Why Sippin Energy Has Trusted Tank Monitors for Over 15 Years.
Gary Sippin, CEO of Sippin Energy Products, shares how his company has utilized tank monitors for the past 15 years and why they decided to partner with GREMLIN® tank monitors. The following interview was conducted by Richard Goldberg, President of Warm Thoughts Communications, on behalf of Angus Monitoring Service.
Gary is the incoming Chairman of the Connecticut Energy Marketers Association and a co-founder of Destwin Energy Systems.
Richard: I’m here with Gary Sippin, CEO of Sippin Energy Products. Gary, can you describe Sippin a little bit for us?
Gary: Well, we are a company that in six months will be celebrating 100 years of business. I’m a third-generation owner. We have the fourth generation coming on board. And we are a full-service heating oil, propane, and HVAC marketer in Fairfield County, Connecticut.
Richard: And how many delivery trucks do you run for oil and propane in the winter?
Richard: How long have you been using tank monitors as a part of your business?
Gary: We’ve been using tank monitors for just about 15 years.
Richard: So, you were “in” very early with this technology. Why did you get started in the first place?
Gary: I had spent a lot of time studying the metrics of routing and logistics. Routing and logistics efficiency is what drives a lot of initiatives at Sippin Energy. If you think for a moment, not specifically of tank monitoring, but about delivery efficiency and routing logistics efficiency, there are variables required to make those formulas work. There’s mileage, there’s time, there’s pump speed, there’s a litany of different things that go into it. But volumetric forecasting is one of those variables that’s critical to routing logistics. And in our efforts to make routing logistics work, we kept on coming back to the inability of current forecasting modes (degree day/k-factor) to avoid creating downstream inefficiencies. Very early on we realized that a fairly significant percentage of accounts, no matter what you did, could never be forecasted efficiently with delivery software alone.
Richard: What do you think about the notion that K-Factor as a forecasting tool has gotten even more problematic since then?
Gary: Generally speaking, K-Factor calculations from a software standpoint and an exception-recording standpoint have improved. It’s just not enough, because you are still fundamentally just guessing. And other variables have gotten more problematic. There’s a lot more migration of customers going from company to company, not staying long enough for K-Factor history to adjust. Another limitation is the frequency of extreme weather swings over the last 10 years.
Richard: And then there’s the increase in use of ancillary heat sources-wood pellets, space heaters, heat pumps, etc.
Gary: Yes, it’s impossible to tell when customers are actually starting to use their oil or propane for central heat, and when they are relying on these other devices. The patterns that make k-factor work well are breaking down. And obviously, k-factor never worked for propane customers who are using it for ancillary purposes.
“it’s impossible to tell when customers are actually starting to use their oil or propane for central heat, and when they are relying on these other devices. The patterns that make k-factor work well are breaking down”
Richard: So, what do you think the monitors do for you, especially since there’s a real investment required to bring them into the business? What justifies the investment of cost and time?
Gary: Many fuel companies look at averages when they’re dealing with their metrics, and that can be dangerously misleading, i.e. my average drop is 187 gallons (in a 275 oil tank) so I’m good, I don’t need to do anything. However, that actually looks like an EKG graph. On one end of the scale you have run outs, on the other side you have tons of short deliveries. The fact that they happened to average out at 187 doesn’t necessarily mean that you have running a good system for profitability. For us, that’s not good enough, and we’ve built an approach designed to maximize our efficiency by prioritizing the urgency of delivery for each tank. And to do that, you can’t be guessing at how much is in it.
Richard: I know that in addition to Sippin, you are a principal at Destwin Energy Systems, which gives you insights into tons of oil and propane companies. As you’ve looked at delivery data, I’m sure you’ve had conversations with other companies and you’ve compared your approach to what they are doing. How many fewer trucks do you think you run for your size business then typical fuel companies you’ve benchmarked?
Gary: That’s hard to say. I think without the combination of the technologies we use, we would probably need an additional three or four trucks to get the same work done, and that may be understating it.
Richard: What else do you think fuel delivery companies fail to recognize? After all, the use of tank monitors is still relatively low.
Gary: One thing they underestimate is the cost of short deliveries. I’m telling you Rich that 7 out of 10 dealers that I encounter in my travels just don’t care about short deliveries. They’re not even on their radar. They care about run outs. But if you ask a dispatcher about all their short deliveries, they’d say “No, no problem I’m ahead“. They completely miss how much money this sucks out of their business.
Richard: We seem to be in industry that accepts a lot of inefficiency and comes up with rationalizations why, many of which are simply that we’ve always done it a certain way.
