By The Upside Team
The most expensive assets on all fuel retailers’ books are their land and equipment, but few retailers track how often those assets are in use today.
Capacity utilization is the best way to track it. It measures the gallons that could be pumped at your station in a given hour, versus the gallons that are actually pumped.
Unfortunately, given time and labor constraints, many fuel retailers don’t track their capacity utilization. Manually, it would require employees or third-party consultants to stand outside and continuously watch the pumps to see when they’re in use. This isn’t efficient or cost effective for most retailers, and worse, it only accounts for a single day’s capacity utilization instead of the overall picture at their site.
Since these pumps are already paid for and employees are already manning the cash register during their shifts, improving this one metric can dramatically increase revenue without any increase in operating costs. That’s pure incremental profit.
Let’s discuss how to calculate capacity utilization, and how to capture gallons from competitors.
How to calculate capacity utilization
Counting the number of cars at your pumps per hour is one method for calculating capacity utilization. At Upside, we use transaction data to analyze on-site activity for a full 12-month period to get a holistic view of your site’s overall performance. Here’s how it works:
- Average capacity utilization: First, Upside determines a site’s maximum capacity. To do this, we process their hour-by-hour transactions over a year-long period and identify the single hour with the highest number of transactions or gallons sold. From there, we tally the number of transactions or gallons sold every other hour the station is open, and divide the total number by the max capacity. This reveals the site’s average capacity utilization.
- Rush hour capacity utilization: Of course, some times of the day are always busier than the rest, like morning rush hour. Upside calculates a separate average for these high-volume sales times to get a clearer picture of daily performance. To do this, we identify the three hours (often non-consecutive) with the highest volume of transactions or gallons sold, tally up the totals, and divide by maximum capacity.
Remember this formula for how to calculate capacity utilization:
Capacity = the maximum possible transactions in an hour
Utilization = the average transactions in an hour / capacity
Benchmarking your capacity utilization
With access to transaction data from more than 30,000 retailers across the nation (roughly 20% of all gas stations), Upside found that on a given day, average capacity utilization is only 24%. That means the majority of the time, retailers have a 76% open capacity rate.
Stations fare slightly better when looking at rush hour data. During peak sales times, the average capacity utilization jumps to 41%, but that still means that for 59% of the day, there are fuel pumps on site that aren’t generating revenue.
Now that you know how to calculate capacity utilization, how does your station compare to the nationwide average? Consider taking a cursory look at some of your transaction data to see how your performance compares. Regardless of what your utilization rate currently is, there’s a significant opportunity to expand your sales volume.
How Upside increases capacity utilization
Upside is a digital marketplace that influences everyday buying decisions for millions of users across the nation looking to get more value from every dollar they spend. Upside’s platform generates personalized, margin-bound promotions to encourage users to consolidate their purchases at participating retailers.
To see a return on the investments you’ve made at your site, you have to ensure they’re being used as much as possible. Read our recent eBook to learn more about how to increase capacity utilization.
Sponsored content by Upside