Inventory Management & Loss Control

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1 Inventory Management & Loss Control Why are we talking about Inventory Management- A look back at six very different but actual cases Why is inventory management so important? The easy answer $$$$ How to help prevent this from happening to you

2 Inventory Management & Loss Control Large Airport Facility Millions of gallons every year Mid-size Airport Facility 1,000,000 gallons Large Airport Facility 3.5 millions gallons Large Gasoline & Diesel Terminal Hundreds of thousands of gallons Large Gasoline, Jet & Diesel Terminal Large losses out of tolerance The Miami VICE Connection 2,700,000 gallons 2

3 Case # 1. Process Process Process. Don t overlook the simple things A largest airport facility reported large losses month after month after month. These losses were outside of allowable industry standards Losses we in excess of 50, ,000 gallons every month The team was working hard to try and understand what was going on Weekly meetings with all stakeholder on-deck Getting ready to spend big dollars in trying to resolve the issues (New inbound meters, truck meters new tank gauging eq. etc.) What was at risk? The contract which was held for the last 50 years The companies reputation within the aviation industry

4 Case # 1. Process Process Process. Don t overlook the simple things Gross vs Net Facility used a gross inventory booking system They received fuel deliveries every day and booked it gross Fuel arrives inside the terminal tanks at about degrees Product sits in the tank for about 6-8 days before the product is transported via pipeline to another terminal During that 6-8 days, product cools off from degrees to about degrees Under a gross in gross out system, that produces a lose every time Was it easy to get people to understand this?

5 Case # 2. Paperwork and Basic Processes A Mid Size airport facility was forced to finally report their year-to-date inventory gain/loss data. Missing.. was 1,000,000 gallons and reported on December 20 th The team was NOT working to understand where the missing fuel was Company President called and canceled my vacation so guess where I went? Five hour days looking at the books. No automation. The fuel was missing for about 7 months. (How can that be you ask?) Where was the corporate inventory close out processes? What was at risk? The contract states, The Company is responsible for any losses outside of allowable tolerances What does 1,000,000 gallons of Jet A cost? $$$$$$$$ The companies reputation within the aviation industry

6 Case # 2. Paperwork and Basic Processes The facility did conduct a daily inventory close out. However, no matter what the gain/loss numbers reflected, it was never investigated or reported outside of the facility ( someone was hoping the numbers got better) Someone fat fingered a pipeline receipt Terminal received 1,000,000 gallons but booked 2,000,000 gallons If you look at your inventory daily, your life will be so much better Good time for a corporate change Corporate Inventory Policies and Guidelines were established 6

7 Case # 3. Do you recall Enron? An audit was performed on a large airport facilities inventory program. What did this audit find? An accounting mistake ( cooking the books is what its called today) to the sum of 3,500,000 gallons There inventory system was automated. However, this location created a fake airline account. Why? So they could balance the books daily. After 5 ½ years, this account reflected 3,500,000 gallons of Jet A that was not there You think change is coming to this location? 7

Case # 4. Do you recall this guy? A large facility reported monthly loses for over 2 years (they only had records dating back 2 years) Product losses were PUL & Diesel Why you ask?

8 Case # 4. Do you recall this guy? A large facility reported monthly loses for over 2 years (they only had records dating back 2 years) Product losses were PUL & Diesel Why you ask? After providing new procedures and creating improved processes, things got better. But did things really improve? After an ongoing review and detailed investigation, theft was identified. Even after our daily inventory became good. As a Corporation, you must look at your inventory from cradle-to-grave 8

9 Case # 5. Great people bad charts. A large facility reported monthly loses that were generally out of tolerance No one could understand why. Great people trying to do the right thing. After a team investigation, bad data was identified along with the need to improve basic processes. A Tank strapping chart was identified as incorrect data. Every time this locations product level dropped below a certain tank level/mark, the facility reported a large loss that never came back We also worked on fundamental (101) inventory training Created a daily inventory close out process Created automated inventory sheets to collect daily receipts, BOL and meter data. (BIG HELP!) 9

10 Case # 6. Miami Vice Large airport facility with good inventory data that did not show any concerns or issues GM and 18 others were found to be stealing approximately 2,700,000 gallons of Jet A from the daily water draws being conducted within the facility Using wrong temperature to create book gains Selling this fuel to FBO & private airplanes Stopped selling to aircraft and started selling Jet A to fishing and recreational boats in the area The story gets better! The FBI is called in because its bigger than what we all thought. 11 people arrested, 19 charged to include 1 Airport Accounting Supervisor working with the terminal staff Side Note- Terminal GM was one of them arrested. He was a former police officer convicted of homicide and served time. Think there were some corporate changes coming? 10

