This conversation has been translated in English with some abridgements. Full version >>
Line personnel from procurement departments is recommended to refrain from reading.
Alexander Kuzmin is an expert with over 20 years in non-fuel business of gas stations and the implementation of projects of its reorganization. With this huge experience, Alexander is ready to offer the plan for the changes to the chain of stations of the federal scale in just 30 minutes.
His partner in this conversation is the head of federal chain which is bringing together more than one thousand stations located over the entire territory of the Russian Federation. In our dialogue, he will be called the Leader.
Leader: Alexander, you promised to tell me about the most important changes that I need to carry out so that customers perceive our stations on a par with the best European chains. And you promised to do so in just 30 minutes.
Alexander Kuzmin: Before you begin the conversation i would like to clarify what are the specific goals you want to achieve?
Leader: For over the last five years there has been a significant strengthening of the position of vertically integrated oil companies, whose major shareholders are various state-controlled structures. In the eyes of the vast majority of Russian citizens oil companies and their corresponding chains of gas stations are clearly perceived as being a part of the “state”. All attemps to prove them otherwise had the opposite effect.
Alexander Kuzmin: In simple terms, Russian drivers should take your gas station as being the same as “cool” foreign ones. Is that so?
Leader: Yes. First of all, I do not like the situation with the organization of non-fuel businesses in my company.
I regret to admit that today the non-fuel businesses in every marketing and sales divisions are de facto private business of these units’ leaders as well as of their entourage – they have their own “private” providers, service organizations, advertising and marketing partners. As a result, the shelves of my gas stations’ stores have been converted into a storage of various expensive and useless junk, cafes – into a roadside diner, and gas station’s equipment servicing – into a waste of budget without the expected return.
Alexander Kuzmin: There’s only one recipe for the changes – a total centralization in decision-making pertaining to choosing product lines and matrix, selecting suppliers, service companies, promotional partners. And of course, the personnel reorganization regarding the most active opponents of these reforms.
In order to truly meet the European level’s requirements, your first need is to establish tough standards of the proposed product lines in your shops and cafes, as well as to implement objective tools of control over the actions of your field managers, the quality of work of suppliers and service organizations serving your gas station.
The first and most important step is to create a single federal decision-making center – let’s call it conditionally the Department of retail sales. Its structure must have at least three administrations (departments, units) responsible for following segments – non-fuel business, operation of gas stations and IT support.
Leader: Such a structure already exists.
Alexander Kuzmin: If the desired structure is created – that’s good. But can you guarantee that the decisions of the Head of the Department of retail sales and its staff will be carried out in the territorial sales units of your chain without questions being asked, at once? I insist – at once!
Leader: I am sure that my administrative resource and will be more than enough to solve such a problem once it arises.
Alexander Kuzmin: Excellent! Now you need to set specific management tasks. Staff of non-fuel businesses department should create a single federal matrix of goods for shops and cafes of your chain and then personally conduct the selection of suppliers for selected product range. Staff of the operational department should find a partner able to organize remote monitoring of manufacturing equipment of gas stations, and IT department should find the partner able to implement IT solutions for the management of orders and deliveries, deploying them over the accounting systems, which are now used in your marketing and sales divisions. And i know it for sure that there are more than 2 or 3 such systems.
Any reorganization involves the solution of certain problems. Solving the problem of standardization of your product range, we have to come to the agreement that field sales departments should not have “local product range managers” or some significant “local” suppliers. Now the Russian market is already close to the stage where there is no such product or delivery itinerary which the central office could not arrange through their federal logistics partners.
Leader: I should note that we have now a lot of federal suppliers but their products are not in high demand at all our stations. Managers of regional sales divisions argue that local products are selling better and prove it with genuine reports.
Alexander Kuzmin: How else could that be? If you are economically interested in working with specific local companies, what could be a proof of a successful collaboration? Of course, the sales report, which features some very impressive numbers.
