Tapping Technology in Lubricant Distribution
As if the many challenges lubricants distributors face in the normal course of business are not enough, the obstacles imposed last year by the pandemic were unprecedented. Lubricant demand plummeted, operating costs significantly increased, supply lines were interrupted, and social distancing greatly reduced the opportunity for face-to-face interactions with staff and customers.
While 2020 was tough and we are still working through the pandemic, the challenges many faced to stay connected and the solutions they employed have underscored the value of electronic technology in lubricant distribution. Understanding why, starts with a look at how and where technology is used by lubricant distributors.
Undoubtedly, the most exercised technology that helped lubricant distributors communicate with staff, continue to serve their customers, and build business over the past year was the phone, and teleconferencing platforms such as Microsoft Teams and Zoom. As many found during the pandemic, the challenges imposed by social distancing can be greatly reduced with teleconferencing. For many it became the accepted and expected way to get face time with staff, customers, and prospects. But while this may be the most visible use of technology to help stay connected over the past year, there is much more.
Generally, electronic technology in lubricant distribution can be bucketed into three groups, as shown in Figure 1. One group, comprises platforms that handle in-house business operations. These include software packages and platforms for order entry, accounting, customer relationship management (CRM), enterprise resource management (ERP), and other back office functions. In some cases, these applications are fully integrated software suites, while others are knitted together with platforms from various vendors.
The next group includes technology that electronically connects distributors with their customers and their assets. In addition to enhancing customer service with electronic communications, technology in this group provides distributors with a direct line of sight to their customer’s bulk tanks.
These platforms run the gamut from old school mechanical sensors that display tank volume on a local gauge to electronic sensors that transmit real time data using a range of network technologies from Ethernet and third generation (3G) cellular to 4G LTE (Long Term Evolution) and Satellite, and send it directly to the lubricant distributor. While some distributors only use the data in a reactive mode to monitor their customer’s tank levels and make runs when volumes dip below preset thresholds, others have integrated software suites that enable complex analysis of demand data at the tank level to assist in planning, asset management, streamlining customer service, and optimizing logistics.
The third functional group of technology platforms include software and telemetry used in managing the day-to-day logistics of delivering products to customers. These platforms most often include software that manages vehicle planning, scheduling, and dispatching. In addition, some distributors optimize logistics with vehicle tracking devices and product barcoding.
To better understand how these technologies helped get lubricant distributors through the pandemic and what we might see moving forward, JobbersWorld reached out to Mike Eddings, Sales Director – North America, Anova.
Mike Eddings, Sales Director – North America, Anova
Anova is a global leader in remote monitoring of industrial assets, providing Industrial Internet of Things (IIoT) solutions that enable improvements in efficiency, safety, service, and profitability.
JobbersWorld: How did e-technology help lubricant distributors stay connected and maintain business continuity in 2020?
Mike Eddings: The pandemic altered the ways in which we interact with each other. Connections to employees and customers on computers, mobile phones, and the wireless networks and applications that connect them have never been more important. We have seen distributors adopt Zoom and Teams to run business meetings and we have seen more technology projects like fleet management upgrades and tank monitoring expansions.
JobbersWorld: So, do you see technology investment as a key priority in 2021?
Mike Eddings: Well Tom, I am glad you called them investments, because that’s what they are. But there is also the utilization of technology that is being scrutinized. Business leaders understand that often their investments in technology have been underutilized, and what used to be adequate usage and output, now is unacceptable. We have been conducting monthly and quarterly business reviews with our customers for a long time, and of course they are now virtual, and we are seeing new interest in additional staff training and integration projects. I believe sometimes simple training and workflow discussions offer immediate opportunities for improvement
JobbersWorld: Beyond maintaining business continuity, do you feel that use of technology during the pandemic has changed the expectations of customers lubricant distributors do business with?
Mike: I think it has accelerated the evolution of customer connectivity, especially related to transactions. It is common now to place an order on your mobile phone and to be able to watch a timeline for your order delivery. Petroleum distributors are being challenged in new ways to keep up with higher customer service expectations. Connecting to the customer through an application on their mobile phone has been an elusive goal. Tank monitoring has traditionally offered a wireless technology bridge between the customer and the distributor, providing both visibility into the amount of product in the tank. We took the mobile customer connection that already exists and built a marketing platform around it. Distributors can brand the app with their logo and company information and send sales and marketing content directly to the customer on their mobile device. They can empower the customer to place delivery requests from their phone. The ability for customers to see the levels within their tanks can help give them a higher level of confidence and potentially guide them to adjust ordering behaviors that lead to fewer deliveries.
JobbersWorld: Specific to tank monitoring and logistics platforms, what are the major points of differentiation that provide a competitive advantage for distributors, and how so?
Mike: The fundamental goal of either technology package has been to safely deliver the largest possible volume of product while maximizing the profitability of the transaction. Tank monitoring solutions do this with predictive analytics that help distributors zero in on when to deliver, to whom, and how much to take. Logistics solutions increase driver and truck efficiency through process automation. Besides being more profitable, creating what I call a “digital supply chain” provides three important differentiators: transparency; communication; and responsiveness. Logistics and tank monitoring technologies provide convenient access to information specific to inventories and orders which creates transparency and trust. They also connect customers to the business in new ways which keeps them engaged and builds loyalty. And of course, being faster and more responsive is always a good thing.
