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Volume Talks in Fuel Supply Price

It’s time for many marketers to face the hard, cold reality that to thrive in the next decade, they will need to be able to buy fuel at the “right” price. To get this “right” price, it’s going to take volume. This may be an uncomfortable thought for many small, family-operated marketers, and welcome news for those larger jobbers wanting to expand their territory.

What caused this emphasis on volume is simple economics. As fuel suppliers consolidated and struggled to create and maintain shareholder value, they realized they needed to critically analyze their customer base. They began the tedious chore of identifying bottom-line profitability by customer.

Not surprisingly, many found that the cost to maintain and serve small jobbers was excessively high. If they reduced the number of customers, they could increase their own profits. Some had already begun this strategy years ago via a super or master jobber/subjobber relationship in specific territories. Others simply raised contract minimums to weed out the small customers.

Meridian’s prediction is that this volume-emphasis trend will continue, making new requirements difficult for small jobbers. This does not, however, spell demise for the small jobber. Instead, there may be a silver lining in this cloud. The small jobber will likely fill the high-service niche, unable to be filled by the high-volume, truck and trailer operations.

Although the small jobber will fill this niche, they should still align themselves with a strong regional jobber for fuel availability and pricing. As super regional jobbers emerge throughout the country, it will be much easier to work with them than against them. It is not unlike the small community bank working hand in hand with a national bank, making the smaller loans a big bank doesn’t want to fool with. The small jobber is best poised to take the tankwagon and special instruction deliveries.

For large jobbers, the trick will be to optimize profits. This means negotiating supply deals and then maximizing each load’s economics given the rack and brand choices available. The biggest and best in the industry will need sophisticated fuel management software to constantly monitor ever-changing prices and availability and stay on top of the game.
In addition, large volume jobbers will be best poised to take advantage of hedging as part of their daily fuel management strategy. Large volume will be needed to absorb the unavoidable personnel and technical costs of sophisticated fuel management programs.

In summary, as a small jobber, take stock of what you do best, align yourself with a big-volume powerhouse and enjoy the ride. For big volume jobbers, expand your supply sources, hone your negotiating skills, and get fuel management down to a science.

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