EFFICIENT, reliable distribution may not be the sole factor in a petroleum marketer's success, but it does help a company stand out from the crowd. A well-managed distribution system is one of the hallmarks of an excellent petroleum marketer. This is especially true today.
Good distribution management certainly contributed to the success of the Lykins Companies, a petroleum marketer headquartered in Milford, Ohio. Over the past 50 plus years, the company has built a distribution network that meets the needs of customers across a broad section of the Midwest and mid south.
“Efficient distribution is the name of the game today,” says Ron Lykins, vice-president of transportation for the Lykins Companies. “We use a combination of our own trucks, owner-operators, and common carriers to meet distribution needs. We operate virtually around the clock, and we are getting 96% utilization out of our own trucks.
“We've been able to maintain most of our operating efficiency despite the challenges that grew out of the September 2001 terrorist attacks in New York City and Washington DC. Roadside inspections have moderated, but we're still seeing more than we did before September 11. Heightened terminal security has posed no real problem.”
Today's around-the-clock operations and antiterrorism security issues show how much the petroleum marketer sector has changed over the years since the Lykins Companies was established in 1948. The company got its start as a service station operator.
By the mid 1950s, the company was buying heating oil delivery trucks, and the petroleum marketing operations grew from there. At one time or another, the Lykins Companies was a distributor for Sinclair Oil, Gulf Oil, Pennzoil, Union 76, Amoco, and Citgo.
For the past 10 years, the company has served as a marketer for Clark, Citgo, BP Amoco, Exxon, and Marathon. Lykins Companies has 20 C-stores of its own and serves approximately 200 dealers, as well as some sub-jobbers. Products hauled include gasoline, heating oil, diesel, biodiesel, and some kerosene.
Most of the customers are concentrated in southwestern Ohio, northern Kentucky, and eastern Indiana. Transportation operations are conducted in a 500-mile radius of the Cincinnati, Ohio, area, and trucks generally stay within a 100-mile radius of a petroleum terminal or bulk plant. Heating oil is delivered in a 75- to 100-mile radius of Cincinnati.
Operations are divided into two divisions — wholesale and commercial. The wholesale division concentrates on hauling gasoline and diesel to service stations and C-stores operated by Lykins Companies and other marketers. The commercial division operates the Lykins' seven bulk plants and focuses on heating oil deliveries to approximately 18,000 customers. The commercial division also delivers a variety of fuels to farms, small businesses, and small contractors, in addition to providing on-site fueling for bus fleets, trucking, and construction companies.
Customers are served by a company fleet that currently stands at 25 tractors, 27 tank trailers, and 27 tankwagons. The fleet operates out of the seven Lykins bulk plants, in addition to a number of petroleum company terminals. The largest bulk plant — with a 70,000-gallon capacity — is at the Milford headquarters terminal.
“One of our marketing strategies is to have our own transport fleet,” Lykins says. “However, we've made a number of changes in recent years to streamline the overall operation. We had an opportunity to sell our common carrier operation (Premier Tank Lines) in 1995. We wanted to refocus on our own internal transport needs.
“We've also begun to view our truck fleet as a rolling bulk plant, and it's doubtful we'll build many new bulk plants in the future. On any given day, we have tens of thousands of gallons in inventory out on the road.”
Even with the transport fleet now dedicated to the Lykins Companies' needs, it's not enough. Common carriers fill the gaps in areas where it isn't cost-effective for the petroleum marketer to run its own trucks. The Lykins Companies currently uses 35 to 40 approved carriers, most of them smaller operators.
To keep its own transport fleet running around the clock, the Lykins Companies employs approximately 55 drivers. Another 30 drivers are assigned to the tankwagons. Some of the tankwagon drivers are commissioned contractors, who own or lease the vehicles.
“Using contractors gives us greater flexibility for seasonal heating fuel operations and for our on-site fueling activity. Contract fueling has become a good business for us, and a lot of the work is done at night. Commissioned contractors can hire their own drivers, but these individuals must be approved by the Lykins Companies and must participate in our drug and alcohol testing program.”
All drivers are now required to wear photo identification cards. The ID cards are made in-house using passport-type photographs supplied by the drivers. The photos are laminated onto the ID card at a local copy shop.
