Do you Have a Handle on all Forms of Fuel Variance?
Are you Aware of all Types of Fuel Variance?
There are many points from rack to nozzle where fuel variance can occur and It is a significant challenge for retailers to manage and prevent variance along this journey before the fuel reaches the customers tank. Without a team focused on fuel reconciliation, it is impossible to identify all forms of fuel variances, let alone investigate to verify if there are true fuel losses. Independent of fuel loss due to ambient temperatures and evaporation, fuel variance can be bucketed into three main areas: equipment errors or failure, technician behavior, and malicious theft or fraud. These can also be referred to as a physical fuel loss or an accounting loss. Each of these demands vigilant monitoring and in-depth analysis to identify. Without monitoring and accounting for fuel variances, retailers can find themselves with large write-offs at the end of financial periods.
Is Your Equipment Operating as is Should?
There are many pieces of equipment in the fuel system that can create variance in reconciliation. A piece of equipment that is usually top-of-mind for a retailer would be fuel meters. A non-calibrated fuel meter can either have you shorting customers or releasing more product than is being charged for, making it critical to remain aware of meter performance.
Another leading cause of equipment-related variance can occur due to inaccurate tank charts. Errors related to tank charts will frustrate efforts to gain an accurate picture of inventory in a tank, making it difficult to accurately assess how much fuel is on hand. It is estimated that when a probe is removed and reinstalled, or a new probe is put in place, a new tank chart will be needed 75% of the time. Tank charts will also fall out of date due to movements in the ground around the tank that will shift its position over time, giving a view of inventory that is inaccurate. Without accurately measuring how much fuel is in the ground and how much is leaving the tank, retailers may find themselves with an increased number of retains or runouts and smaller margins on their fuel business.
To Err is Human
Mistakes happen, even with experienced technicians. Sometimes these mistakes greatly impact inventory levels and lead to significant variance. Things such as a miscalibrated meter or a misaligned probe will have retailers operating from a position of less or more inventory than what is thought to be on hand. Errors to probe placement can happen after maintenance is performed on the probe or after compliance testing if not carefully placed back in the same manner. This difference can have significant implications across a large network or even a single site if the variance is substantial. Constant monitoring of tanks, meters, and probe readings will make sure these differences are addressed as soon as possible, lessening their impact.
How Thorough Analysis Identified Theft
The first step in countering fuel theft is determining when it has occurred. Small amounts of loss can go undetected for some time as detailed analysis over an extended period is needed to identify it. Theft that happened to a big-box retailer illustrates this exact point: through analysis, Insite360 determined that small amounts of fuel were missing, once a week, around the same time as a fuel delivery. When these small losses were examined, each one led back to the same carrier and driver. Small amounts of negative fuel variance were seen at each delivery – 40 gallons on one delivery, 35 gallons on another, 28 gallons on another, etc. This created a pattern, pinpointing the theft to a specific location and driver. Insite360’s thorough analysis of all available data identified the fraud and the driver was removed from their position.
It is easy to see how that theft and fraud could have gone unnoticed for quite some time, given that the amounts in each instance were not significant. Only by looking at available fuel data over time, and truly digging in, could this loss have been identified and resolved.
How to Protect Your Business Against Theft and Variance
There is no simple way to manage all forms of variance, it takes managing a number of data points and ensuring that the fuel system is operating as it should. Retailers do have options to combat variance, and this can be effectively managed with trained and dedicated personnel along with the right products to enable the needed analysis to protect fuel profits. Whether a retailer develops an in-house team or partners with an outside provider, such as Insite360, fuel variance needs to be addressed to protect fuel profits and help ensure the success of the business.
Tristin Segler is a management professional within Insite360’s Advanced Variance Analysis (AVA) team who has strengthened client value, grown the business by adding industry-leading clients, and worked to establish best practices. Tristin has spent over 5 years in Oil & Gas industry, with a focus in the cloud software business, and has a passion for driving success in customer implementations and providing world-class managed services. Tristin continues to enhance Insite360’s offerings by partnering with Product Management to modernize software platforms as well as collaborating with Sales and CSM to refine value propositions and drive top-line growth.