First in line for technology

June 1, 2006 By    

The deployment of Ferrellgas’ bold new business model has a lot of folks talking, but there is no consensus as to whether the nation’s second largest propane retailer has launched a new and important period in the history of the industry.

Ferrellgas executives say the $60 million technology-driven investment already is driving startling improvements in operational efficiencies and profitability, and they believe performance is going to get even better as they hone the system.

Competing independent marketers say the closing of local branches and reduction of workers has slowed response time and hurt customer relations, enabling local marketers to pick up many former Ferrellgas customers as well as some of its best employees.

Investment analysts say they are cautiously optimistic that the changes will enable the retail giant to realize the economies of scale rarely seen in the propane industry. While they like the model, they also recognize that the quirks of the propane industry make this an experiment that could go either way.

Jim Ferrell, who conceived Project Renaissance before his return from semi-retirement in 2001, is steadfast in his conviction that the centralized call centers and integration of technology is a model that represents the future of the propane industry.

“If you are ever going to get expenses down and customer service up, you have to do it,” he confidently explained at breakfast in late March.

Having been at the helm since 1965, Ferrell has learned to assume nothing as business plans are put into daily practice. It’s why he spent almost a year personally visiting employees in the field to answer questions before implementation.

Yet even with the promise of a $30 million payout to the company’s bottom line on schedule for the first year of deployment, Ferrell admits the company still doesn’t have all the answers.

“We are plowing new ground here,” he says of the model that could be the standard for multi-state marketers in the next few years.

“I think you can see why the competition says this is a suicide mission. There obviously is a lot at stake, and we could still screw this up.”

If the model proves successful, look for Wall Street to muscle the industry’s four other publicly held marketers to invest in technology to similarly cut costs and improve profitability.

And for the rest of the propane industry to belatedly apply the lessons about using technology to improve business performance.

 Patrick Hyland
Patrick Hyland

Patrick Hyland

Editor

phyland@questex.com

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