The ultimate goals of digital transformation are to accelerate business processes and enable faster growth. Unlocking those benefits in the downstream refined fuels industry requires three keys: frictionless transactions, actionable operational intelligence, and data mobility. Let’s look at frictionless transactions and the many benefits it provides.
What does friction mean in downstream energy?
According to physics, friction is roughly defined as a force that resists the movement of two relative objects.
For downstream professionals, this manifests itself in financial terms. Like physical matter, money is inherently difficult to move; it wants to stay where it is on both sides of a transaction. To overcome that entropy, there must be enough effort to move that money from a seller to a buyer.
Luckily, innovators have solved this problem. In physics, through either engineering (e.g., a wheel) or chemistry (e.g., an industrial lubricant), it’s possible to reduce friction and move a larger object with less energy. To continue the application to refined fuels transactions: the goal is more fuel transactions with less effort. The gap between the necessary work and a transaction reconciliation defines a profit margin. Let’s examine the benefits of reducing friction in downstream energy transactions.
Consider a fuel transaction. How many people do you need to complete a beginning-to-end movement of product? Many downstream businesses have inventory managers, market analysts, marketers, sales teams, logistical coordinators, accounting staff, etc. All these people perform vital functions. Eliminating one of them doesn’t magically delete the need for work they performed; it just makes it someone else’s problem. For too many managers, this presents a dilemma: if you want to do more business, you must hire more people, which means increasing payroll, cutting into profit. The alternative is missing opportunities because the business lacks the resources or agility to take advantage of advantageous market volatility.
But what if, like those physical innovations that made moving heavy objects easier, you could add something to the force you already have that lets them push more business through without the added expenditure? That’s what digitalization does: it eliminates friction, so business moves faster and can accommodate more customers. Instead of making repeated phone calls and logging into multiple portals, the data appears automatically in an employee’s system, right where they need it — before they need to ask for it. When an opportunity presents itself, an employee doesn’t need to spend time looking for the data they need to act; instead, a confident and profitable buy/sell decision can be made in the moment.
That’s what digitalization does: it eliminates friction, so business moves faster and can accommodate more customers.
Manual data entry requires time better spent elsewhere. There’s the time to write down information on a notepad while talking on a phone. Time to type that information into a field on a software app. Time to track down an error when it turns out that somewhere in the process, a letter or number was misentered or omitted.
Also, the risk of loss increases with physical or local media: printed paper or contact information can be misplaced or destroyed. How often has someone asked you for the phone number of a person everyone knows but whose number the person asking doesn’t have?
This is the problem with physical and locally-saved data: if either one of those things is absent, the process of transferring money is arrested. This friction slows down the transaction.
Instead, data is sent automatically and proactively. Since it comes from its original source without manual labor, there is no opportunity for error. It can be used immediately without fear of loss, nor the time expenditure of confirmation.
Instead of one transaction taking three hours and earning $120,000, three may be made in the same timeframe — without added headcount.
Making confident, profitable decisions in the moment is good, but that’s not the end of the story. Digital modernization doesn’t just bring one faster, correct decision after one examination of available data. Instead, it fuels a constant stream of confident decisions — each made in the moment of the opportunity. Instead of one transaction taking three hours and earning $120,000, three may be made in the same timeframe — without added headcount. This is when a business truly starts to accelerate and separate itself from its competitors.
Digitization’s real value isn’t necessarily calculable. In this data-driven, chat-bot-influenced world, you can put your human capital to work doing things only humans can do: sell, build relationships, and think about what matters to the enterprise.
Digital modernization lets your employees do their best work while your helps data translate insights into action.
Learn more about the three keys and how they can help you reduce risks and drive greater efficiency and profits.