatest products and services available to help you with your fuel management needs. And finally, get involved in NACS’s Motor Fuel and Technology committees to see what is available on the market and what other Marketers and Retailers are doing to improve and automate their fuel management process today.