In addition to the identification cards, security issues receive more attention now. Security is discussed during driver meetings, with a particular emphasis on petroleum terminal procedures. All loads are dispatched from the Lykins headquarters, and dispatchers keep a close watch over the fleet.
“Most of the security procedures were already in place at the terminals from which we operate,” Lykins says. “We've just reinforced the importance of those procedures with our drivers.”
Company drivers are provided with late-model vehicles that are maintained in top shape. The Lykins Companies has spent years determining the right vehicle specifications for the operating area. Many of the commissioned drivers operate tankwagons built to the Lykins spec.
International is the primary supplier for tankwagons, and the newest units are on 4900 chassis with 230- and 250-horsepower engines. The trucks have a seven-speed transmission and single-speed drive axle.
“We recently began spec'ing the trucks with air-conditioning and the arctic insulation package for increased driver comfort,” Lykins says. “We're also putting air-ride suspensions on the bobtails when we can.”
Aluminum cargo tanks are built by Boston Steel, Amthor, and Hutchinson Industries. Boston and Amthor tanks are purchased through Phoenix Industries & Apparatus Inc in Loveland, Ohio, and the Hutchinson tanks come from Tri-State Tank in Cincinnati.
Typical capacity is 2,800 gallons, but the company runs larger units to meet specific customer needs. Several 3,500-, 4,500-, and 5,000-gallon tankwagons are used for delivering gasoline and other fuels to commercial accounts.
The tanks have three or four compartments and double bulkheads. Hardware includes OPW and Dixon Bayco API adapters, Nordic manifolds, Betts internal valves, and Tiona Betts domelids. Scully overfill protection is used throughout the fleet. Hose reels are from Boston, Nordic, and Hannay, and hose nozzles are supplied by OPW and Scully. Blackmer pumps and Chelsea PTOs are standard.
The Lykins Companies prefers closed rear decks on tankwagons to protect product delivery systems from the weather and from dust. The vehicles are specified with ample work lights.
On the transport fleet side, the Lykins Companies has been buying the International 9200i with a Cummins M11-370E engine, Fuller 10-speed transmission, and Meritor tandem-drive axle.
“For the transmission, we're spec'ing Fuller's FRO15210B, which works better with the weights that we are transporting,” Lykins says. “We also buy a heavier driveline.
“For driver comfort, we specify the best interior that we can get. It doesn't cost that much more to go first class. In addition to good driver acceptance, we also benefit from higher resale values.”
Driver enhancements include an air-ride seat, full gauge package, tilting/telescoping steering wheel, heated side mirrors, and CD player. Cellular telephones are hardwired into some of the tractors.
With few exceptions, most of the tractor components are standard from the manufacturer. One exception is the Groenveld automatic chassis lube system. “The automatic lube system ensures that all areas of the tractor receive the right amount of grease,” Lykins says. “We don't do any of our own maintenance, and this provides an extra measure of insurance.”
The petroleum marketer also specifies 14,000-lb capacity steering axles, which come with larger brakes for added stopping power. The drive tandem has a 40,000-lb capacity.
Each tractor generally is married to a tank trailer. Heil aluminum petroleum trailers predominate, but the company recently bought two units from Polar Tank Trailer Inc. The typical unit has a 9,500-gallon capacity, is double tapered, and has four compartments.
“We prefer a 50-50 double taper on our tank trailers,” Lykins says. “This gives us a lower center of gravity.”
The Lykins Companies specifies its own vapor-recovery manifold on the trailers. Other hardware includes Civacon API bottom-loading adapters, Betts and Knappco internal valves and domelids, and Civacon and Scully overfill protection.
Most product hose comes from Hart Industries and is specified with OPW Kamlok fittings. Delivery elbows are from OPW Engineered Systems.
Running gear on the newest trailers includes the Hendrickson Intraax air suspension system. “We're putting this on all of our new trailers, and I wish we'd had it 20 years ago,” Lykins says. “We're also putting air suspensions on bobtails wherever we can. We're using the Neway air beam suspension on the bobtails.”
The specifications give the Lykins Companies a tank fleet that can reliably meet customer needs day in and day out. The fleet is flexible enough to quickly adapt to changes in the market.