Diversification can be a double-edged sword for petroleum marketers. If done successfully, it spreads out risk and expands profit opportunities. If done poorly, it wastes money and resources.
One company that manages to do it right is Bolla Oil Corp. This ever expanding operation is the result of 24 years of hard work by the company’s owner, Harry Singh, and the quality people he has hired to help run his enterprise. At the core is an ever expanding c-store operation featuring over 75 sites, typically upscale in format, serving the New York City metropolitan area.
The Bolla Market concept is seen as being more similar to an Italian villa than a tradition C-store. The core of the company’s retail mission statement: Our mission is to become the most successful, most recognizable, and most respected chain of gasoline stations and convenience stores in the region. We will strive to meet this objective while adhering to the highest standards of business conduct.
The company additionally operates 19 auto repair shops, four car washes, a commercial real estate business, a C-store construction and renovation business and an industry management consultancy. In June it announced it was moving into the fuel transportation business.
It's not uncommon for a marketer to use a common carrier for at least some, if not all, of its fuel logistics. Conversely, some companies operate their fuel logistics partially or entirely in-house. Bolla made the decision to shift from exclusively using third-party common carriers for fuel deliveries to moving entirely in-house. While this represents a significant operational shift, and a capital investment reported at $1.5 million, a variety of factors prompted that decision.
Why make the move?
Delivery management was one core driver. "With the gasoline market, the way it is, there are drastic changes within 24 hour periods,” said Jay Singh, Bolla’s vice president of operations. “Having control of the transport gives us a big leg up on being able to manage our inventories in terms of which way the price is shifting. Naturally, when the price is going up you try to store up as much as possible while the price is lower. And when the price is coming down, you try to run your inventory dry and take inventory as necessary. This is a lot more manageable if you are the dispatcher and the transport company. Otherwise, you have to work within the timeframe of your transport company."
The company’s sites also tend to be high volume requiring a highly active delivery schedule. Running the transport in house allows for economical and customized loading and drops and the reduced likelihood of run outs.
Another driver, and one that was hard to ignore, are the potential savings. ”You pay about $.03-$.04 per gallon on trucking through a third-party,” said Singh. “Total cost of operations considered, we’re looking at a roughly 20 percent savings on trucking costs. And when you’re talking 200 million gallons, that comes out to be about $2 million in savings.”
The company is currently focused on meeting it existing and future logistical needs and not on serving other dealers. However, Singh noted that if someone came to them with a need and the deal made sense, they would consider it.
As noted, Bolla made a complete transformation of its logistics with this move starting from the ground up in a short time frame. Singh noted that the most challenging aspect was creating the infrastructure in house. Establishing the processes for purchasing—who's going to be looking at the pricing, who's going to be dispatching, what’s the approval process and generally setting up the structure. The actual purchasing of the 20 trucks, the truck equipment and the software integration was fairly straightforward.
From a technology standpoint, all of the drivers are iPad equipped and linked to central dispatching software in the office that is managed by three people that are communicating between the drivers and the terminals. Singh noted that this has made the transition much easier. The company also uses GPS with all its trucks. The technology is primarily used for driver accountability and not scheduling.
Such a move would be daunting for any operations, but Bolla has benefitted from how the company runs its operations and treats its employees.
“It was quite a challenge, but we have a reputation in the industry,” said Singh. “Once word got out that we were considering the possibility of bringing transport in house, we were approached by some very competent people looking for an opportunity and we brought them in to handle dispatching and procurement of the vehicles. We've got great people on board.”
Finding and retaining quality drivers similarly remains a notable issue for the industry. As with the headquarters personnel, Bolla’s reputation helped make that process easier.
“We treat employees like family,” said Singh. “They are welcomed into the home and the social events that we have, and they are treated like any member of the family. We are very visible and we have excellent employee retention in a high-turnover industry. We've had people in associate positions where the average rate of turnover is every six months that have been in that position for 15 or 20 years. The people that come on with us tend to stay on with us. And others see the same faces and they see people moving up and they realize the opportunities we provide. So once Bolla trucks started rolling and we had the initial people in their positions, drivers were literally knocking on our door and asking to come on board. They see the chance for advancement and opportunity and know that we do right by our employees.”
Also helping ease the process was the company’s organization structure. “My father started the company in 1988,” said Singh. “He still puts in 16-hour days and he signs off on every detail. We have a fairly flat structure and everyone ultimately reports to him with no in between so we can make decisions quickly and it doesn't go through the normal red tape and chain of bureaucracy that a lot of organizations put in place.”
Is such a move right for everyone? That depends on the specific company. Bolla’s move into trucking goes hand-in-hand with its previous efforts, like real estate and construction, to diversify, but to do so within core competencies and core operational areas. It fills some very specific needs that not only are related to cost savings but the delivery dynamics of its high-volume stations and its market demographics. It also builds on a company management philosophy where owner Harry Singh ultimately calls the shots, but he gives his managers and employees considerable autonomy to do their jobs. While it’s early in the shift for Bolla, so far it appears to be the right move for them.