Driving with Data

July 19, 2018

Written By Mark Fenner

I was recently asked by an employee what I think MFA Oil Company will look like in the future and whether I feel we are still prospering. Both are great questions and probably something I don’t talk about enough. I feel the company will be much larger in the future and driven by data. We likely will continue to pursue acquisitions and also plan to continue to grow our business organically by switching prospective customers away from our competitors one person at a time.

Some of you may recall CHS bought MFA Oil out of its ownership in the oil refinery in McPherson, Kansas, just a few short years ago. Prior to the buyout, the refinery represented around 70 percent of our earnings over the previous 15 years. We had to make some drastic changes to adapt, and I’m pleased to report we’ve made great strides in improving the efficiency of our bulk fuel and propane delivery businesses.

We’ve also implemented the integration of our JD Edwards E1 accounting platform, the largest project in the history of the company. This difficult undertaking has taken several years to complete, but I’m so proud to tell you all of our plants have fully made the transition to the new system. What does that mean for the cooperative? Looking to our past helps to explain it.

Yesterday – Where we were

• Our antiquated hardware and software systems lacked standardized processes and procedures.
• We were managing reactively because our access to financial information was limited to the previous month or up to 60 days prior.
• The high volume of same-day delivery orders caused our operations to be inefficient.
• We were missing opportunities to maximize our strength and size through procurement due to too many of our small plants operating in a vacuum, rather than working as a team with neighboring plants.
• We weren’t doing enough to train and develop our employees.
• Our lack of e-commerce and online bill pay options resulted in a subpar online experience for our bulk fuel and propane customers.

Today – Where we are

• Our technology has been upgraded and standardized.
• The new accounting platform has been installed at all of our fuel and propane plants, enabling improved delivery logistics, route optimization and online bill pay.
• We are monitoring some customer bulk fuel and propane storage tanks.
• Our plant managers now oversee broader geographies and work cohesively with other plants within their district. They are also focused on delivering excellent customer service with the help of our customer service representatives and drivers.
• We’ve leveraged our buying power and are getting far better rates on many of the items we purchase.
• We’ve created field-based routing centers, modified our route creation process and improved the overall efficiency of our drivers’ routes.
• Our board has supported the purchase of state-of-the-art equipment which has enabled us to provide our employees with the tools they need to do the job right without compromising their safety.

Future – Where we are going in FY 2018 and beyond

• We’ve already begun using business intelligence capabilities to manage our business in real time. Getting sales and delivery information quicker helps us manage our business better and more effectively.
• We’ll be generating reports capable of flagging variances outside the norm to highlight unusual prices, costs, sales, inventory, etc.
• We’ll be establishing management dashboards to provide a quick overview of key performance metrics.
• We plan to bring e-commerce solutions to our bulk fuel and propane customers at mfaoil.com, which will include selling all products online and providing customers with access to their account information.
• We’ll be automating our accounts payable department which will enable us to pay up to 80 percent of our invoices without human intervention—reducing costs and errors.

Your MFA Oil Board of Directors has empowered us to aggressively pursue these upgrades to assure the cooperative stays relevant and profitable for many more years to come. We must now put all of the data at our fingertips to good use.

We’d be naïve to believe that managing data properly won’t impact some members and customers. For example, let’s say our data analysis tells us we have a list of inefficient deliveries, which by the way, is likely to happen. What are we going to do about it? We cannot simply ignore the information. We must act on it and find a solution to make servicing those accounts more efficient.

You might assume that would mean charging more, but that’s not always the answer. Let’s assume you are using a 300-gallon or 500-gallon tank. In that case, the solution may be as simple as setting you up with a bigger tank. The net result might even help you get a lower price. We offer discounts for right-sizing tanks, which basically means switching you to a correctly sized tank according to your overall demand.

This is a common challenge for companies like MFA Oil which have been in business for decades. Think about it. What has happened to the size of farm tractors and combines? They’ve grown larger, including their fuel tanks, as farmers tackle more acres. Some of you may even be operating newer equipment with older fuel storage tanks that hold enough volume for only a single fillup. This type of situation creates chaos in the supply chain.

We want to reward you for helping us plan your deliveries with better, more aggressive pricing. That way, you know we are taking care of you, and our employees can feel good about saving you money while helping the company to be more efficient. Striving for these types of win-win scenarios is what being a part of a cooperative is all about!