By Joe Petrowski
For a retailer to maximize fuel income and traffic for inside sales, it is vital to have both a great procurement team and a street pricing team working in a collaborative and coordinated fashion.
For procurement, the essential variables are:
- Building optionality into the book as much as possible. That means multiple suppliers, multiple terminals, multiple trucking vendors and a portfolio of contracts (index, posted, MERC, differentials and fixed).
- Maximizing credit lines with suppliers and being set up at multiple terminals.
- Understanding transportation costs, including pipeline, barge and trucking.
- Understand blending economics, including renewable identification number (RIN) economics.
- Focus constantly on the impact events that affect regional supply, including refinery outages, pipeline interruptions, strikes, turnarounds and terminal outages or constraints—especially during Reid vapor pressure (RVP) change season. React quickly.
- The procurement director’s job is not to forecast prices or speculate. A top performer:
- Keeps the system supplied at all times.
- Purchases better than index or on par with competition.
For street pricing, the essential variables are:
- Establishing weekly volume for every site and using daily price adjustments to maintain that volume.
- Pricing to competition on a real-time basis, taking into account facility and location.
- Maximizing contract sales through a fleet program, loyalty program or internet sales.
- Using social media to “ping” customers for purchases during the 10:00 a.m. – 4:00 p.m. slow period.
- A director of street pricing is measured by:
- Maintaining and growing site volume
- Being on par with or beating retail margin results for the market area
Both the procurement director and retail pricing director should be cross-trained in each other’s function, along with any supporting clerical professional.
The important function for overall fuel performance is possessing the best information systems and data, including EPIC, OPIS, Platts, GasBuddy, Kalibrate and PriceAdvantage.
The key attributes in the team are always information, intelligence, speed and diligence.
Joe Petrowski has had a long career in international commodity trading, energy and retail management and public policy development. In 2005, he was named President and CEO of Gulf Oil LP and elected to the Gulf Oil LP Board of Directors. In October of 2008, he was named CEO of the now combined Gulf Oil and Cumberland Farms, whose annual revenues exceed $11 billion and that now operates in 27 states. In September 2013, Petrowski stepped down as CEO of The Cumberland Gulf Group. He is now Managing Director of Mercantor Partners, a private equity firm investing in convenience and energy distribution, and a member of the Gulf, Yesway and Green Print, LLC Boards.