The Spencer Companies fleet helps drive growth

Nov. 1, 2008
Running its own fleet gives The Spencer Companies a competitive edge as a petroleum marketer. It's as true today as it was 85 years ago when the Huntsville,

Running its own fleet gives The Spencer Companies a competitive edge as a petroleum marketer. It's as true today as it was 85 years ago when the Huntsville, Alabama, company was established.

The Spencer Companies currently operates five transports and two tankwagons that are used to supply more than 60 c-stores and numerous commercial accounts, most of them in north central Alabama. The Spencer Companies also has a bulk plant in Huntsville with a total storage capacity of 83,000 gallons.

“We firmly believe that it's worth running our own fuel hauling fleet,” says J Spencer, vice-president of The Spencer Companies. “We can provide our own fuel transportation at a lower cost than we would pay if we were solely reliant on a for-hire carrier. We handle up to 90% of our own fuel hauling with the remainder going to a small number of for-hire fleets.

“For many retailers, gasoline has become a loss leader. As an industry, we petroleum retailers really shot ourselves in the foot on this, and it's not likely to change. We must make the distribution process as efficient as possible to remain profitable.”

Veteran operation

The company has been running its own fleet operation for many years. Spencer's grandfather arrived in Huntsville to run Alabama Oil Company of Huntsville in 1923. In 1943, he bought the Huntsville operation, as well as another petroleum distributor in Decatur, about 26 miles west of Huntsville.

Throughout most of its years in business, The Spencer Companies has been a branded marketer. For years, Amoco (now BP) was the primary gasoline brand marketed by the petroleum marketer. A second brand was added in 2001 when The Spencer Companies acquired another Huntsville marketer.

Today, the company operates 34 c-stores under the MinitMan Food Stores brand and six unattended cardlock locations. Another 30 c-stores are leased to dealers. While most of the stores are spread across north central Alabama, five are in Birmingham, about 98 miles south of Huntsville.

In addition to the retail operation, The Spencer Companies serves primarily rural accounts through the bulk plant in Huntsville. The plant was acquired with the other-branded marketer purchase. The bulk plant has four 20,000-gallon storage tanks for regular unleaded gasoline, premium unleaded gasoline, low sulfur diesel, and ultra low sulfur diesel (ULSD). Kerosene is stored in a 3,000-gallon tank. The bulk plant also distributes lubricants. Two 2,800-gallon tankwagons operate out of the plant.

Ethanol transition

The transition to ULSD two years ago was relatively uneventful at the bulk plant and the c-stores in The Spencer Companies system. However, another transition now is underway, and it is proving to be more challenging and more costly.

“We've begun switching the underground gasoline storage tanks at our BP-branded stations to E10 (10% ethanol) blends,” Spencer says. “We have to finish the process by the end of the second quarter. It is costing us about $3,000 per station to have the storage tanks cleaned out. Most of our stations have three gasoline storage tanks, and we have to make sure they are thoroughly clean before we start selling E10 gasoline blends. We're also changing all of the filters in the dispensing systems.

“We'll have to do this all over again next year for the other branded stations. It's an expensive effort for a product that has a very low profit margin. I'm worried that biofuels could bring another marketer shakeout like we saw with the underground storage tank regulations that took effect in 1998. We could see a lot of marginal c-stores shut down.”

All of the fuel products marketed by The Spencer Companies are hauled to the Huntsville area by tank truck from the pipeline terminals in Birmingham. That is the closest refined petroleum product pipeline to the north central Alabama region.

Distance from the petroleum pipeline is one reason the truck fleet has benefited The Spencer Companies operation. Management believes it is better to keep as much of the transportation cost in house as possible.

Busy tank fleet

The busiest of the c-stores move 100,000 gallons of gasoline a month, and that keeps the five transports busy. The Spencer Companies typically runs two drivers on each of the five tractors in its fleet.

“We want as much productivity as possible out of our fleet,” Spencer says. “Most of our drivers average two loads a shift, but those operating closer to Birmingham are able to handle up to three loads. Drivers have the opportunity to work six days a week to maximize income and many do.”

The Spencer Companies provides drivers with comfortable Kenworth T800 tractors. The petroleum marketer has been running Kenworth tractors since the late 1980s.

“We bought several makes of tractors over the years, but we switched to Kenworth because they build an outstanding product for a very competitive price,” Spencer says. “We buy our tractors from Kenworth of Birmingham, and we've had the same sales representative for many years. The dealership treats us very fairly, as we are very loyal.”

The Kenworth tractors are purchased through CBC's C-Buying program. The Spencer Companies has been enrolled in the program since 2001 and has received $9,425 in rebates up to now.

“It's a great program,” Spencer says. “We've earned rebates for tractor and tire purchases. We think it's a no-brainer to join the C-Buying program. When we receive a quarterly rebate check, a membership fee of no more than $125 is deducted, but we get a lot more than that in rebates.”

The Spencer Companies buys one to two tractors a year through the program. Tractors typically run 225,000 to 250,000 miles per year and are traded at around 700,000 miles.

Standard spec

For the most part, The Spencer Companies buys a standard specification that fits the needs of over-the-road petroleum hauling. One benefit of the standard spec is that it is easier to move from one tractor to another. “Drivers usually stay on the same tractor, but there are times when we do have to move them around,” Spencer says.

The newest T800s were ordered with driver features that include GPS navigation and extended cabs. The carrier selected an upgraded interior package for more driver comfort. The drivetrain includes a 475-horsepower Caterpillar engine and Eaton 10-speed transmission. Aluminum components were spec'd wherever possible to reduce vehicle weight.

Tractors are paired with Heil 9,200-gallon, five-compartment petroleum trailers. Tank hardware includes OPW bottom loading outlets, Civacon overfill protection, and Civacon elbows.

Goodyear and Kanaflex product hoses with PT Coupling hardware are stored in hose trays on the trailers. “We prefer the trays because they give drivers easier access to the hoses,” Spencer says.

Trailers have Hendrickson Intraax air suspensions. Running gear includes PSI by Meritor tire inflation systems, B F Goodrich tires, and Alcoa aluminum disc wheels.

The proven vehicle specifications and skilled truck driver team give The Spencer Companies a competitive edge in a demanding market. Day in and day out, the fleet helps drive success for the Alabama petroleum marketer.