Wholesalers have served a crucial role in the supply and distribution of goods including oil fuel for centuries. Acquiring the oil procured from the very first of oil refineries, wholesalers have largely been responsible for regularizing fuel supply from the lords to the peasants. However, regularization and fuel logistics management have not thrived without challenges.
Over time, wholesalers have struggled to meet the rising demands of the oil and gas industry as well as consumers. Logistics, which is defined as “the part of supply chain process which plans, implements and also controls the efficient flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet the customers’ requirements,” became nothing short of a nightmare for fuel wholesalers.
The competitiveness of the market, increased control of the refiners over the products, as well as the increasing complexities of the supply chain caused fuel wholesalers to struggle to maintain their relevance in the market. The evolution of industry standards and fuel logistics led to the following concerns which plague the fuel logistics industry even today.
Wholesalers have always struggled with transportation concerns when it comes to fuel logistics. The remote geographical locations of the oil refineries, inaccessibility to those locations, longer distances to and from the point of origin all the way to the point of consumption, storage and delivery concerns as well as the fluctuating fuel prices which affected the fuel surcharges have long since affected the competencies of wholesalers.
All of these factors have contributed to slowing down the fuel distribution process considerably, which, in turn, has also affected the industrial manufacturing processes.
Inventory Storage and Management
The ever-increasing demand for fuel has created a mammoth-sized problem within the fuel logistics industry – that of inventory access and storage, along with its successful management.
Maintaining an orderly and timely flow of the fuel from the refineries to the consumers while maintaining the material and information has always been a difficult task.
The limited capacity of transportation devices was unable to meet the consumer demands giving rise to the need for storage facilities that would serve as the middle ground for product supply. The storage facilities were required because they facilitated in preventing a supply deadlock, helping maintain a smooth run of operations in unfavorable circumstances which may be caused by weather conditions, facility location, improper access to the production facilities, inadequate fuel production, delivery delays due to a lack of infrastructure and more.
Lack of Communication and Trace-ability
The distances of the remote production sites to mainstream areas posed great communication challenges for all involved within the supply chain. The limited infrastructure and the inadequate access to and from the refineries also made it difficult to maintain full transparency in terms of product delivery.
Poor access to the refineries as well as the limited infrastructure of the production sites caused and continues to create issues within the fuel logistics industry. Additionally, the management of emergencies at diverse locations posed major challenges in terms of maintaining workplace and workforce regulations.
Due to the inadequate fuel supply, higher fuel prices led to higher transportation costs, resulting in an increase in rates of every aspect of the industry. This greatly cut into the industry revenue, and earnings of both, wholesalers and suppliers. Cutting corners in order to manage the elevated transportation costs led to sub-standard operation cooperation and sloppy management resulting in greater losses.
Third party logistics, or 3PL – the practice of outsourcing the basic operational logistic services as a means of successfully managing the supply chain requirements as well as cutting back the elevating costs – emerged as the solution to all fuel logistic challenges faced by the wholesalers over decades.
Though introduced less than forty years ago, 3PL has been used to outsource some of the major logistics services within the fuel industry, including but not limited to: transportation, warehousing and storage, inventory forecasting and supply maintenance, order fulfillment, packaging, freight forwarding, and more.
Despite these common challenges that wholesalers have faced for centuries, there are numerous advantages for the industry to engage and employ third party logistic providers, including:
A specific third party logistic provider will, owing to their specificity, not only have greater knowledge but also higher expertise within the industry, providing more targeted fuel logistics solutions to the supply chain managers. Furthermore, they will have the equipment and technical resources required to run the operations in a faster and more efficient manner than the distributor may be able to.
This greatly reduces the costs for both manufacturers and wholesalers, helping them stabilize and even increase their revenues and profit margins. 3PL services also provide warehousing facilities, negating the need to spend exorbitant amounts in locating, purchasing, and maintaining storage spaces for inventory management.
The production or wholesaling company rarely, if ever, has the requisite industry knowledge which can minimize transport times and increase productivity and delivery efficiencies. A third party logistics provider dedicated to providing seamless delivery processes specializes in effective time management to meet both the supplier and the consumer’s requirements.
Low Capital Investments
Due to the fact that there are numerous 3PL service providers which manage different aspects of the industry, there is little need for manufacturers, suppliers, or sellers to maintain their own storage or transport facilities. This not only greatly minimizes the running costs of production and operation, it also lowers the capital investment commitment. Distributors and manufactures can thus freely focus their resources on the core business in addition to saving on their market profitability.
Corporations which establish and manage their supply chain logistics themselves are unable to offer a larger number of services owing to the increased costs. Utilizing 3PL service providers to outsource the transportation, warehousing, picking, packing and delivering processes, distributors are able to expand the scope of their business faster and with greater flexibility.
Since the fixed costs are greatly reduced due to third party logistic providers, corporations have a higher level of scalability.
Most third party logistic departments utilize the latest technological advances and devices to link and manage the flow of information in an effective manner. They are able to establish greater transparency within the process, increasing visibility across multiple sites and enabling distributors to meet the demands across facilities.
Technologies such as FuelNOW allow all logistics levels to interact with one another through one integrated platform, effectively eliminating any communication gaps. The collaborative relationships that are established via the Internet through such technologies optimize the fuel logistics industry to enable a balanced and highly effective execution of logistic services while reducing transportation costs and delivery time, improving productivity, and increasing profitability industry-wide.