Bobtail Efficiency: How Competitive Are You?

Knowing what it really costs to operate one of your most expensive assets, and how to reduce those costs while maximizing efficiencies, is critical to growing a business. For Minnesota propane marketers, both large and small, utilizing bobtails to achieve maximum productivity can be the difference between being successful or just getting by (or even worse, going out of business!). Efficiency in any business requires both understanding and effectively managing operating costs, including tools that can help you measure the efficiency down to the cost of delivering one gallon of gas.manufacturer

Just as in every other state, the propane industry in Minnesota is highly fragmented, with many private, independent, and family-held marketers. Because of this, the industry has a dearth of measurable and quantifiable benchmarking data compared to other industries, which makes it very difficult for marketers to know how they are performing against their peers. Without quantifiable metrics or real-world data, there are only “guesstimates” or surveys, which often are not very useful because they cannot be verified.

at-a-glanceMost marketers grapple with what specific metrics are needed to measure performance objectively in this very competitive environment. The best way propane marketers make money is to efficiently deliver propane into customer tanks via bobtails (and, of course, billing and collecting). Why skimp on drivers, trucks, or technology that will make your bobtails less efficient when this is your primary revenue source and critical asset?

The Minnesota Propane Association (MPA) asked me to conduct its first Bobtail Operating, Cost & Efficiency Analysis in the summer of 2013. My “roll-out,” complete with instructions and a template to collect the data, was presented at the association’s meeting in Minneapolis the following January.

The results were then provided at the MPA meeting at Madden’s Lake Resort this past June 23. The 38 marketers who participated in this initial study provided excellent data, which made for a very comprehensive report with real-world value. Minnesota propane marketers now have their first comprehensive detailed costs, metrics, and variances at their fingertips. The consensus is that future studies will be necessary to “clean up” the initial data and discern trends. The next study will include drops by tank size. Because all specific company information is completely confidential and the results are actual data and not “guesstimates” or surveys, there is less reluctance to participate.

Specific Data Requested from Each

Each marketer received detailed instructions and an Excel file to be completed and returned with following specific information for each bobtail:

• Truck Details — Manufacturer model type, year build, fuel type, transmission, bottle size.

• Demographics & Technology — Topography, primary use, onboard PC logistics software.

• Most-Recent 12-Month Totals— Miles driven, gallon throughput, number of drops.

• Most-Recent 12-Month Costs — Driver, variable, fixed.recap
 Each respondent received a 28-page booklet with three fully customized pages that provided specific details and variances (amount and percentage) to other Minnesota marketers. The marketers who did not elect to participate in the study but attended the presentation were given a generic Minnesota Successful Marketer booklet for illustrative purposes only. This mythical Minnesota Successful Marketer has four bobtails and delivered 2,105,000 gallons in its most recent 12-month period. Custom Report #2 shows how the Minnesota Successful Marketer compared to other marketers in all of the appropriate categories.

Marketers Categorized into Sub-Groups

While it is useful to compare each marketer to the other 37 participating in the study, it is even more beneficial to compare to marketers of similar size since the dynamics and costs are certainly not identical for large and small marketers. Each marketer was assigned a category — A, B, C, or D, in each of two separate sub-groups differentiated in size by the number of bobtails and annual gallons delivered. This allowed for much more accurate comparisons, as marketers compared their results with marketers of similar size.

minnesotaAfter reviewing the entire report, especially the recap page with the summaries of all key metrics, demographics, and costs, analyze your company’s customized confidential reports, noting its variances as detailed in Report #2 to similar marketers. Take the opportunity to determine what looks especially good, bad, or surprising compared to your peers. Were there any eye-openers or unexpected results?

Take a look at your actual cost per drop, per mile, per gallon. What are the efficiency differences between trucks, between drivers, and how can these be improved? These results may be shared with key company members to make improvements.

Real-World Benefits of Study

minnesota-2The study generated many questions and comments. Many marketers realize that their business can truly be run more efficiently with real, quantifiable data that may bring to the forefront the possibility that they may have too many bobtails for the gallons delivered or are not nearly as efficient as their competitors in gallons per drop, for example.

minnesota-3Previous bobtail studies have helped marketers be more successful by:

• Encouraging larger drop sizes and annual throughput per bobtail to maximize efficiencies;

• Identifying trends and costs to improve operations by decreasing costs by gallon, mile, and drop;

• Determining if on-board computers and logistics programs increase productivity, and utilizing or buying capable software to provide comprehensive energy solutions;

• Realizing that efficient routing will decrease the cost per drop and overhead costs, and that intelligent routing software can allow a new driver to be productive from the first day. One final detail—eliminating an unnecessary bobtail will provide a savings of $200,000 a year.

Mike Shilts is vice president of marketing and business development for K&K Management Solutions in Indianapolis. He has been involved in the propane industry since 1996. Contact him at This email address is being protected from spambots. You need JavaScript enabled to view it. . Shilts would like to thank Will Norman and Roger Leider for permission to publish the article. For additional data on the study, click here to read the complete booklet.