Nick Mashburn first heated a home with propane during the winter of 2013-14.
That was the winter of the polar vortex, which overwhelmed a number of propane marketers and restricted their ability to effectively make deliveries.
Unfortunately for Mashburn, his marketer didn’t reach his tank before gas ran out. Because Mashburn ran out of gas, the pipes in his home froze. The pipes ultimately burst, flooding parts of his home.
“We were out of propane for four days,” Mashburn says. “ I was living at the time in New Hampshire, in a fairly rural area. My supplier was 50 miles away, and I’m sure he has customers 50 miles in the other direction.”
The bad experience gave Mashburn an idea. He had built a career the previous 10 years focusing on energy efficiency. His job was to collect and analyze data from large commercial and industrial buildings and develop solutions through software to achieve energy savings.
Considering the event he just experienced at home, Mashburn saw an opportunity to develop a solution that ensures customers like him don’t run out of propane again.
“For about six months I continued to work at my full-time job,” he says. “I started to develop a prototype on nights and weekends to figure out how this data could be collected. When I came up with something that seemed like a good solution – something that was safe and reliable – I started looking at how to bring this to market.”
Mashburn, who has since brought a tank monitor to market and launched a supporting company called Tank Utility, illustrates how fuel management and delivery is changing. Entrepreneurs see an industry making inefficient 50- or 100-gallon fuel drops and one or two too many of the same annual customer stops, and they’re bringing new technologies to marketers.
Still, are propane marketers willing to embrace the change technology brings? And what is the consequence for those who don’t embrace it?
“The dealers who do not embrace technology today have gone out of business – they just don’t know it,” says Richard Gibbs, vice president of Telsen21, another tank monitor provider.
“Their competitors will embrace it and find, in dollars and cents, the hours and trucks saved.”
Models to follow
Labor and transportation are a propane marketer’s biggest expenses. The more propane marketers top off tanks with 20 or 30 percent fills, the more they’re visiting the same tanks.
The topping-off-tanks approach translates to more man-hours, and more man-hours mean more costs. The approach also means more trucks are needed to make the necessary number of deliveries, leading to additional costs for marketers.
“There has to be a paradigm change,” says Bill Stomp, vice president of Digital Dispatcher, a company that offers a number of services, including route optimization and fleet tracking. “We can’t just top off tanks anymore.”
Christopher Job, who oversees Xact tank monitoring at Schmitt Industries, agrees. He says marketers are starting to see the value in technologies such as tank monitors and that the adoption rate is slow but steady.
“The industry is way behind in the adoption of technology,” Job says. “It is taking folks from other industries and the children of the owners to bring technology to the forefront of some of these companies. If people are looking at hiring at the management levels, they need to be looking outside the propane industry.”
Aaron Cargas, vice president of product development and marketing at Cargas, sees the marketer’s mindset slowly shifting toward the use of technologies that can help manage supply.
“Everybody is using websites and cloud technology in their personal lives,” he says. “They’ve become more comfortable with technology through smartphones and tablets. I really believe the consumerization of smartphones and tablets is driving the change.”
To Stomp, marketers are no different than UPS and FedEx, two of the largest delivery companies in the United States. Marketers should study those companies, he says, because they’re the best at what they do.
“I challenge delivery companies across North America to stop a FedEx or UPS driver and ask them how many deliveries they’re making,” Stomp says. “Take one of these UPS drivers out to lunch, and you’ll find out they’re doing 80 to 150 deliveries per day. We’re stuck in our little box, but the reality is that the best delivery companies are in our backyard.”
FedEx and UPS weren’t always the best, Stomp says. In fact, the two companies were highly inefficient at one time. Drivers were once given packages that took them in every direction, and they’d crisscross one another throughout town while making deliveries.
“UPS drivers used to meet in a parking lot,” Stomp says. “They’d butt up the two trucks because the wrong packages would be on the trucks, so they tried to put them in the right order.”
Routes are now optimized for UPS drivers, Stomp says, and drivers are twice as efficient as they once were. Drivers are also being monitored, which encourages them to focus on the job at hand.
“Wouldn’t you move a little faster if you knew your boss was watching you all day long?” Stomp asks.
UPS and FedEx changed. Propane marketers who haven’t adopted such technology can, too.
Xpress Propane’s John Wilcox is one marketer who’s been open to new technology. He says the combination of back-office software and a wireless dispatch solution helped his company take one net truck off the road.
“We were growing so quickly that I was able to increase our customers by 600 in the last year and not add another truck because I can dispatch and route more efficiently,” says Wilcox, the operations manager whose company has been delivering propane for about two years. “We have eight trucks, and my initial [software] investment was $5,000 per truck. If
I’m able to cut a salary and take a truck off the road, I think I could get my return back within a season.”
Tank monitor exploration
Tank monitoring is another delivery management tool marketers are exploring to shore up their bottom lines. Tank monitoring providers are largely in agreement that monitors aren’t cost-effective for every propane consumer. A day may come when monitors are cost-effective enough to that point, but monitors are especially useful in certain propane markets and with particular customers.
“Commercial accounts are ideal for tank monitors,” says John Redmond, vice president of product strategy at Advanced Digital Data. “That’s where you cannot have a run-out and where you can pick up really productive [efficiencies].”
In addition, Redmond says residential customers who use propane for more than home heating are better fits for tank monitors.
“The more uses of propane in a residential account, the more unpredictable your use of propane is,” he says. “You can’t predict use for the customer who’s going to light up the fire logs for aesthetic purposes.”
Pat Barron, vice president and general manager of TankLink, agrees with Redmond.
“In Florida, for example, you have a lot of random propane use based on snowbirds coming down to use their pools,” Barron says. “They’re cranking up the pool heaters. Plus, you use so much propane in the wintertime because it gets quite chilly at night. It’s a difficult business to manage.”
Seasonal homes with a propane tank are generally a good fit for a monitor, adds Telsen21’s Gibbs.
“If a consumer doesn’t know what’s going on with their camp down in Cape Cod, they will pay to have the data and know that they are not having any problems,” he says. “The second-home market is strong in the Northeast, and it may be in other parts of the country, as well.”
Tank monitors add comfort for retailers and consumers throughout the winter, too. A monitor obviously can’t help secure a load when a propane shortage arises, but it’s a tool that can help marketers manage through tough stretches.
“By having the data visible to them, retailers can target which tanks need to be replenished first,” Barron says. “Also, from data, they can see use history, which predicts when a run-out is going to take place.”
Cargas echoes Barron’s sentiment.
“If you’re in a shortage, you want to optimize your entire company to get the product where it needs to be at the right time,” he says. “That’s where the planning and forecasting tools come into play, as well as tank monitoring.”
Some tank monitoring systems have alarms built in so marketers are aware when tanks approach critically low levels.
“That gives them the heads-up to get out to those tanks before they get empty, when the supply line is limited,” Barron says. “Retailers are able to do a much better job to make sure their customer set is taken care of properly without run-outs, even with a low supply line.”
Consumers like Mashburn, the founder of Tank Utility, want to avoid run-outs, as well. While most tank monitoring companies target propane marketers for their products, Tank Utility has focused on getting tank monitors in consumers’ hands.
“We started by focusing on consumers because they’re quicker to make purchases and we, as a small company, need to bring revenue in the door as quickly as possible,” Mashburn says. “We started there, and by getting our word out to consumers, we found our first [propane] supplier to work with. That was a great experience.”