Efficient organization and IT model for transforming propane leader

One of the largest commercial retail propane companies in the United States, with over one million customers in 45 states, was hindered by its IT capabilities - in both operational efficiency and growth capacity.

As a result of decentralized IT systems and applications in 604 districts, its cost structure was highly inefficient. The IT organizations operated with customized legacy applications for customer management, collections, pricing, and distribution. Also rather than standardized applications and processes, the IT infrastructure comprised individual systems running on many different platforms.

Additionally, in this flat or shrinking industry, the propane company can only achieve growth by acquiring competitors’ customers. And the company lacked the capacity needed to service new customers.

Challenge
The primary challenge was to transform the fragmented company into a centralized organization, in order to achieve appropriate economies of scale for driving increased capacity and improved customer service at a reduced cost structure. At the same time, the company needed to improve efficiencies and reduce overhead costs and headcount through more effective use of technology.

In addition to these immediate challenges, the company required an IT platform for future growth that would enable the company to play a role in consolidating the propane industry.

Approach
Working closely with IT and business leaders, the joint company/A.T. Kearney team designed an application architecture to improve the company’s overall operations and organizational model to deliver key strategic capabilities.

This integrated solution included numerous components, such as:

• Customer service to provide more complete and accurate customer information and improve problem resolution, including a centralized call center
• Scheduling and fleet routing to improve delivery costs, increase operations capacity and improve customer satisfaction
• Delivery efficiencies for better customer service, and cross-selling opportunities
• Pricing strategies for multiple customer types, regions and competition
• Demand forecasting for operations, staffing, deliveries, etc.

Results
As a result, the project generated $30 million in annualized cost savings within a payback period of less than 24 months. It accomplished its dual goals of improving revenue and margins, and reducing costs and optimizing assets.

Additional, specific benefits include:

• Improved margins due to enhanced pricing capabilities
• Lower operating expenses because of control over improved matching of supply with demand
• Servicing more than one million customers with fewer assets and people
• Improved service levels for customers

The company was able to improve the economics of each delivery and reduce its overall fixed costs through a balanced mix of centralized and decentralized initiatives that focused on organizational structure and business processes, which put the customer at the center of its operations. Similarly the company’s IT strategy supported this model by integrating the technologies and organization across multiple locations and sites.

Today, this IT architecture serves as the backbone for the company’s new operational model, helping it significantly improve its shareholder value and achieve a competitive edge. Importantly, its success has also fundamentally altered the landscape for the industry by raising the bar to new heights.

For additional information see Transforming Field-Service Operations: Running Faster, Longer, Smarter in Customer-Delivery Services