Logo: CHS Inc.Last fall’s unprecedented propane demand for grain drying, combined with high home-heating demand during a very cold November, caused major logistical challenges for most suppliers and retailers in the Upper Midwest. During the busiest weeks of October and November, many retailers were forced to allocate gallons to customers or temporarily cut them off due to overwhelming demand.

One exception was Eau Claire Co-op Oil Company (doing business as Chippewa Valley Energy), based in Eau Claire, Wis. Thanks to a recently developed strategic supply plan and an excellent relationship with their CHS Propane account manager, the cooperative didn’t have to turn away one customer or allocate gallons. In fact, they moved nearly double the propane volume last November that they had the same month in any previous year.

Take a broader view

The cooperative’s energy department manager Barry Hines and risk manager Nate Kaiser say that taking a broader view of their business was at the heart of the new supply plan. They attribute that approach to CHS Propane senior account manager Alan Groene, who convinced them to modify their former supply strategies.
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“In the past, we would buy as many gallons as we could in the summer and hope it was enough to get us through the winter months,” recalls Hines. “Last year Alan helped us be more strategic by analyzing propane volumes on a monthly and even weekly basis throughout the year, and tracking it at each of our different propane terminals.”

Looking at the cooperative’s average winter demand, they calculated how many gallons they needed to pull in the summer, based on a 2:1 ratio – for every two winter loads they needed to pull one summer load. “We backed into the plan, based on necessary allocations,” explains Kaiser.

“We used to chase pennies in the summer, trying to get the lowest price, but you have to consider more than just price,” he says. “In a year like this past year, it’s all about having product when your customers need it, and we accomplished that.”

Consider all terminal options

Having reliable supply was due, in part, to looking at more terminal options. “Alan recommended that we consider pulling from other terminals, looking at volumes moved and reliability, not just price,” says Kaiser. “In the past we hadn’t used one of the Twin Cities terminals because it was more expensive, but Alan pointed out that it provided both pipeline and rail access, so its supply was more reliable.”

Kaiser says that proved valuable when one of their regular rail terminals was shut down last fall for several weeks due to a rail strike.

“It’s important for customers to understand that terminal capabilities differ. I can provide them with insights on that,” says Groene. “With 21 years of experience in the business, I know where the pinch-points are in our regional supply system.”

Communication is key

Initial planning and frequent plan updating is made easier with tools built into the CHS Propane Control Room, notes Groene. “Once I’ve worked with the customer to develop their year-long supply plan, which starts in April, we communicate regularly to tweak things, based on weather or other factors impacting their demand. Monthly changes can be made using the Nominations tab in the Control Room website.”

CHS quoteInstituting the use of a daily position report was another important tool for the cooperative, says Hines. “It shows us exactly where we are, in terms of product sales and inventories, and ensures that we’re all on the same page. We use it in our regular communications with Alan.”

That often-daily communication is another important part of the cooperative’s recent supply management success, he says. “The honest communication we have with Alan and the service he provides is really unmatched. He’s always accessible and responsive by phone or email, even on weekends during the busy times.

“That kind of communication is essential in helping us make last-minute changes and stay ahead of the curve,” adds Hines. “It definitely makes a difference during the high-demand times like last fall.”

Propane marketers should work with their CHS account managers this spring to develop a supply plan that includes summer lifting to build allocations at network terminals for next winter. Marketers not currently partnering with CHS Propane can learn more by visiting CHS Propane Insights or by calling 1-800-852-8184.

This page was produced by North Coast Media’s content marketing staff in collaboration with CHS Propane. NCM Content Marketing connects marketers to audiences and delivers industry trends, business tips and product information. The LP Gas editorial staff did not create this content.