Propane marketers and equipment vendors convened in Boxborough, Mass.
By Stephen Bennett
The Northeast Propane Show provided an opportunity for 1,400 exhibitors and attendees to “get some education, see some new products, ask a lot of questions and go home excited about what they do, ready to grow their business,” said Joe Rose, president of the Propane Gas Association of New England.
Rose presided over the show, held at the Holiday Inn in Boxborough, Mass., for the last time. Rose is retiring, though he will still be a presence, serving as a consultant to his yet-to-be-hired successor. The next Northeast Propane Show, which is held every other year, will be in 2018.
At this year’s show the educational program spanned both days of the Aug. 10-11 event and featured a broad range of presenters and subjects, including sessions on: how to use multi-meters; managing inventory; combustion analysis; operation of a vaporizer; relief valve sizing and operation; procedures for a bobtail creep test; new technology; best practices in collections; and tank monitoring.
Hank Smith, vice president of Independent Technologies-Wesroc in Blair, Neb., said propane dealers can use tank monitors to increase revenue, lower costs and manage assets more efficiently. “Most important is that monitoring helps you keep existing customers and get new ones,” Smith said in an interview following the show. “You’re in the business of delivering fuel. What does it cost you when you lose a customer? What does it cost to get a new customer?”
With respect to revenue, Smith said, “it’s not so much that you’re making money selling a monitoring service to your customers. It’s the business that you’re generating or keeping because you have monitors. And it differentiates you from your competitors.”
A fuel marketer doesn’t need a monitoring system for will-call customers, Smith pointed out. “If your customers all call you when they need fuel, then you don’t need monitors.” But propane marketers often have “keep-full” customers who expect their fuel provider to keep their tank full without needing to be called, Smith noted. “If you have sporadic-usage customers it’s very hard to do that with software and degree days,” Smith said. “A monitor makes it very easy to do that because it tells you exactly what the fuel level is in the tank.”
Smith recommended that dealers do their homework before choosing a tank monitoring system. “Make sure the vendor has the correct certifications,” he said. “Check with some of your peers in the industry to see what they say about different monitoring systems.”
Smith recounted some business cases—companies that had deployed tank monitoring. The most striking case involved a propane dealer that deployed 5,000 monitors on “extremely busy, high-usage tanks,” and projected that, in the first year, it would save 45,000 deliveries. It found that after one year it had saved 48,000 deliveries, Smith said.
Accounts with unpredictable usage patterns might be residential customers that have swimming pool heaters or propane gas fireplace logs. “Say you’re at home and you say, ‘Oh honey, I’m going to start the gas fireplace and we’ll have a glass of wine tonight,’” Smith said. “It’s hard to predict when you’re going to have that let’s-start-the-gas-fireplace feeling–you know?”
Monitoring commercial and institutional accounts with irregular usage patterns—convention centers, restaurants, churches–can pay off in a big way, Smith said. “They don’t particularly burn the same amount of gas every day,” he said. “A church may have a wedding this weekend but not the next weekend.”
Most dealers that aren’t using monitoring technology show up when a customer’s tank is “about half-full, on average,” Smith said. “With monitors we drive it down to an average of about 20% full [before] drivers deliver.” At that point, Smith noted, “You’re not losing money on the cost of delivery and you’re not wasting money going there when you don’t need to.” For his audience at the Northeast Propane Show, Smith demonstrated a spread sheet he had created. The spread sheet had fields for tank capacity and the level the tank was filled to–usually 80% for a propane tank, Smith said. After variables were plugged in—the price the dealer charged the customer, the dealer’s cost of fuel, the cost to deliver—the spread sheet calculated profit or loss on the transaction.
Smith added that for dealers who offer tank monitoring there is some additional revenue opportunity in offering related value-added services such as indoor temperature monitoring.
The session on collections featured Milissa Lord, vice president of business development for A.R.M. Solutions, a collection agency based in Camarillo, Calif., discussing “best practices.” The fuel industry is plagued with “load-to-load mentality” customers, Lord said in an interview. “Because dealers are not creditors, customers feel little to no urgency to pay their past due balance until their tank is empty,” Lord said. “These slow-paying customers require extensive internal collection efforts every time they get a delivery,” she said. “The time and resources expended have real costs associated,” Lord added. “Meanwhile margins are shrinking.” In the propane business, she pointed out, tank locks, service disconnections, reconnections, and safety checks all inflate operational cost and reduce margins.
Lord said the cost of operating has risen to the point that fuel marketers can no longer afford to operate with delinquency and still remain profitable or grow their business. Trying to do that can leave a company exposed and vulnerable to acquisition, she said.
“What we see is that folks that have poor internal processes and don’t manage their customers’ paying habits properly ultimately are less profitable–they work harder, they make less—and also they’re the ones that are being acquired,” Lord said.
When dealers turn an account over to a collection agency they’re typically advised that they should discontinue working with or taking payments from that customer, Lord said, and that means the account is no longer in their control.
Fuel dealers should develop a proactive credit policy and stick to it, Lord advised. A.R.M.—it stands for Accelerated Resource Management—features a web-based technology that enables fuel dealers to remain involved with the management of problematic accounts, she said. Through a web-based portal dubbed A.R.M. WebView, fuel marketers maintain access to current standings and collection activity on accounts. Fuel marketers may intervene on any account to preserve client retention, Lord said, adding that the collection agency has integrated its system with software platforms that provide automation of account placement, transaction updates and status changes.
Among exhibitors at the Northeast Propane Show, Bergquist Inc., demonstrated “Pipe It Propane” a smart phone application designed to assist propane marketers in regulator and tubing size selection during tank installations. The app, available for iPhone, iPad, and Android devices, is a tool for proper Kosan+ regulator and line sizing calculations for tank sets, Don Montroy, director of marketing for Bergquist, said in an email after the show. Users of the app enter information including Btu load by appliance, whether plastic or copper tubing is being used, and the distance from tank to building. “The app will identify applicable first-stage regulators, second-stage regulators and tubing size necessary for the job,” Montroy said. The app also allows users to purchase applicable regulators via a link to Bergquist’s mobile storefront.
Hanbay Inc., Pointe-Claire, Quebec, Canada, exhibited a new valve actuator for propane dispensers, tanks and bobtail trucks.
“Moisture, corrosion, and ice buildup pose a major problem for propane distributors during the cold season,” Isaac Ennio of Hanbay said in an email. The company’s electric Spring Return Fail Safe Actuator, designed to be explosion-proof, is compact and fits new or existing valves on dispensers, tanks, bobtails and trucks, the manufacturer said. Dual fail-safe protection includes a fusible link and electronic thermal cut-off, the manufacturer said. The actuator is designed to ensure a valve will be securely shut in an emergency event: the actuator automatically closes the valve when its power supply is turned off or lost.