The high cost to retailers of wet stock losses was revealed in a lively discussion during one of the Working Lunch sessions at last month’s International Forecourt and Fuel Equipment Exhibition.
Rikki Hunt, chairman and chief executive of Fuelforce, admitted to having discovered losses of more than £1million due to hot product – equal to 0.8% per year of his fuel volume – as he focused on the problem by investing time and money in fuel management systems and analysis.
Other retailers in the audience expressed similar concerns following a presentation by PRA director Ray Holloway during which he revealed the likely losses of the average retailer.
“On a loss of just 0.45% per annum a retailer could be losing £24,300 a year on a 9m-litre site, based on a cost price of 60ppl.” He also gave the example of a retailer who took a delivery at 18.6degC and lost 162 litres in the process – and it didn’t come back in the days after delivery.
“I’ve been in the industry 30 years, and for no particular reason, 0.3% is regarded as an acceptable loss – the industry norm – in negotiations between retailers and oil companies on fuel deliveries,” said Holloway.
While there are many factors which can contribute to fuel loss – the key areas are during delivery, storage and dispensing – the discussion focused on the many aspects of delivery losses.
“There is no system in place that actually protects you in the purchase of motor fuel to actually receive a guaranteed quantity against the order you’ve placed,” stressed Holloway. “We need to provide a means to verify the delivered quantity.
Until relatively recently we still used an old fashioned dipstick to measure the quantity in any pot on a tanker that came onto your forecourt. As we got into vapour management, the oil companies very quickly cottoned onto the fact that we could dispense with the dipstick, and if they dressed it up in such a way that your employees were at risk if they climbed on the tanker, they could simply refuse to take the risk and they wouldn’t accept the risk transferring to you. Rather than put up guard rails to allow the dipping process to continue, they just removed the dipsticks completely, and got away with it. And today you get absolutely no verification whatsoever of the quantity of fuel that arrives on a tanker about to deliver into your tanks. As an industry, I can only say the oil companies in it are very lucky because it wouldn’t happen in the brewery industry.
“The underlying problem in this industry is ineffectual definition of measurement. It is the PRA’s responsibility to get the government much closer to the point of understanding. These are not the sort of losses that this industry allows you to recover through your margin and it never will be.”
Independent retailer Nick Brocklehurst expressed anger at having to “sign blind” for something of such high value and having to accept the invoice.
David Charman of Parkfoot Garage in Kent said oil companies were not particularly receptive to compensating for any losses at all until you could prove where the losses were. “The key to confronting your supplier is to have proper information, and until you have that you’re not in a position to approach them. We all accept a 0.3% loss and have done for years. The loss we should be accepting is 0.0%! The only way to start tackling the problem is to invest in new systems. Along with most retailers I monitor fuel on a 24-hour basis, but I believe we need to move away from that and move to a real-time recording of fuel in and fuel out. There are enormous advantages to this as it will finally tell you where the problem is.”
Martin Window, Trading Standards officer for Hampshire County Council, was questioned as to why the National Weights and Measures Laboratory is completely ineffectual. He replied that NWML had not been indifferent to the problems of fuel deliveries and had grappled with it for some time.
“NWML deal with prescribed equipment. If it’s not prescribed it doesn’t come under our control and tanker delivery equipment doesn’t come under our control – it’s not prescribed equipment. It never has been.
“As recently as last year the Department of Trade and Industry and NWML carried out research, spoke to retailers, did field visits into the problem of hot fuel, and decided to maintain the status quo.
“A petrol retailer is a consumer as far as their fuel supplier is concerned, and under the provisions of the Weights and Measures Act it is an offence for one person to supply short measure goods to another person. The problem Weights & Measures have is that it is purely an evidential problem. To put it crudely if you have a delivery and you put it in your tanks and you complain to us, there is absolutely no way we can measure that delivery.”
The final Working Lunch on security sparked some lively discussion and independent retailer Jonathan James, who runs three forecourts in Cambridgeshire, kicked off with a personal account of how crime affects his business and what he’s done to minimise the problem: “The key thing I do in my stores is defensive merchandising in stock loss hot spots and areas that can’t be seen by the cashiers. I keep minimum stock on the shelves, and make sure that I put bulky products in areas of blind spots.