Leader: I agree that such a scenario is very likely. Perhaps it would be worthwhile to conduct unannounced site inspections, but this will require additional resources.
Alexander Kuzmin: Additional checks alone will not solve this problem. First of all, it is necessary to exclude the possibility of filling the shelves with personal preferences of local buyers.
Leader: How do you recommend to generate product matrix for my gas stations? Each potential supplier assures that his product is in demand by customers and will sell well.
Alexander Kuzmin: The easiest and most effective way is to enter into the product range something that is sold at the stations of your foreign competitors. In these chains there are virtually no “superfluous” goods – their range is matched with the real demand.
… This conversation has been translated in English with some abridgements. Full version >>
Leader: All right, let’s say, I will make a decision about the start of such large-scale transformations. Who will do it? This requires a structure that at the moment I just do not have.
Alexander Kuzmin: The most correct (but also the most difficult) step is the creation of a processing company for non-fuel businesses of your retail chain, which will deal with all of the above. However, it is essential to close the activities of the processing company on absolutely all suppliers and service contractors of your chain. Of course, the administration will not be free, but outsourcing of this kind is economically justified: you are not confused by the presence of contractors, processing fuel cards’ transactions of your company?
Leader: Processing company for non-fuel businesses? I never heard of that before. Don’t you by any chance want to persuade me to take a decision on the choice of a single supplier for the entire chain of gas stations?
Alexander Kuzmin: No way. In your industry, without exception, the error of all high-level managers is that under disguise of restoring the order and the impementing development of related businesses, de facto, they are trying to choose a partner that can become a single integrated supplier. Such a supplier is possible only in theory.
Leader: Are there in your arsenal solutions thar are able to deliver a quick economic impact? At least in one year?
Alexander Kuzmin: Fast and visible effect is only provided by the organization of a cafe area at the gas station. Today, the coffee is the most marginal and the best-selling product on the gas station.
Leader: At a recent meeting I reported on the possibility of cooperation with the leading players in the fast food. How do you evaluate the idea?
Alexander Kuzmin: Partner programs with valid fastfood market leaders is the correct and effective step. But let’s look at the real possibility of such cooperation. For each partner, whether it is McDonald’s, KFC, Burger King, or someone else, you need a separate room, and it’s a large area. Most gas stations have trading rooms of 50-80 square meters, and in this area you should place not just a cafe, but a whole shop. No fast food operator can expand the business in such cramped conditions. In the reconstruction and construction of new stations you can comply with the requirements necessary to accommodate a fast food restaurant of these players, but most of your stations are not suitable for such projects. But this does not mean that they can not make a profit from the sale of the cafes’ product range – as I told you, the coffee alone can earn several billion rubles a year. Offering hotdogs and freshly baked pastries can bring you several billion of additional profits.
Leader: Let’s sum it up: to start the transformation I need to strengthen the weight of the federal department of retail sales, to introduce a single federal matrix of products, to issue a line of private label brand products, to centralize the management of the merchandise at the gas stations, to establish a division of developing the planograms for each station, to choose a partner that can implement IT-ADR solutions, to create an atlas of the whole chain of gas stations, to organized the Center for remote monitoring of the process equipment of gas stations, to reorganize cafe areas and develop a brand for my cafes? Is that all?
Alexander Kuzmin: Almost. After the necessary partners will be selected, you and your managers will have to spend a lot of effort to train the gas stations’ staff, as well as to introduce the procedures for the preparation of fast-food products, cafes’ equipment maintenance and standards of communication with customers. Good help is the introduction of employee motivation programs aimed at the involvement in achieving the outcome of the shops and cafes.
Leader: Alexander, in what aspects your advice here is different from the ones coming from numerous consulting agencies?
Alexander Kuzmin: The main difference – I practice what i preach, these changes are already being implemented and received proven positive results. In addition to experience, I possess unique resources required for the successful transformation – that is unique IT-solutions, database of specialists, logistics and industrial infrastructure.