We have been in this industry for over 30 years.  In that time, we have worked with hundreds and hundreds of heating oil and propane dealers of all different sizes and shapes.  Our clients have been multi-state public companies, they have been mid-size regional operators, they have been multi-generation local dealers, and they have been companies who have a fleet of 4 trucks to deliver to their thousand customers.

All companies share 3 things.  Yes, everyone.

  • Deliveries are smaller than anticipated – or smaller than the self-defined “Optimal Delivery” size.
  • Tank size is treated with more importance than consumption –Deliveries do not consider the individual traits of customer consumption when planning – whether it be the time of year or the pace of consumption (need to clean this up)
  • There is excess capacity for 11 months of the year –Budgeting and delivery planning are all based on weather & consumption not based on capacity & efficiency.

Tank size is treated with more importance than consumption

If you look at your BOS and focus your attention on the Optimal Fill or your Reserve Level, you will find that >90% of the tanks have the same optimal number for similar sized tanks.  That means that you are looking to make the same sized delivery every day of the year for every customer that you have – regardless of whether the customer is with you for 15 days or 15 years, or whether the customer has a K of 4 or a K of 14.  If that sounds like the way you have always done things, it’s time to consider a smarter way.

Optimal fill levels are directly related to Reserve Levels.  Reserve Levels are premised upon the sacrosanct notion of not allowing runouts – or anything very close to a runout.  Accordingly, the reserve level is almost always indicative of the elbow room needed to avoid a runout for a high-consuming tank in the middle of the winter – i.e., a K of 4 in mid-January.  If you think a tank will consume about 8 gallons per day at that time of year and are looking for about 7 to 10 days of reserve, the logic of a 70-gallon reserve is very sound.  However, for most of the year even a K of 4 doesn’t need that much oil in reserve.  For the entire year the higher K’s may never need a reserve as large as 70 gallons.

Using the data that you have ready access to will allow you to change the delivery size that you should expect make.  Given the accuracy of short-term weather forecasts, if you know how many gallons are in a customer’s tank and you have a K-factor and baseload number, you can target larger deliveries in the non-winter months, and you can also vary the planned delivery sizes based on the individual customers’ consumption patterns.

Automating the process to move the reserve daily can increase average delivery sizes by over 10% and, by default, decrease the number of deliveries that you will make by 10%.  Think about the value to your business, your capacity, and your logistics if you could deliver all your gallons by making 10% fewer stops.  That is what a Dynamic Reserve can and should do for you.

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