Integrating Data to Improve Fuel Management Efficiencies For Downstream Trading Partners

Author: Gary D. Bevers, President. Bevers & Co. - Downstream Petroleum Solutions

Shrinking fuel margins, new hypermart competitors, and the ever-present call both to increase volumes & streamline operational costs are pushing Marketers to improve efficiencies throughout their businesses. Data integration and automation are hot topics, as more Marketers understand the value eBusiness brings to the bottom-line. Staff hours spent on manual processes can be reduced or eliminated by eBusiness technologies.

Sounds great, right? Unfortunately, data integration in the petroleum and convenience-store industry isn’t a simple endeavor. The process of data integration is complex. Our industry has a very complicated data value chain with multiple sources for critical data files: Suppliers, Terminals, Carriers and Marketers. Outside of EDI X12 standards each Supplier typically distributes their transactional data created with proprietary formatting and coding. These proprietary data files must be translated against “normalization” tables to provide “standardized” files for processing by the receiving party.

The set-up and maintenance of data normalization tables requires an experienced staff to ensure the success of any data automation process. Maintenance of these tables is a daily occurrence and the upkeep represents a substantial hidden cost incurred with data integration initiatives.

For example — most Suppliers refer to the same fuel products and terminals by different names and/or product codes. In order for a Marketer to compare prices from several different Suppliers, the product and terminal codes all have to be standardized with translation against ever changing normalization tables. While single branded Marketers only have to worry about translating the code from one Supplier for the specific products and terminals they use, multi and unbranded Independent Marketers typically receive posted “rack” price data from 7 to 15 Suppliers, with some getting fuel pricing from over fifty Suppliers and for 100’s of terminals. When you add invoices, CC, EFT’s and BOL’s to that list, the amount of data translation for automating these files grows exponentially.

After the files are standardized, they are then imported into a back-office application, such as PDI, Pinnacle, AIMS and DM2, that has been specifically designed for the petroleum marketing and distribution business. Though these application software providers have extensive experience with handling imported data, there are generally one-time set-up costs associated to enable their programs to accept this imported data and data normalization and file maintenance is an on going issue.

There are three main import/export routines in use in the industry today. Deciding which data integration routine to use depends on requirements and technology capabilities of both sender and receiver.

1. Electronic Data Interchange (EDI), a mature technology and process in use by Suppliers and a few large Marketers, is the Standard that was developed and managed by API/PIDX. Data encoded with industry standard formats transmits reliably and cost effectively from one computer application to another after the initial capital investment is incurred. For participating companies, EDI works well and it isn’t going away any time soon. However, due to the prohibitive costs of set up and maintenance, small and medium size companies haven’t adopted this standard to date.

2. Comma Separated Values (CSV) is a versatile flat file format and is the most common data transfer in use today by Marketers of all sizes. In this format where you sort data in columns, as long as you understand the column headers and any relevant “keys” or look up tables, anyone can program or read it with a little effort. This export routine is suitable for a variety of data transfer routines but works best where the files are “standardized” and the data and formats are stable and seldom change.

3. Extensible Markup Language (XML) is a flexible, text-based language that allows many applications to read a document and is readably viewable via a standard web browser. Though XML has received a lot of industry attention, and “hype”, in the past several years it is presently a “shifting” data standard in the downstream petroleum industry. Even without mature data standards, XML represents hope for the smaller Marketer and has already been implemented by several Major Oil Companies to transfer XML data to their Marketers via Extranets and marketing Portals. Though less expensive than a typical EDI integration project, a data automation implementation still requires an initial investment in time and technology for the Marketer to receive the time/cost saving benefits.

Automating Manual Processes Delivers Cost Savings to Downstream Marketers

The real benefits of data integration and automation come into focus when we take a closer look at typical Marketer business processes.  Manual processes can be reduced or eliminated – saving time spent gathering data, manually inputting data, checking for re-entry errors, inter-office reporting, and invoice reconciliation. These manual processes can be very time intensive, and are great places to start automating business processes.

For example, Supplier prices affect nearly every department in a Marketer organization. A pricing clerk gathers posted rack prices and enters them into a spreadsheet. Copies of this spreadsheet are then distributed throughout the organization, with new copies sent as new prices come in. Sometimes prices have to be re-entered into the accounting system to calculate customer price and supplier fuel cost. Manual processes like dual points of re-entry are very time intensive. Re-entry errors can also cause costly mistakes in fuel buy decisions and accounting.

The customer order-to-invoice process provides another good example because it currently requires several manual steps to complete.  While a bill of lading (BOL) is printed at the terminal and returned to the Carrier’s dispatch office, the BOL is typically either faxed or mailed to the Marketer for manual entry into the back office accounting system. The invoice group matches up the BOL and order, and enters gross/net gallon adjustment. The AP group receives supplier invoices and matches the BOL to supplier invoice, looks for missing BOL & makes corrections. This is a time intensive process, with each group having to wait for the next piece of data to finish the process. Pricing errors cause “re-setting” of accrued payables.

Data Automation Potential Includes: Transactional Data, Price retrieval, Price Export, and eBOL delivery, Invoice Reconciliation and Financial Settlement.

The ultimate, cost effective data solution must enable two-way, real time communication of data rich files including: product rack and spot pricing, invoicing, EFTs, CC memos, text messages, eBOL’s, inventory allocations and terminal reservations. These data communication files must be available in both standard and “normalized” data formats for easy integration into a wide array of Marketer’s back office and 3rd party applications. The solution must address distribution through Internet, email, FTP, paging, Instant Messaging, WAP/PDA support, as well as import/export to spreadsheets and multiple databases of all common file types including traditional EDI and yes, the lowly, ubiquitous Fax.