SA's sprawling service stations search for competitive-edge

South Africa's sprawling service station industry faces significant challenges as many of these operations struggle to survive amid intense competition, sky-high oil prices and a battle to maintain their portion of the regulated fuel price margin.

The explosion of new service stations in recent years followed relaxation of regulations that, among others, previously limited where service stations could be located and the distance between competing operations.

Dave Cormack, oil and gas solutions manager at software company SAP Africa, believes the range and intensity of the issues confronting the service station industry are driving many to re-evaluate the way they operate in a search for greater efficiency.

"In an overtraded and highly competitive market only the most efficient and productive will be profitable, and only the sufficiently profitable will survive and flourish.

"The big issues for service stations include stock monitoring, control and shrinkage as well as the need for real-time information to be available up and down the supply chain," says Cormack.

The traditional fuel business is also under pressure as a result of increasingly efficient engines and ever-rising levels of environmental awareness.

"Operators have therefore looked to expand their scope and create new profit centres or risk having to abandon the market altogether. In this context, the convenience shop has become a critical source of both revenue and profits for service stations. Management of these has to be an integral part of the overall service station business," says Cormack.

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He argues that against this exceptionally complex and competitive background, a comprehensive and integrated software set-up can play a key role in helping service stations achieve the efficiency and profitability they need.

With a decades-old record in developing industry-specific solutions for more than two-dozen industries, Cormack believes the SAP for Oil and Gas solution is properly suited to the complex demands of the industry.

Says Jan Zielinski, Oil and Gas solutions manager at parent company SAP AG: "We expanded our traditional Service Station Retailing (SSR) solution with the addition of convenience store functionality in response to clear demand for it in the marketplace. With this addition the SAP solution set is ideal for any oil organisation regardless of size to manage all of its service station operations centrally using real-time data and based on the same best practices anywhere in the world."

Cormack adds that the solution is flexible enough to be configured for any business model, and can be built to include a mix of company-owned/company-operated (COCO) stations as well as company-owned/dealer-operated (CODO) situations.

"Within the complex network of a single oil company we have found that there is generally not one homogenous service station model in use, and some functionality in the system fits better in certain environments."

To support the vast amounts of transactions which a network of thousands of service stations will generate in a single day also requires that the solution provided be capable of handling massive transaction volumes. He says the service station retailing solution has proven its transaction processing capabilities to be more than adequate for the largest global oil organisations, while the back-end SAP modules processing the more retail-focused elements of the service station's business are renowned for being the highest-performing enterprise solution available.

Comments Cormack: "We are not reinventing the business with this solution. Traditionally there was a solution in place before, but spread between multiple different systems. In the end the data which was fed from one system to another often ended up in a SAP Financials module anyway, so it made sense to expand the SAP platform and create a single solution for customers in this industry vertical. In the disparate model it was always very difficult to track where problems in the data set came from. Now head office locations get a real-time view of the entire breadth of its operations and existing legacy systems can be redeployed in more profitable ways."