Tank monitoring saves propane delivery stops, reduces company costs

Every day, more and more propane (and other fuel) companies are deciding to add remote tank monitors as a means of improving their business. What defines “improving business” varies from company to company, but generally boils down to three key areas: reducing costs, generating revenue and improving customer service.

Like any business decision, there has to be valid reasons for making the move to remote monitors. Let’s start with reducing costs.

One of the most obvious areas of cost reduction is tackling the costs associated with the physical delivery of propane (or any other fuel). A good first step is a simple mathematic process of comparing your actual delivery gallons to what you would consider an optimal delivery. As an example, using actual averages of deliveries, you might consider a delivery of 400 gallons to a 1,000-gallon propane tank as efficient. This means there were 400 gallons in the tank when your delivery truck showed up at the tank. Four hundred gallons were then delivered, for a total of 800 gallons in the tank at the end of the delivery. (Most propane companies fill to 80 percent of the 100 percent water capacity of a tank.)

Keeping the math simple, let’s say you have a 3,200-gallon bobtail delivery truck, which can hold 2,560 gallons of propane if filled to 80 percent capacity. Theoretically, you would deliver 400 gallons to 6.4 of these 1,000-gallon tanks (2,560/400) with a single load. So what happens if you could consistently arrive at these tanks when they are 20 percent full instead of 40 percent?

Too risky, many of you say, primarily because the risk of run-out is higher the lower you let the tank go before a fill. I agree that not all tanks should be treated the same, but back to my math example. If the 1,000-gallon tank is at 20 percent, it has 200 gallons left. To get to 80 percent, you would deliver another 600 gallons. Our same bobtail would now make 4.3 stops to deliver the same amount of fuel, or a 33 percent improvement. Yes, I know you wouldn’t make a 0.3 stop, but it illustrates the mathematics of this opportunity.

Not many of you deliver only to 1,000-gallon tanks, so let’s look at the same math for smaller tanks. The number of stops saved using the same 3,200-gallon bobtail if you delivered at 20 percent in the tank, versus 40 percent, 50 percent or 60 percent in the tank, looks like this:

 

Stops Saved If In-Tank Starting Percentage Goes to 20% From:

                               40%                          50%                          60%       

Tank Size:

1,000                          2                                 4                                 9

500                              4                                 9                                17

125                             17                              34                                68

Stops Saved:        33%                          50%                          67%

 

This example is overly simplified because most companies deliver product to a mix of tank sizes. What it does show is that the same amount of fuel can be delivered by a single bobtail with one-third to two-thirds fewer deliveries if your bobtail can show up when the tank has 20 percent at the beginning of the fill – which is possible with remote tank monitors. If your average in-tank amount prior to filling is at 40 percent and you drop it to 20 percent, you cut one-third of your deliveries from the same bobtail; at 50 percent, you cut one-half of your deliveries; and at 60 percent, you cut two-thirds of your deliveries.

For predictable accounts, you may have routing software that can forecast when you can make an efficient delivery. However, unpredictable accounts are great candidates for easy cost reductions. What your cost reductions will be depends on all of the various costs that go into supporting your delivery organization.

Another way to approach cost savings is to look at your delivery policies. Some ideas that our customers have implemented with the use of remote tank monitors resulted in a change in philosophy for “keep full” accounts. “Keep full” accounts have been around for years. The problem with “keep full” accounts is that eventually they cause you to deliver more frequently than required as you become fearful of running the customer out of fuel. Using remote tank monitors takes the fear out of “keep full.”

Another approach is to use remote tank monitoring on new customer tanks. How many times have you gotten a new customer because a competitor has run that customer out of fuel – and then you promptly run them out of fuel, as well? Not only is it bad for public relations, but also it is costly getting the customer back in service. Putting a tank monitor on new accounts until you know for sure what their usage is going to be is a good way to eliminate run-outs for the new customer, the associated costs and the embarrassment.

Remote tank monitors offer many ways for generating revenue and for improving customer service – both subjects for another discussion.

Hank Smith is the vice president of sales for WESROC. He can be reached at hank.smith@itcmail.net or 352-633-3626.