Distributors Want Supply Chain Visibility

Share

Distributors Want Supply Chain Visibility
© Gorodenkoff

Improving supply chain visibility, managing costs and overcoming labor shortages through innovation are three key concerns that oil and petroleum distributors cited in a recent survey by a packaging supply company.

Minneapolis, Minnesota-based Graco Inc. commissioned a survey of fluid distributors to capture a snapshot of the current market. The company conducted the research for the report, “2021 Industry Outlook for Oil and Petroleum Distributors.” Sixty fluid distribution leaders, located in the United States and around the world – who primarily work in the lubrication oil and gasoline and diesel fuel industries, completed the survey.

Get alerts when new Sustainability Blog articles are available.

The company pointed to projections of flat lubricants demand in the coming years as one reason distributors’ margins are slowly shrinking. “For years, lubricating oils have served as a cash cow for fluid distributors,” the reported noted. “Even a careful look at today’s lubricant market would suggest it should remain a high-margin business in the near future. However, a longer-term forecast of the lubrication market is not so bullish.”

Graco cited a recent McKinsey report that projected that between 2017 and 2025, the compound annual growth rate for road transport and automotive lubricants is projected to grow by only 1%. Between 2025 and 2035, the McKinsey report suggests the CAGR will decline slightly, by -0.8%. “For fluid distributors, slowing demand could quickly create a competitive environment predicated more heavily on efficiency, service and minimizing overhead cost,” Graco noted.

Surveyed about the top emerging challenges in the fluid distribution market, 24% of respondents cited capital investment costs and the same percentage cited labor shortages. Delivery/distribution and managing fluids were each cited by 17%, and competition by 13%.

The survey report concluded that during the pandemic, new workflows, halted supply chains and unexpected equipment shortages requires that industry leaders reprioritize business investments to meet the needs of those new business realities. Supply chain visibility became more important. “After a year when inventory shortages and closed ports of entry became one of the dominant features of the early pandemic, most businesses sought out new strategies to avoid becoming the next victim of poor end-to-end supply chain visibility,” the company noted in the report. Among survey respondents, 79% said visibility to customer of fluid supply is important or essential to their organization’s delivery strategy.

Asked which key initiatives were most important to their business, 37% of the fluid distributors chose eliminating runouts, 28% picked monitoring of inventory levels and 15% chose the optimization of route planning.

Fifty-five percent of respondents said they provide some form of level-monitoring services for their customers, and many said they saw fully integrated tank-level monitoring as an innovation they would like to see in the industry.

Twenty-four percent of fluid distributors cited the labor shortage in distribution and transportation as their top concern in the next few years. This is attributed mainly to the mass retirement of baby boomers since 2015. The report noted that distributors have used digital tools and techniques to enable them to streamline workflows and empower existing employee teams to do more and perform tasks better. They have also aimed to invest in infrastructure that better aligns with employee career aspirations and that modernizes the job to better fit the skill sets of a modern workforce. “We know customers’ priorities shifted during the early pandemic in order to maintain business continuity,” Laura Evanson, director of marketing in Graco’s Lubrication Equipment Division, said in a news release. “This survey/report comes at a critical time and allows all of us in the oil and petroleum industry to gauge what’s most important as we move forward.”