The fuel distribution industry is like a giant game of chess, where every move counts, and the stakes are high. Fuel and oil play crucial roles in the global economy, with a staggering 94.1 million barrels circulating worldwide each day in 2021. The industry comprises an intricate network of suppliers, distributors, and customers, all of whom rely heavily on the consistent availability and stability of these essential resources.

At the heart of this industry is the need to manage the supply chain and ensure products are delivered seamlessly from the refinery gates to customer’s sites, with a focus on efficiency, reliability, and safety. However, this process is not always straightforward, and there are often bottlenecks that can cause delays or disruptions in the supply chain.

In this blog post, we'll look at the challenges and strategies for success in the fuel distribution industry. And more specifically, on managing inventory, route planning and optimization, and compartment planning. We also briefly touch upon factors that impact the supply chain, such as the global energy crisis, volatile fuel prices, and the increasing demand for greener fuels.

Fuel expenses outweigh other operating costs

The American Transportation Research Institute also reported that fuel expenses were 35.4% higher in 2021 than in 2020, erasing the cost savings that fuel distributors experienced during the pandemic. This increase in fuel expenses outpaced other significant expenses, including driver wages, which increased by 10.8%, and repair and maintenance costs, which rose by 18.2%.

Transport costs make up a significant portion of the overall cost of fuel distribution in both the United States and European Union, accounting for 40% of the total expense. This is a major challenge for fuel distribution companies, particularly those that rely on heavy-duty trucks using diesel as their primary fuel source.

Rising fuel prices boost transitioning towards greener transport modes

However, the crisis has also led to governments and companies taking steps towards a more sustainable and secure energy system. The World Energy Outlook 2022 highlights the crisis as a catalyst for significant disruption in natural gas, coal, and electricity markets. Governments are diversifying oil and gas supplies and accelerating structural changes to increase or maintain energy security in the long term.

Some fuel distributors are already taking initiatives to provide cleaner lower-carbon renewable fuels as well as biodiesel from waste. By collecting cooking oils from restaurants and other food producers to use as raw materials for biodiesel manufacturing they help save carbon saving of diesel supplied to customers.

Efficiency on the Road: The Role of Route Optimization in Fuel Distribution

Distributors need to be able to transport fuel from refineries to storage facilities, and then from storage facilities to gas stations and other customers. This requires careful planning and coordination, as well as the ability to track deliveries in real-time. It also means finding ways to be more flexible, cost-efficient, and adaptable to fluctuating market conditions.

By optimising delivery routes, distributors can reduce the transport costs (eg. reduce number of miles travelled, decrease fuel consumption, and improve the overall delivery times).This not only benefits the distributor but also their customers who receive their fuel deliveries in a more timely and reliable manner. Additionally, route optimization can help distributors to reduce their carbon footprint by minimising unnecessary emissions.

Safety and efficiency using compartment planning

In the world of fuel distribution, compartment planning and loading rules are critical components that help ensure safety and efficiency. By following specific rules for gravity orders, cross-compartment contamination, and sequencing, compartment planning can minimise the risks associated with transporting liquids, such as weight shifting and sideways forces during acceleration, braking, and cornering. This not only ensures safety but also reduces wear and tear on vehicle components like brakes, making them last longer.

Compartment planning also enables fuel distributors to cater to a broader range of customers by carrying different fuel types and delivering the appropriate amount to each customer based on their specific requirements.

However, compartment planning is just one piece of the puzzle. Loading rules, such as axle pressure and load sequencing, are equally crucial. Different scenarios require different strategies, and fuel distributors must be able to adjust their plans accordingly to ensure the best possible outcome.

Watch this 20-minute webinar on demand to learn more about downstream fuel distribution compartment planning and loading rules.