The average petrol retailer could be losing as much as £15,000 per site, each year, due to indifferent monitoring of his fuel stock. And that’s just for starters.
Petrol is a difficult product to deal with. Unlike Mars bars, it doesn’t arrive packed up neatly in boxes which remain intact until required. Fuel changes size, it leaks and you can’t even be sure the right amount was delivered in the first place.
With margins so tight, you can’t afford to see product vanish into thin air. Nor can you afford for it to slowly leak away where it can’t be seen. Clean-up costs are a huge burden, particularly if the leak meanders beyond your land, incurring the wrath of the Environment Agency and the possibility of a fine of up to £20,000.
Yet industry experts and service providers say that many retailers are still failing to take control of their wet stock, and shy away from making what they consider to be a big investment in complex technology, but which could, in the long term, make a significant difference to their bottom line. On short deliveries, for example, what seem like fractional amounts per delivery can stack up to enormous financial losses over a year.
"Wet-stock losses are complicated and the biggest problem is struggling with poor data," says Martin McTague, managing direct of Edensure, which recently launched ES3, widely regarded as the most advanced wet-stock monitoring service available. "Many retailers are brow-beaten by the whole process and have started to see losses as an inevitable cost of doing business. They set a mental benchmark figure and providing the losses don’t go beyond this they don’t do anything else."
Edensure is at the forefront of a campaign to set a new benchmark for the wet-stock monitoring industry. It has the full support of the Petrol Retailers’ Association, which itself has been running a campaign for the past 18 months to tackle the somewhat contentious issues surrounding wet-stock losses, and in particular, hot fuel.
"Modern monitoring equipment and techniques show clearly that most losses experienced by retailers occur on delivery days, and are a result of either short measures in the loading process at the terminal, or product shrinkage due to movement or temperature," says PRA director Ray Holloway. "This demonstrates just how little integrity exists in the loading and measurement process at terminal sources. Our campaign has highlighted to fuel suppliers (and the government) the unfair and immoral practice, of not delivering the quantity of fuel for which the retailer is invoiced.
"The increasing cost of oil has raised the degree of effect on forecourt retailers, and in the days when major oil companies announce ever-greater profits from trading oil, their collective avoidance of an effective solution is unforgiveable."
The burden of proof has always been the oil companies’ strength, according to Holloway, because retailers keep records of varying quality, but modern monitoring equipment and techniques could be the only answer.
"The PRA announced its intention to confront the issues involved with a specific campaign, knowing full well that expensive, and probably futile, legal action was not an option," says Holloway. "We have been pursuing a number of initiatives."
Meanwhile, there are several options open to retailers looking for wet-stock monitoring solutions.
At its most basic level, wet-stock reconciliation can be done by taking daily dip readings from the tank and comparing them to delivery and sales records. But this is a laborious task, and allows huge potential for mistakes as well as the risk of missing vital signs of a problem.
These days, automatic tank gauges and modern EPoS systems have made the measuring and recording process easier, and you won’t find many of the biggest and most successful retailers without such a system.
But even these cannot guarantee you protection. "If you don’t actually monitor the information these systems are giving out then you will be no more secure than the guy doing careful daily checks with a dipstick. You cannot assume the technology is going to warn you when there’s a problem. It’s often not that sensitive," says Edensure’s McTague. Which is why handing over control to a third party service provider can help you to better identify and manage your losses.
Launched in the UK in February, Edensure’s new ES3 system is a remote monitoring service, which records forecourt data around 500 times a day, providing forecourt owners and managers with the detailed information they need to tackle problem areas, from over-dispensing pumps to supplier tanks that consistently under-deliver.
McTague, who was recently appointed to the PRA’s wet-stock committee, says the significant feature of ES3 is that it equips owners and managers with the information they need to challenge suppliers and negotiate fairer deals, redressing the balance between independent retailers and oil companies.
"Other UK wet-stock management providers are currently reading forecourt data at a fraction of the rate of ES3, meaning there is a huge gap between the accuracy of our service and other, more established, brands in the marketplace," claims McTague. He says the continuous measuring gives the system an unrivalled level of sensitivity. Leaks are detected much earlier and because the system monitors every pump on the forecourt, those that are over-dispensing can be immediately identified.
