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Fluid distributors face new challenges

Jan. 6, 2022
Graco study spotlights importance of visibility for fuel, lubricant haulers amid parts and employee shortages, market uncertainty

A recently published report by Graco surveyed fluid distribution leaders in the United States and across the globe. Report findings highlighted active and emergent challenges faced by industry professionals, including recent developments resulting from the COVID-19 pandemic and subsequent shifts within the labor market that have further exacerbated a longstanding decline in this area for the broader transportation industry.

Visibility is ‘Mission critical’

While few problems are universal in business, supply-chain constraints and unexpected equipment shortages have plagued companies throughout 2021, compelling reprioritization and investment into visibility over their end-to-end supply chains. It’s no surprise then, as per the report, that 79% of fluid distributors now say visibility to customer fluid supply is important or essential to their organization’s delivery strategy.

Remote tank-level monitoring, like Graco Pulse Level, is one strategy that is gaining popularity as a low-cost way to improve refill performance and optimize routing to a wide network of service shop locations. TLM software enables fluid distributors to gain immediate insight over their entire operation—whether it includes 20 customers or 2,000-plus customer locations. Of the professionals surveyed by Graco, 55% of respondents reported that they currently provide some form of level-monitoring service to their customers. As capabilities become more commonplace, demand for greater tank-level visibility will continue to grow, and it is poised to be a powerful differentiator for distributors who are able to adopt and implement robust strategies across their businesses.

When asked which key initiatives were most important to their businesses, eliminating runouts and monitoring inventory levels were the two most frequently stated answers for companies surveyed. Regarding transportation logistics, some of the top-ranked answers included optimizing route planning, minimizing truck rolls, and the reduction of unnecessary stops. Survey respondents said they rely on their vendors—more than peers or marketing associations—to steer them toward the right industry insights and trends.

Uncertain waters ahead

If a rising tide lifts all boats, receding waters expose what lies beneath. According to a recent McKinsey report, road transport demand is nearing its peak and the overall industry outlook is less than bullish for the upcoming decades.

Between 2017 and 2025, the compound annual growth rate for road transport is projected to grow by only 1%. Between 2025 and 2035, that percentage will go negative for the first time (-.8%). While global consumption of petroleum and liquid fuels is set to grow by 5.3 million barrels per day year-over-year in 2021, global liquid fuel consumption remains lower than previous years as demand fluctuates and electrification rises.

Lubricating oils, which for years have served as a cash cow for fluid distributors, face a similarly stark fate as future growth for the high-margin lubrication market follows a similar trajectory as road transport. Consumption is changing but growth is also stymied by navigable market conditions that threaten to sweep the unprepared into the undertow.

According to Graco, the preeminent emerging challenges for the fluid distribution market are cited as overcoming both capital investment costs and ongoing labor shortages, with more than 24% of respondents marking these as their No. 1 priority in the next few years.

Other fluid distribution leaders are prioritizing addressing their delivery/distribution, as well as the way they manage fluids and adapt to competition. According to the Graco survey, nearly half of respondents reported providing equipment at no cost to some or most of their customers as part of a service contract. With equipment purchase cost no longer a sole factor for procurement costs, efficient fluid and tank management solutions have become interwoven with overall business efficiencies and the planning of infrastructure costs.

Old problem, new solutions

A looming concern for the better part of a decade, COVID-19 only was an accelerant for the labor shortages now faced by distribution and transportation. The Baby Boomer generation—those born from approximately 1946 to 1964—are retiring out of the modern day labor force and their absence has left a clear gap. As far back as 2019, 94% of distributors already noted they were experiencing declining workforce interest and were struggling to find the right people for their open positions, according to a PEI study.

With nearly a quarter of fluid distributors listing addressing the labor shortage as their primary concern over the next few years, there is cause to believe that significant disruption is necessary to facilitate a reversal of this trend that only stands to worsen as legacy talent continues to exit the market. Graco says innovation, above all else, is the key to change.

The company sees merit in two current approaches fluid distributors have undertaken to address labor shortages. The first of these is that distributors have sought out digital tools and techniques that will allow them to streamline workflows and empower existing employee teams to do more—and do it better. The second is through the investment in infrastructure that better aligns with employee career aspirations and modernizes the job to fit the skill set of the modern workforce.

Business analytics and insights sit at the center of both strategies, increasing the adoption of technologies that not only maximize efficiencies but improve employee experience (EX) through new opportunity and the removal of roadblocks. For example, in the broader transportation industry, route optimization is helping eliminate backhauls and reduce routing delays caused by a complicated web of delivery deadlines. For the fluid distribution market, infamously dependent on just-in-time deliveries, the same strategies can have an even larger impact, especially when high volatility results from fluctuating end-user demand.

As for EX, younger generations expect greater investment and utilization of digital tools—not only because they assist with their jobs but they prepare them for an increasingly technology-dependent world where a lack of knowledge could leave them without a paycheck.

Across industries, 78% of millennial workers said they feel innovation is essential for business growth, yet only 52% of the generation would consider their organization to be innovative. For fluid distributors, the right technology can serve as a visible sign that the organization is committed to improving the employee experience and supporting long-term career growth.

Jack Koenig is the global product marketing manager at Graco.
About the Author

Jack Koenig

Jack Koenig is the global product marketing manager at Graco.