Refining fuel distribution

Outsourcing to capable local logistics managers is reducing risk and increasing returns for oil companies.
 

When outsourcing distribution, it is essential that fuel companies partner with transporters who are attuned to the demands and high standards of the fuel industry.

Fuel companies need to sustain flexible and cost-effective transport operations in order to compete in a highly competitive market. Since logistics is not part of an oil company’s core focus, it is easier to partner with logistics managers who can handle the burden and positively impact on the bottom-line.

In essence, the fuel supply chain follows this process: exploration, discovery, drilling, harvesting, crude oil retail, refinement and distribution.

In the past, fuel companies were in complete control of the entire process from exploration to retail. These days, oil giants are rethinking where they want to be in the supply chain.

Specialising in segments in which they have competitive advantage, they can considerably improve their position if they form strategic partnerships in distribution segments where others may be able to make the entire package more appealing. Local distribution is one of these areas, with fuel companies able to shed the rigid capital burden of owning distribution assets to logistics experts with strong local networks.

Local logistics expertise and networks mitigate the risks associated with fuel distribution, the largest of which are safety and environment. It therefore makes sense for oil companies to partner with a logistics company that guarantees high levels of safety, health, environment and quality (SHEQ), and complies with or exceeds fuel distribution codes and practices.

Back in 2009, BP said that, as part of a review of its logistics operations, it would invite 3PLs to tender for the delivery of fuel from terminals to petrol stations and wholesale customers in South Africa, and Caltex recently made the move to employ local distributors in the Eastern Cape with Caltex Eastern Cape Marketers (CECM). The company intensified its focus on higher SHEQ standards, and has optimised distribution through its partnership with Cargo Carriers in a new joint venture called Uzuko Carriers.