“I ensure that at peak periods we have extra members of staff on the shop floor, but the threat of violence has got to the stage now where they can’t risk tackling a suspected thief.
“The other work we do is in partnership with the police. We issue banning orders, which was working quite well until the government decided to bring in the £80 Fixed Penalty Notice. I’m completely anti it because I think a criminal needs to be made to feel a criminal by being arrested. The FPN is not compulsory so if you’ve already banned a shoplifter, the courts will treat it as shoplifting with aggravated circumstances to heighten the penalty as much as possible.
“When someone is arrested I also ensure that they are given a copy of the photograph of them in my store stealing. They can see exactly how good that camera is.”
Joining James on the panel was Jag Singh, who has launched the Drivestop system to combat drive-offs in the UK; Alan Townsend from the Flying Squad at New Scotland Yard talking about robbery initiative Raid-control; and West Midlands crime reduction officer PC Phil Russon; and Colin Todd from CCTV company BP2K discussing automatic number plate recognition.
Jag Singh explained how his Drivestop system uses warning lights and an audio message followed by syringes – or stingers – that deflate the motorist’s tyres if they proceed with the drive-off. Taking a question on dealing with aggression from motorists, Singh said: “What we tend to do is put in a time-delay syringe system so that if a drive-off happens and a car goes over the stinger system, the tyres will not deflate until eight hours later.”
Jag said he had guidance from the police, and PC Phil Russon talked about the legalities of the system in terms of damaging a motorist’s tyres. “A legitimate person isn’t going to cross that threshold and go back and say ‘you’ve damaged my tyres’,” he said. “If it does happen, it will be a matter for solicitors to argue out in court. At the site in Wolverhampton we’ve seen an 80% reduction in drive-off crime on that forecourt. If we could spread that across the country we’re talking several millions of pounds worth of crime.”
In response to comments on crime displacement Alan Townsend said: “You never displace the amount of crime you stop, ever. There is no evidence to suggest that whatsoever. You might reduce something by 50%, but you only displace about 10% of it so you stop 40% of crime. That’s not me talking, that’s the Home Office.”
Townsend went on to explain how sites can be Raid-control certified by ensuring they train staff in raid awareness and security awareness; use cash management systems; use time-delay systems on safes; have cameras and cash-staining systems. “Raid-control becomes the security department for the independents,” he said. “We will help you do the risk assessments, we will find out where your weaknesses are and help you implement procedures. We give you support in training your staff, give you advice on what kit to purchase, and help make the deterrent credible because you can have all the kit you like, but unless you tell the robber ‘we’ve got this so go away’, they’ll still come in.”
In answer to a comment from the audience, Townsend added: “We’re working closely with the Association of British Insurers to get the major insurers to consider, if not reductions in premiums, certainly a guarantee that premiums will be held.”
Finally, Colin Todd talked about the benefits of automatic number plate recognition systems, which link to a national database. “ANPR in conjunction with CCTV allows you to specifically record an event that has been brought to your attention whether it’s a dodgy number plate, an unclear number plate, or known number plate that’s causing you a problem,” he said, adding that the system links to a national database.
“Cars drive off quite fast from some forecourts and we have problems grabbing a registration plate on a conventional CCTV system, but the ANPR system can grab a number plate up to 100-150 miles per hour if necessary.”
A session on fuel pricing and supply contracts saw Darren Briggs, managing director of BigOil, predicting that most fuel supply contracts will be Platts-plus within two years, and therefore it was crucial that retailers used daily independent price data.
Susie Hawkins, partner at the Simon Smith Group, said she used the BigOil price data system religiously. “I recently tracked back four months of invoices, and found mistakes in the calculation of the margin share. I got £26,000 of credit back. Without the BigOil site I wouldn’t have been able to do that.”
Adam Hooper, business development director at BigOil and former sales and marketing director at Platts, said that once you have an understanding of Platts pricing levels then you are on a level playing field with your fuel supplier because you’re talking about the same reference point.
Ray Holloway gave extensive advice on supply contracts and how complex they are now: “In my days with BP a contract was only four pages long, the last BP document I had was 47 pages long. It may be full of small print, but
for you it’s the real living stuff. Once you’ve signed the contract it’s a legal document and without the agreement of both parties involved in the contract, you can’t change the terms thereafter. If
you don’t understand something you should ask for an explanation – you don’t have to accept the legal jargon.”