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Issue link: https://read.dmtmag.com/i/166098
RETAIL OPERATIONS By BRIANREYNOLDS The Case of the Missing 1 Percent I n 1988 the EPA mandated that all petroleum storage tank (PST) inventories be reconciled on a monthly basis. At that time a standard was created thereby allowing for a variance in fuel inventory each month of ± (1 percent of sales + 130). This margin of error standard was created as an inevitable acceptance that 1 percent may be as close as the lowest common dominator of technology available to which all petroleum tank operators could unanimously achieve, which is a wooden measuring stick. While some states and municipalities have stricter guidelines, the EPA 1 percent over and short margin of error remains the law of the land today and the same effort is routinely accepted for business accounting purposes as well. In the mid 80's fuel costs were on average below 90 cents per gallon. Time being money once 99 percent inventory reconciliation is accomplished the hunt usually stops. Over time the total acceptance for a seemingly mediocre accounting practice has been cast in stone, and today most marketers call it a day if reconciliation to within 1 percent is accomplished. It takes time to look for every drop of gas. But for inquisitive minds, the question has always been where did the 1 percent go? Many of us have also been treated to ill-informed flat earth interpretations of the laws of physics and without question we have happily subscribed to un-informed explanations of missing fuel due to the expansion and contraction of volatile liquids due to heat/cold, Elvis, passing comets, full moons, Big Foot or anything else that sounds good. But the truth is that the reason why it has been virtually impossible to reconcile 100 percent of tank inventories is due to incomplete information. With modern automatic tank gauge information it is virtually impossible to reconcile 100 percent of Fuel inventories. The reason is that ATG information is incomplete. The problem begins at the tank factory where tank charts are created. Most tank manufactures provide disclaimers that tank charts are not 100 percent accurate. The variance between the tank chart and the actual tank may vary up to 10 percent. A common installation practice for ATG tank strapping is to use 4 known points from the factory tank chart and interpolate between the points to obtain volumes. This is an imprecise way to utilize a very precise instrument – the ATG probe. Today, with $3 and greater cost of fuel inventory per gallon a more precise method of accounting for fuel inventory is needed. In today's market a 1 percent margin of error for a typical 8,500 gallon transport load of fuel is 85 gallons. At $3 per 34 September 2013 gallon, inventory losses of $255 per load are routinely disregarded. With a concept known as continuous fuel monitoring can all fuel inventories be tracked accurately. For example, Simmons has created a product called ClearView that can utilize an existing ATG along with the fuel control systems to determine the causes of missing fuel. The Bill of Lading is the basis from which fuel is paid to Brian Reynolds has over suppliers. This is where the investigative 40 years experience as process begins with ClearView. a petroleum marketing A sophisticated continuous fuel moniprofessional. He began career as a youth worktoring system will create a precision tank ing in the family-owned chart providing a unique opportunity to petroleum marketing company in Cisco, Texas, see exactly how much fuel was delivered. where the company Sales will be reported correctly during the was a pioneer in the delivery even if every dispenser/hose is field of High Volume pumping at maximum speed. Supermarket Fueling. That business mode has Continuous fuel monitoring systems been one of the most provide a clear view and investigative copied in High Volume analysis where all fuel from the terminal Petroleum Retailing for the past 20 years. He to the hose has gone. Continuous fuel was also part of team monitoring makes it possible to promptly that invented the visible identify events such as tank leaks, fuel theft roll back fuel dispenser for awards based dis(through bypassed meters or dispenser counted fueling. He curtampering), short deliveries, delivery rently works at Simmons cross-drops and pump-outs. Additionally Corp. as an account representative. Simmons dispenser flow rate, bagged dispensers and provides a variety of meter calibration issues are flagged quickly products and services to for immediate action. manage fuel inventories and to detect tank and In today's market a one percent marline leaks. The company gin of error is a sub-standard process for is a major outsourcing profitability. Many petroleum marketvendor of compliance monitoring services for ers handle more cash (or the equivalent owners of underground of cash in fuel inventory) than many storage tanks. community banks. If one percent of the bank's cash went missing, there would be a full-blown investigation by the F.B.I. and local law enforcement. The petroleum marketing industry accepts one percent of missing inventory on a regular basis. Continuous fuel monitoring represents an opportunity to put an extra layer of security to detect missing product as well as a means to prevent fuel loss. NPN Magazine n www.npnweb.com