October 9, 2018
READING TIME ~
We keep going on about live margin, but what does that mean?
Let’s start with the current situation:
Many retailers are working out their margin based on either the most recent delivery or the cost if they were to take a tanker today.
Most recent delivery makes sense because that is what the fuel has cost you.
Using the replacement cost also makes sense as you will have to replace the fuel in your tanks.
However, neither are giving an accurate cost of the fuel that remains in your tanks and as one of two main drivers (alongside competition), this is imperative when making pricing. decisions.
As we know, multiple deliveries at different cost prices are in there. And to complicate it further, throughout the day, customers are taking fuel out.
So, I hear you ask, how does EdgePetrol give you a live number?
1. We securely connect to you fuel supplier and receive your replacement cost for the day/week.
2. We connect to your tanks to spot deliveries as they arrive and apply the correct replacement cost to that fuel.
3. This allows us to ‘weight’ and ‘blend’ the fuel. Think of this as an average cost of what is really left in the tank,litre by litre.
4. Our connection to the POS means that we receive each transaction by volume and selling price.
5. We remove the sold fuel as it leaves the tanks, taking It off the oldest delivery (first in, first out or FIFO), updating the cost and re-weighting for each transaction.
6. We then minus the blended cost from your selling price and give you a LIVE weighted and blended margin for each grade!
7. Finally, we bring it all together and show you a LIVE margin for your site and even your portfolio
Furthermore, we have now adjusted the margin to include your fuel cards. We call this ‘net’ margin:
How does that work?
By understanding the cost of each fuel card and identifying the transactions as they come in, we can apply this to your margin and show you both a gross and net margin for each site.
We also remove any bunkering from the margin, so you know what you are really making on each litre you are selling through your site!
Whilst only EdgePetrol customers can have this type of live information at their fingertips, we believe that looking at a blended cost and margin allows you to make better decisions around your sites.
Therefore, we have put this logic into a spreadsheet, which can be downloaded here.
If you replace the numbers marked in red with your data, you can see your blended margin. It won’t be live and will change every time a customer takes fuel out your tanks, but we hope it helps!
If you want to discuss how to get the most out of your forecourts, feel free to get in touch.