ZIFFPAGE TITLEHedging Their Bets

By Mel Duvall  |  Posted 2005-10-06 Print this article Print

Trading, pipeline scheduling and accounting systems boost revenue-without big staff increases.

Hedging Their Bets
Kim Berghall, president of Sisu Group and chief architect of PetroMan, says the software allows Western and other fuel suppliers to bid on and automatically capture contracts for refined products, then schedule and confirm deliveries in pipelines. It also handles the resale of fuels, including electronic invoicing and a credit module that checks and tracks a customer's credit risk. Companies like Western will often hedge their large purchasing contracts by selling futures on the New York Mercantile Exchange to protect against large drops in the price of oil; PetroMan automates much of that process by plugging directly into the primary exchanges.

"The hedging module is one of the most important features of the software," Berghall says. "If you're good at [buying and reselling fuels], you can make a healthy profit. But you can also just as easily lose your shirt."

Information from PetroMan automatically flows into Western's chief financial application, Global Financials, a package by Global Software of Raleigh, N.C. The two applications have automated most of the complicated process of buying and selling fuels, according to Christine Hays, Western's chief financial officer.

Hays, who is also the company's chief human-resources and technology executive, says Western keeps its head count low by outsourcing most functions not associated with the core business. Payroll, for example, is outsourced to Automatic Data Processing of Roseland, N.J., and employee benefits are handled by Schwarz Williams Cos. of Minneapolis. Management of the company's technology infrastructure is outsourced to Ultimate Data, a local consultancy formed by one of the original programmers of Western's billing software. And in basic terms, manufacturing and delivery of the company's products is outsourced to the refineries and pipelines.

Emison says he could have added a human-resources officer or a full-time chief technology officer, but he has resisted that temptation. "Consultants may charge more by the hour, but they don't create little empires," he says, referring to the likelihood that an HR executive would want a cadre of assistants.

With oil prices climbing steadily, business has been good, Emison admits. But what goes up also comes down, and Western has to be prepared.

"It's not an easy world out there. We have to reinvent the wheel every day," Emison says. "Staying lean has been a key to our survival."

Western Petroleum 9531 W. 78th St., Eden Prairie, MN 55344
Phone (952) 941-9090
URL www.westernpetro.com
Business Wholesale fuel supplier
Key Business Executive James Emison, chief executive officer
Revenue, 2004 $3.6 billion
Revenue Per Employee $62 million
Challenge Use technology to automate business processes, allowing the company to eke out profits from bulk fuel sales
Key Productivity Application PetroMan from Sisu Group

Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


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