Measuring Success

February 1, 2005 By    

Overall, 2004 appears to have been a tough year for propane retailers who made it into this year’s LP Gas Top 50 ranking.

 Patrick Hyland
Patrick Hyland

Twenty-one of the 50 largest retailers reported a drop in sales, while just 40 percent saw sales growth. The remaining 18 percent did not report last year’s numbers for us to compare.

The industry still lacks a thorough, credible source for tracking propane sales nationally, so we cannot say whether the performance of these companies reflects the industry as a whole. According to research we did for our December State of the Industry report, retail sales were expected to grow 7.6 percent over 2003.

Forty percent of the Top 50 retailers told us they added customers since last year, 14 percent lost customers and 18 percent reported no change. State of the Industry respondents say the customer base grew an average of 3.2 percent.

Thirty-eight percent reported an increase in the number of workers since 2003. Twenty percent employed fewer staff, while 22 percent reported no change. State of the Industry reported a 3.9 percent average increase in the workforce.

Selling more gallons does not always mean healthier profits, of course. Margins can take a hit when prices spike, expenses surge or receivables stack up.

Likewise, companies that learn to operate more efficiently can maintain or grow bottom line contributions without selling more gallons. Deliver the same volume with less payroll, overtime or fewer miles on your fleet and there will be more green in your pocket.

So, the real issue is whether the industry is getting more productive.

There has been improvement in each of the categories used to measure propane retail sales productivity over the last six years. Here are some findings comparing 1998 LP Gas Top 50 data vs. 2004, adjusting for weather considerations:

  • Gallons per bobtail: up 5.7 percent
  • Gallons per outlet: up 25 percent
  • Gallons per employee: up 2.6 percent
  • Bobtails per outlet: up 6.1 percent

If you believe — as many do —that gallons per bobtail is the most relevant measure of productivity, there appears to be minimal progress. That’s both surprising and disappointing given the growth of tools to aid productivity in those years.

Today’s propane retailers can benefit from significant advancements in information technology-primarily with onboard computing and logistics software that is proven, affordable, user-friendly and readily available. Some analysts contend this technology can generate as much as 30 percent improvement in productivity.

Clearly, our industry’s application of this technology still lags others in the logistics and delivery business.

Propane marketers who want to improve their bottom line in ways beyond selling more gallons must get serious about revamping their bobtail operations with technology that gets them the most out of every gallon they sell.

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