Edensure estimates that over-dispensing pumps can cost an average of £4,000 a year per forecourt. The biggest problem for retailers is not knowing which pumps are causing problems, often resulting in faulty pumps going unnoticed for lengthy periods. Meters can drift very quickly, so even if you have an annual audit, the pump could already be giving fuel away again before your next check.
In addition, McTague says ES3 has the ability to track temperature changes in the tank. "The system checks tank inventory data, on average, every three minutes. Unlike other wet-stock management services, this gives the retailer the vital facts and figures to challenge the standard temperature accounting allowance dictated by suppliers," he says.
In fact the company has such confidence in the accuracy of the system that it offers its customers £500,000-worth of insurance cover against any incident they get wrong.
The system is remotely managed, with information automatically recorded at the site by a ’black box’ or data acquisition platform. Customers then receive monthly analysis reports which give a comprehensive breakdown of tank and dispenser loss and detailed delivery audits. The service costs £130 plus VAT per month.
Nick Brocklehurst, managing director of Westbridge Motors in Northampton, was one of the first retailers to try ES3. He says: "We previously didn’t have a specific system in place that accurately measured our wet-stock loss. We had a POS system, which had wet-stock analysis built in as part of it, but it did not give us specific detail as to our exact percentage loss or where it was coming from.
"The installation of ES3 was very straightforward and we saw the benefits almost immediately. We discovered that we were significantly over-metering on five unleaded hoses, so we recalibrated the pumps and made instant savings."
Gilbarco Veeder-Root offers monthly and weekly Statistical Inventory Reconciliation (SIR) services and is in the process of launching a new daily service, aimed at higher-risk sites. Currently being trialled with a major client, this will see figures analysed on a daily basis meaning problems can be detected more quickly. The service is due to be rolled out by the end of this month, according to Peter Maloney, business development manager, at Gilbarco Veeder-Root. "Technology is developing to allow us do this, such as higher-speed broadband connections into sites to allow retrieval of more data," he says. He believes many retailers are still relying on basic cumulative variance analysis, rather than the more modern SIR techniques.
He says it’s important that retailers who do use an SIR service ensure their provider is third-party certified to meet the US EPA leak detection standard of nine litres a day. "There’s a difference between a company claiming to meet the EPA standard and actually being certified to prove they meet the standards," he says.
As you would expect, Gilbarco’s Fuel Management Services - known as FMS - are independently certified. Prices start at around £60 a month for the most basic SIR monitoring for a typical six-tank site and rise according to the level of service being provided.
Fairbanks Environmental is a well-established name in the SIR market and currently monitors around 8,000 tanks on around 1,600 sites in the UK. Around 75% of these clients are said to be independent retailers and BP has made the service part of its dealer package. Monitoring costs for a typical site are around £80 per month, plus VAT. Each client has a dedicated Fairbanks analyst, who has regular contact with site personnel and will build up a thorough knowledge of its history. They can then identify typical tank operating patterns.
Leeanne Taylor, dealer account representative at Fairbanks, explains: "We use SIR to analyse the trends within the wet-stock reconciliation data, not just for tanks on an individual site, but by grouping together several hundred tanks which have the same characteristics - supply source, throughput, geographical location and so on." Fairbanks’ latest innovation is meter-drift prediction. This service identifies which pumps may be over-dispensing. "It gets to the cause of the problem quickly to save the client money," says Taylor.
Meanwhile, Torex Retail supplies an automatic wet-stock management called WSM. Huw Carey, sales director for petrol and convenience, says the system provides accurate statistical analysis to highlight emerging problems. "The aim is to increase your annual profit and avoid the huge environmental clean-up costs incurred if there is a fuel leak." WSM works with Torex’s Iridium and most other POS systems. It covers temperature control, leak detection, water content, short delivery and over-dispensing.
Finally, retailers should not forget their environmental responsibilities.
Gilbarco’s Maloney says: "I’m afraid risk management is not at the top of everybody’s agenda. Business is being driven by costs and the focus seems to be most on short delivery and shrinkage due to temperature loss. Risk management is still just as important. The average cost of a leak remediation exercise in this country is around £60,000. The speed with which you detect a leak is the key to reducing and avoiding the costs of a clean-up."
Carey echoes this view: "Wet-stock monitoring services are like an insurance policy. They can save you from large environmental bills. If a leak goes undetected for some time and spreads, the garage will be liable. The costs of cleaning up that damage could put a business under." He believes that the courts are likely to come down much harder on environmental issues in the future.
You have been warned!