The Price Point Crusader

If there was ever a prize for Most Convoluted Supply Chain, the oil industry would probably win first place. But Kristen Irvin, founder of TeamFuel, is not interested in the complexity; rather, she's interested in the victim of the complexity: the end...



Oil companies know how to play the game. They keep retail prices low, then raise the wholesale market because they don't want consumers to complain. Once consumers complain about gasoline prices, that's when the government comes in and takes a look to make sure nothing illegal is happening. That's the reason wholesale companies pay more for fuel. I'm not saying they're bad; that's just how it works.


The bottom line for refiners is that even if they can reduce costs it doesn't mean they'll cut costs along the supply chain. They're in business to make money. And knowing these guys aren't going to pass these costs on, we decided what we could do is help customers get the best price possible.


iSource: Explain this a bit more.


Irvin: Oil has a very complicated supply chain with many players. TeamFuel is working at the other end of the supply chain, focusing on what the utility or trucking company can do to get a better deal. We can't fix things like OPEC or help environmental concerns, but what we can do for the end user is to buy a little more efficiently, and try to buy before prices go up. We can make incrementally better purchasing decisions for wholesale users by using a set of algorithms that tell us exactly when to buy. Prices rise and fall daily and, by buying smarter, we can use inventories in our favor. In the end, we're able to buy more optimally than if the client bought it themselves. We think we can reduce costs by 12 percent by having experts in charge of the buying.


iSource: Tell us how you came to this business and this end of the supply chain.


Irvin: When I worked for my father, I saw the oil companies making a lot of money at the customers' expense. The jobbers and distributors were the ones making all the money, and customers couldn't control fuel prices, paying for their fuel at whatever the going price was that day. I decided to use all the inside information I had to represent the clients, to try to beat the oil companies at their own game.


iSource: And you decided the best way to do that was with outsourcing?


Irvin: To truly leverage the supply chain I needed to work for more than one company. That's how I developed my business model to be an outside fuel department for big organizations that didn't quite buy enough to have their own people who were expert fuel buyers.


iSource:  Tell us about enabling technology both within your company and your industry?


Irvin: In 1996, we started using the Web to communicate with clients and let them know what we're doing as a way of giving them information about market conditions and inventories. It was a big move back then.


But our industry is a little slow when it comes to technology. Small distributors in oil don't even have Web sites. Even though we have streamlined our clients' operations, we communicate with distributors via phone. It's a very traditional industry. You have a lot of people signing for things with paper and a traditional invoice.


iSource: What, in your opinion, are the benefits of enabling technology?


Irvin: First, it's important to realize that technology is an enabler and an integrator. It doesn't take away from human interaction. In our company, we use all different forms of technology, but it takes people to manage the system.


The big benefit, I believe, is that it helps an organization become a lot more scaleable. It makes it easier for a business to add on more clients and grow to where it wants to be. Take our company as an example. We have a tool called the Dynamic Inventory Replenishment System. It uses five factors, like an analysis of current market conditions regionally, nationally and globally; and it determines the best day and time to fill each tank. And it accomplishes it a lot easier than if we were to do it manually. It makes us more efficient and it makes it possible to handle more clients.


iSource: You said that costs wouldn't get passed along the supply chain, even if they were lower. Can you discuss that more?

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