Gary: People and trucks seem to be go-to fixes for all problems in our industry, and I think there is a miscalculation of what it costs to add an additional person or an additional truck, and all the ancillary costs associated with it. Plus, the more trucks you have on the road, the more insurance, greater risk of accident, etc. And that’s if you can even find a qualified driver
Richard: According to accountants who serve our industry, a delivery typically costs $50-$75 per stop. And yet, when I raise that with some companies, they think that overstates it.
Gary: My analytics match up with that range. I think too many dealers aren’t digging into the numbers enough and considering all the ancillary costs. Plus, I think many owners and dispatchers, myself included, tend to believe we do things much better than others, because we are comparing ourselves with some pretty unprofessional players in our business. But that doesn’t mean we couldn’t do even better if we approached things differently.
Richard: So, your principle focus with monitors is to increase the profitability of each delivery. Anything else?
Gary: Yes. Besides the problem of short deliveries, I think the true cost of a run out is grossly misunderstood. That cost really covers a wide spectrum from “it’s an inconvenience and you have to break route,” to “Oh crap the house froze up and it’s a $50,000 insurance claim!”
Rich: There’s also an impact on customer retention as much as 3-5 years after a run out.
Gary: Yes. And often we are giving them something to stay put. If you can eliminate even a small number, there’s a big impact.
Rich: What is your customers reaction to tank monitors?
Gary: It’s generally very positive. People today expect to have technology that increases their comfort and convenience, and our industry has lagged in this regard. We’ve introduced a no run-out guarantee, and it’s fairly substantial, to turn the monitors into a competitive advantage. It basically says, if you ever run out of fuel on our monitor program, we will provides a complimentary one-year service plan, 50 gallons of fuel, emergency service to restart your system and up to $25,000 in damage protection. I will tell you in 15 years of doing this we’ve never had one claim against that. That’s not to say that we haven’t had things go wrong and tank monitors failed to work. Customers just don’t ask for it.
Richard: And you use that as part of your new customer pitch?
Gary: Yeah, we’ve pitched it at every single opportunity, and my salespeople think it sets us apart.
Richard: Do you charge customers for the monitors?
Gary: We don’t, because we see the savings and retention benefits as more than covering the costs, and we want maximum penetration. With the oil, the only time I actually charge is if they have no service plan at all. If they have any service plan with us we include it in the service plan coverage. We also charge small propane users, but not customers who are using it for heat and hot water.
Richard: With so much experience with monitors, and with all your connections, you could have chosen any monitor solutions. Why did you choose the GREMLIN from Angus Monitoring Service?
“Upfront cost are modest with GREMLIN, which made it more feasible to get monitors on more tanks”
Gary: Upfront cost are modest with GREMLIN, which made it more feasible to get monitors on more tanks. Second, our best experience had been with systems that measured tank levels with an ultrasonic sensor. Very accurate and reliable, and GREMLIN has that. The company we had been buying from, Visitank, went out of business. So stability and longevity mattered quite a bit, and Angus has been a fixture in our industry for many years, so that was another plus. Finally, the consumer app they provide that is branded for us is very good.
Richard: How has your GREMLIN experience been so far?
Gary: It’s been very good. The Angus team is very good about assistance, support and training. They’ve been very responsive to us. And I’m not blowing any smoke up … they really have, they’ve been very good.
Richard: How difficult or easy are these units to install?
Gary: Installations have been pretty easy, because the GREMLIN has a very good user app for our installers that takes them step by step pretty simply. We’ve been able to deploy using the entire service department. Angus trained each of our service techs to install the oil Wi-Fi tank monitors, and we’ve been able to do that pretty easily. And to lower the cost we try to get tank monitors installed at the same time we’re doing a preventive maintenance visit or some other service call trying to minimize the number of dedicated trips we have to go to somebody’s house just to do a tank monitor allows you to save some cost. The propane units are even easier.
Richard: Is there anything you wish they would do differently?
Gary: They’ve already addressed it. They introduced the cellular version for propane. The availability of cell phone basic communication is important because you need that in some cases. No communication protocol works 100% of the time in every place, so having multiple options is very helpful. I understand they are about to introduce a unit that works off RF as well.
Richard: Yes, that’s right.
Gary: Ok great. I’m sure we’ll be taking advantage of them for some customers as well.
Richard: Is there anything else you’d share with other fuel companies who are thinking about using monitors more extensively?
“make sure someone in your company owns the deployment of your system, and that you spend time training dispatch to use it properly”
Gary: First, I would make sure someone in your company owns the deployment of your system, and that you spend time training dispatch to use it properly. I’ve always said that owning an airplane doesn’t make someone a pilot. Second, there are always going to be issues. No monitor system works perfectly 100% all the time. But I don’t think that’s a reason to hold off. This business isn’t getting any easier. I personally think that companies need to leverage technology like this in order to maintain profitability in the face of shrinking margins, fewer degree days and rising costs. I’m a numbers guy, and the numbers add up to monitors.