JobbersWorld: Are these technologies expensive and in what ways do distributors get a return on their investment?
Mike: Just yesterday in one of our webinars, a customer shared the returns they had since putting remote tank monitoring out in the field. With our analytics, they found out they had made 4,000 savable stops in the past year. They estimated at 20 stops per day, that is about 200 days of just driving around in the truck, not delivering any product. They also now know who really needs a delivery and who can wait a few days when the weather is bad. They have the route knowledge to transfer in the event of driver retirements and sick days. They know exactly where upsizing a client’s tank will break even on deliveries. And of course, they had returns in efficiency and profit, raising their average fill rate to 57% on monitored tanks.
Yes, there are a wide range of offerings and price structures. I would say, that with the proper approach – the buyer and seller coming together to find the right solution, the project can quickly pay for itself. We focus on the yearly cost to monitor a tank compared to the average stop cost (or cost to stop at a location and deliver product). In talking to many distributors over the last few years we see an average stop cost of about $90. Compare that to our average annual cost to monitor a tank (including the tank monitor) of $110 and you can see that by taking a single stop out of the tank on an annual basis you have nearly covered your costs. Layer on the intangible benefits above, and that helps explain the increased interest in remote tank monitoring. As you mentioned, the pandemic has really underscored the value of digitizing the business with this type of technology.
JobbersWorld: Where can distributors and their customers see the greatest impact from e-technologies
Mike: When done right, tank monitoring, logistics platforms, and mobile platforms improve speed and ease. Both distributors and customers will get what they need faster and more conveniently.
JobbersWorld: Among the various functional tasks enabled or enhanced by e-technologies, which provide distributors the greatest return on their investment?
Mike: Tank monitoring solutions and logistics platforms have the greatest impact on dispatch and delivery planning. You could say that the remote tank inventory data starts the process and the dispatch and delivery applications with mobile delivery verification end the process by closing the loop with an invoice for the service.
JobbersWorld: What challenges do distributors typically encounter when implementing e-technologies?
Mike: Resources are always a challenge. Successful implementation of technology requires coordination and management. Executives and business units may need to make large or small changes in behaviors or processes. Many technology companies like us, understand the challenge and offer training and change management support services to help the shift to a culture that is willing to carry out the effort to improve workflows and lower costs. We have customers who do not have the personnel to take on large scale tank monitor installations or upgrades, but we have built a national team of professional installers who average about 120 installs a week, to meet the need.
Another challenge related to tank monitoring is battery life. The promise of higher volumes and reduced deliveries is compromised when you need to visit your tanks to change the monitor batteries every year. We guarantee our batteries for 5 years, and we expect them to last much longer. This just makes it even easier for our customers to get an ROI from tank monitoring every year.
JobbersWorld: What challenges do distributors’ customers typically encounter?
Mike: We have not seen any difficulty at the customer level. There may be a little bit of support or training necessary to get a customer set-up, but as I mentioned earlier, customers are getting more comfortable with technology, they seek it out, and will select their business relationship based around it.
JobbersWorld: Understanding that technology is continuously improving, and often at a rapid rate, what can distributors do to help assure the technologies they employ today to keep pace with the changes?
Mike: It is hard to see into the future, but you can be confident that the technology will change and improve. In fact, there is a major disruption on the horizon related to 3G cellular technology that will begin to be disconnected at the end of the year as cellular carriers make room for the newest 5G technology. This means that tank monitors in the field over three years are at risk of not working in less than a year. A powerful option to avoid technology changes AND lower the up-front cost of purchasing tank monitors is a Hardware as a Service (HaaS) business model. We offer a Hardware as a Service (HaaS) model that provides a bundle of the monitor, monitoring software, communications, and real industry expert support in exchange for a commitment of five years of service. The HaaS program focuses on empowering customers with the data, analytics, and insight they need to improve the business. We remove the risk of any hardware obsolescence, with no capital outlay.
JobbersWorld: What can lubricant distributors do today to best prepare for tomorrow’s world of e-technology?
Mike: That is a good question. Business leaders should scrutinize their current vendor relationships and look for ways to align their systems and processes. Technology providers should be providing reliable technology, ongoing training, and technical support. We have quarterly business reviews with our customers to review scorecard reports and KPIs (Key Performance Indicators), such as delivery efficiency or reorder points, which can help get people aligned to the common goal. I encourage business leaders to look inward and consider opportunities to optimize and improve. Petroleum and chemical distributors have a unique opportunity using technology to improve processes and manage and administer the right actions, while sharing information more effectively to engage stakeholders and customers in the service cycle.
In closing, JobbersWorld would like to thank Mike for his insights on the use of e-technology in lubricant distribution and the advantages it brings to both distributors and their customers. Further, among the many thoughts Mike shared, the heads up he provided with regards to 3G cellular technology starting to disconnect at the end of the year (knocking some tank monitors off-line) is certainly appreciated and something distributors need to know.
Mike Eddings is Director of North America for Anova. Eddings has a 20-year sales and management career providing solutions in enterprise software, and has been leading the tank monitor sales team helping chemical, lubricant and fuel distributors improve delivery operations for seven years. Mike can be reached at firstname.lastname@example.org ANOVA – Connecting the Industrial World – For Better