Today’s aviation fuel suppliers face many challenges which threaten their efficiency and profitability.
Some are obvious and high-profile – the volatility of oil prices, the need to reduce greenhouse gas emissions, the competitiveness of the airline industry which has caused airlines to chase the best price.
Some are less obvious and not widely discussed but they still have a significant impact on the bottom line. In this blog, we’ll outline some of those.
Yet despite all these challenges, it’s still possible for innovative and agile fuel suppliers to improve their service to airline customers and gain competitive advantage. And what’s more, we know they can do this with fewer resources.
Some key operational challenges for fuel suppliers
Access to critical fuel data
For many aviation fuel suppliers today, the process of managing fuel data is complicated and involves many teams based at multiple locations around the world. Unlike airlines, aviation fuel suppliers do not usually have one centralized fuel management office so the challenges of collecting, maintaining and providing access to important fuel data are even greater.
Tendering for aviation fuel contracts is a significant administrative task for most fuel suppliers. The high number of tender requests that airlines produce, the amount of information and price components contained in each one, plus the number of tender rounds – these all make the bid management process time consuming.
Until recently, there were no industry-wide data standards so over time, each supplier has developed their own format for bids and uses their own preferred payment terms, jet fuel price indexes, units of measure, currencies and so on. This makes it hard for airlines to compare bids and rank them. Ultimately, it slows down the tender process, which is not beneficial to either the supplier or the airline.
Most fuel suppliers have thousands of contracts to manage. They are responsible for providing fuel to hundreds or thousands of flights every day. In order to monitor these contracts and the credit limits of their customers, fuel suppliers must:
- Collect and store uplift data, which is communicated by airport teams
- Calculate the cost of the uplift.
This is not easy. For uplift data to be transmitted from the airport apron to the fuel supplier, a complex line of communication needs to be in place. Calculating the cost of the uplift is even more complex because contracts contain so many variable price components. Fuel suppliers need a great deal of data at their fingertips to perform cost calculations including delivery documents, market data, exchange rates, contract terms, duties, fees and taxes.
We find that fuel suppliers are either trying to collect this data and perform the calculations manually – which means laborious data inputting, a high risk of error, and information that is never quite up-to-date – or with an Enterprise Resource Planning (ERP) solution such as SAP or Oracle. ERPs are powerful platforms but they have not been designed specifically for the aviation fuel industry.
All invoices are generated from the information gathered at the contract management stage, so if that data contains errors or is incomplete, invoices won’t be accurate.
Since contract management is such a large and complex task, errors in invoicing are common. This can harm customer relations and lead to delayed payments. Suppliers often have to raise credit notes, adding an extra layer of administration to the whole process. This also makes it difficult for Accounting to monitor the fuel supplier’s overall financial performance.
Overcoming these challenges without increasing headcount
Thanks to our experience of working with airlines and fuel suppliers, we have a unique position in the industry and can see a better way forward for both parties. There is a way to manage aviation fuel more efficiently and it will save everyone time and money.
It relies on four pillars:
- centralized data
- industry-wide data standards.
1. Centralized data
If you integrate all your fuel data into a centralized fuel repository, you enable all teams in the fuel supply organization, wherever they are in the world, to easily access up-to-date data that is relevant to them. This prevents a duplication of effort and reduces the risk of using outdated figures.
The first half of this blog has shown that many of the fuel supplier’s existing challenges are due to manual and labor-intensive tasks. Particularly, contract monitoring and price calculations. By automating or semi-automating these activities with specialized software, we can speed up processes, reduce errors, and free-up employees to work on more valuable activities.
Workflows can help to ensure critical or complex tasks are carried out in the most efficient and rigorous way – for example, bidding or invoice generation. Workflows can also help to reduce human errors, or at least to alert managers to these errors before they reach the customer.
4. Data standards
IATA has created a series of fuel data standards for the industry. These apply to tender/bid documents, pre-transaction and transaction information, as well as invoices. By adopting these standards, fuel suppliers can offer a higher quality service to their airline customers. That’s because by receiving documents that are standardized, airlines can run more efficient, shorter tenders and process and pay fuel invoices faster.
By implementing these four pillars, fuel suppliers can strip away layers of manual administration and work more efficiently and profitably with their affiliates and airline customers. They can realize benefits such as:
- Improved productivity and performance
- Reduced manual administration
- Quicker and more transparent tender processes
- Less duplication of effort and fewer cross-checks
- Fewer disputes and credit notes
- Better customer relations
- Faster payments.
These efficiency gains may even enable the supplier to offer more competitive contract prices.
A ready-made solution: supplier.One
You can start applying the four pillars and realizing the benefits sooner than you think. FuelPlus has built a fully hosted software solution for fuel suppliers that applies these principles of centralized data, automation, workflows and data standards. It’s called supplier.One.
Key features of supplier.One:
Fuel data repository
supplier.One consolidates large amounts of disparate data from internal and external sources into a single database: daily energy price assessments, airline customer data, fuel uplifts, contract terms and more. It puts all the data your teams need at their fingertips so they can do their jobs more efficiently.
Fuel ticket management
supplier.One enables you to capture your fuel tickets, add notes, change their status and review their history, so that all relevant information is in one place. Most importantly, the system can use this fuel ticket information and other data to automatically calculate the cost of uplifted fuel for each customer at each location.
Market data and price management
Automated daily feeds pull in key data about energy prices and exchange rates from sources that include Platts, Argus and European banks. This means you can update your price list more easily. Price categories enable you to create contracts and generate invoices more quickly too.
The eTender module simplifies the fuel procurement process for both airlines and fuel suppliers. It can automatically link and exchange data between airlines and fuel suppliers using IATA’s XML data standards. The key benefits for suppliers are:
- Get automatic alerts about new tender invitations
- Prepare and submit bids faster
- Manage and revise your bids more easily.
To find out more about how to succeed with fewer resources, contact us or watch our webinar recording on bid and contract management.