Product is your lifeline. What you earn on the bottom-line is a direct reflection of your company’s product management efficiency. Unfortunately, most marketers are very poor product managers. But any company wanting to survive the next decade will need to become incredibly smart at this vital business process. From what you order, to how much of each product you keep on hand, to how you handle and manage product from your door to your customer’s hand, to physical count and reconciliation, efficient product management will dictate your bottom-line success in this decade.

Let’s begin with fuel management. With prices fluctuating widely, marketers with automated pricing and inventory tracking systems, multiple vendor and rack choices, their own fleets supplemented by common carrier availability, and lots of storage, are at a distinct advantage. To be at the top of your game in fuels requires talent and money. First you need sales talent and purchasing talent to bring you volume and negotiate with suppliers. Then you also need capital to invest in technology and equipment.

Too many marketers are stuck in fuel processes from years ago. Price changes that come in have to be manually entered into a computer. They rely on their customers (or stores) to take manual stick readings. Relying on just one supplier, they do not have rack choices, do not have enough volume to negotiate discounts, do not have their own fleet or dedicated fleet access, and do not have significant tank storage availability. This old fashioned system is fraught with potential for human error. So, if you count on fuels for a big portion of your gross profits, invest the time and resources needed to get your fuels product management up to date.

Start by getting prices feeding automatically into your system. Invest in automatic tank monitors and then tie those in to an automated inventory and ordering system. Do an honest appraisal of what benefits you offer a fuel supplier. If you don’t have anything to offer in a vendor negotiation, think growth, possibly through merger. Merging doesn’t mean retirement. If your capital is completely stretched, consider selling while retaining an employment contract. It will take capital investment to stay competitive in the fuel marketplace.

Now let’s move on to store products. The first trick is having the right stuff that maximizes per customer gross profit. Smart marketers have done their demographic homework, have target customers on a store-by-store basis, and have each store merchandised correctly for their target market. (For additional help in these areas, come to Focus on Finance 2001 to learn more!)

Next, considering that every $100,000 in store goods inventory costs you at least $10,000, you’re first goal should be to operate each store with exactly what’s needed plus a small cushion. Smart product managers keep no more than 1.5 times the supplier’s delivery frequency of any product on hand.

Similar to fuel management, automation eliminates potential for human errors. In smart store management systems, inventory ordering targets are computer controlled, orders are triggered and prepared automatically, sent via computer directly to vendors, and confirmed by the vendor to your computer. Price changes are immediately captured. When product arrives, each shipment is scanned in and verified automatically against the order with only exceptions causing a report to generate. The invoice is received electronically and automatically matched. Payment occurs on fully verified invoices automatically via funds transfer. With no order changes, the entire process is seamless and highly efficient. Store personnel must still stock shelves correctly, but the majority of human error has been eliminated via automation.

For this system to work at peak efficiency, customer sales are also scanned which means that inventory is constantly updated on a real-time basis. Another key to efficiency lies in centralization of vendor purchasing negotiations – your specials and discounts. Your product-by-product sales data becomes a valuable bargaining chip to be utilized by a staff member skilled in vendor negotiation. With an automated system, time-limited specials are no longer a nightmare – providing vendor price accuracy is sound.

Can you continue to use a manual store system and stay profitable? The answer lies in your competition. A fully automated competitor without great friendly customer service and clean facilities won’t give you a run for your money if you have impeccable service and a great location. If you add impeccable service, great location and spotless facilities to your automated competitor, they can and will likely under-price you and erode your market share.

Finally, let’s talk about lube product management. Again, having the right products in the right amounts is paramount to success. The more brands you offer, the more difficult a management task you have. Most lubes marketers could get rid of 15% to 20% of their inventory and never miss a customer order window. The 1.5 times supply rule mentioned above works for lubes inventory as well, only volume discounts can muddy up the buying decisions. That’s where buying alliances with other marketers can make sense. Another resource is www.fuelquest.com where marketers can sell or exchange lube products.

In summary, make product management efficiency your focus. It deserves your complete attention.

PetroAnswers Smart Product Management