11 Inventory Management & Loss Controls What steps can we take to prevent or correctly identify suspect inventory data 1. Manage your business Create a sound process Terminal Seal Security Program (copy on hand for review) Good CCTV System Daily review of inventory data What does your team do if the numbers are not within tolerance? Someone should be reviewing/approving this data daily Create documents that will support a detailed review Do you compare BOLs to meter turns? Are your people still using the books 5A & 5B? Have you checked your Tank strapping charts lately? If your system is automated, is it complaint with API measurement standards? 11

12 Inventory Management & Loss Controls Document Examples TERMINAL: LOCATION: Kahului Maui INVENTORY DATE: 4/3/2017 TIME: PERFORMED BY: ACCULOAD METER RECORD METER (NET GALLONS) YESTERDAY TODAY DELTA METER TOTALS 1. JET 1,200,817-1,200,817 JET -4,249, JET 0 0 DIESEL -720,250 21a. JET 3,048,650-3,048,650 REGULAR -1,591,977 21b. JET 0 0 PREMIUM -452, ONROAD DSL 442, ,463 ETHANOL -187, OFFROAD DSL 277, , ETHANOL 115, , UNL87 1,109,179-1,109, ETHANOL 71,391-71,391 TANK OBSERVED API Hydrometer Temp AUTO GAUGES FT INCH SPACE AVAILIABLE DAILY SPACE AVAILABLE (TOV GALLONS) DAYS AUTO TEMPS USAGE LEFT TANK TOV BARRELS B/Day TANK Tank Heels Tank Max Fill Capacity 4. UNL87 482, , UNL92 452, , HIE ADDITIVE 92* DYE (L/R 2)* LUBRICITY LUBRICITY , JET , ,783,488 1,689, , RU , , ,127,465 1,012, , JET , , , , ETH , /8 617, , , DSL /8 43, /8 783, , , PU , /8 591, ,819 58, JET ,425 DAILY TANK GAUGE RECORD AMB o F GROSS OBSERVED GROSS STANDARD TOTAL OBSERVED FREE WATER CTSh ROOF PRODUCT PRODUCT CTPL FACTOR CORR. TEMP o F VOLUMES VOLUMES VOLUMES CTSh Calculation FLOATING ROOF ADJUSTMENT CTPL FT INCH GALLONS FT INCH VOLUMES GALLONS GALLONS Insulated Base T Ambient o F TSh Innage RCZ Ends FRA Apply OBS API Tank API +/- Adjust 3,090 3, ,172 #NAME? NO NO #NAME? Jet-A , #NAME? #NAME? 6B 3 Unleaded Regular N/A 0 #NAME? #NAME? #NAME? NO NO #NAME? B 4 Jet-A N/A 0 #NAME? #NAME? #NAME? NO N/A N/A #NAME? N/A N/A 6B 5 Ethanol N/A 0 #NAME? #NAME? #NAME? NO NO #NAME? C 6 On Road Diesel N/A 0 #NAME? #NAME? #NAME? NO NO #NAME? B 7 Unleaded Premium N/A 0 #NAME? #NAME? #NAME? NO NO #NAME? B #NAME? Fal se Fal se Ver sio n:

13 Inventory Management & Loss Controls Daily Record of all gauges HIE TERMINAL MAUI-ACCULOAD METER RECORD PREPARED BY METER POSITION GRS GALLONS GST GALLONS Dynamic/Diagnostic/Non-reset 1. volumes/meter JET 2. JET 21a. JET 21b. JET 2. ONROAD DSL 22. OFFROAD DSL 3. ETHANOL 3. UNL87 4. ETHANOL 4. UNL87 4. UNL92 5. HIE ADDITIVE 87* HIE ADDITIVE 92* DYE (L/R 2)* 10. LUBRICITY 1. 2.* *NOTE: ADDITIVE VOLUME REPORTED IN GALS. GAUGER'S INITALS: DAILY TANK GAUGE RECORD DATE TIME TANK NO. PRODUCT REEL FEET REEL INCHES TEMP WATER FEET INCHES API AUTO FEET AUTO INCHES 1 JET-A 3 UNLEADED REGULAR 4 JET-A 5 ETHANOL ON ROAD DIESEL UNLEAD PREMIUM HIE ADD. TANK NEMO ADD TANK DYE TANK LUBRICITY. TANK 13

14 Inventory Management & Loss Controls Terminal Seal Program 14

15 Inventory Management & Loss Control NOW WAKE UP! Q&A TIME

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