by Phil Baratz
If your drivers are making the right number of deliveries (20-30) per day and they are working the right number of hours (8-10) per day, AND you are dispatching the right way to optimize the deliveries based on the data you have (i.e., how many gallons are in your customers’ tanks), your trucks should come back close to empty. But they aren’t!
Yes, it has been a mild winter, but you still watch your Ks and your lower-than-normal HDDs. Sure, you might have brought on some drivers in October when you didn’t need them till late November, BUT IT’S JANUARY – why are deliveries so small?
Welcome to the continuation of the wild and whacky winter of 2022-23. Nothing seems to make sense. It’s warm, deliveries are down, receivables are up, receivable lines of credit are stressed, and you still can’t enough find drivers!
In many cases, the answer to what is going on now started a long time ago. In this winter’s case, we can date some of the issues back 3 years to the start of the pandemic, but most of today’s issues date back to last year when Russia invaded Ukraine.
We’ll start with the easy part: Deliveries are NOT small because you are pulling early (you may be doing so, but that only adds to the problem). They are not small because your BOS is suddenly bad at multiplying HDDs by Ks and baseloads (they might not “adjust” fast enough for you, but their math is correct). They are not small because all of your customers are calling you early for smaller deliveries (though there is some of that). Deliveries are small because customers – not all, but in the aggregate – don’t want to burn as much oil when it is costing them upwards of $6.00/gallon that they would do in the wild and wooly days of $3.00/gallon oil. When inflation strikes, interest rates jump, and oil prices double, people will lower the thermostat, put on a sweater, and use a second blanket.
Can it be as simple as that? I’m afraid so. When customer behavior changes – as in the “sweater and 2nd blanket” – customers are, in effect, changing their K-factors. They might not be changing it forever, as if prices fall, they will prefer to sleep with one blanket. However, the difference between a “delivery K” and a “forecast K” can be very wide in certain economic times.
Wait, doesn’t the BOS know this? The answer is no – and you shouldn’t ask them to. K-factor adjustments, imperfect as they may be, are ALWAYS in the rearview mirror. You can’t tell that someone’s consumption pattern has changed until you fill up their tank. You can’t tell if it has “changed back” until you fill their tank again! The BOS is performing as expected – the customer is the one who changed.
Can anything be done? Sure, you can stop guessing when and which customers are more sensitive to prices and can KNOW what is in a tank. Tank monitors are not new, they are not free, and they are not perfect. But in a world that is facing more uncertainty than ever related to consumption – and is even more uncertain due to the growth of the use of heat pumps – knowing what is in a tank is perhaps the single most important thing you can seek to know in order to manage your delivery costs.
Fortunately, most dealers were wise enough to get full margins this winter and to not chase “the shoppers” last summer. While things are tough in some areas, they could be a lot tougher. This is the time to take advantage of the plethora of tools that are out there to improve your bottom line. It costs nothing to speak with us, and might be worth a lot more that you would imagine.