In the last episode it was determined that it is costly for cryogenic bulk transports to return home with any of the liquid they departed with. One way to make it home empty is to drop off any liquid remaining after scheduled deliveries at some other customer tank that has some room available. Ideally for the supplier, this would convert the left over liquid from a cost to income. It was asked, “Is this a good thing?” First, we’ll look at the supplier side with the question, “Did the revenue generated offset the cost of an 800 gallon delivery considering that Company X typically hates to deliver under 1500 gallons at a time?”Here, again, comes The Millennium Answer. The Millennium Answer came into vogue shortly after some high placed U.S. politico said something to the effect of “It depends on your definition of the word ‘is.’” Ever since then it seems everything is contingent. i.e. “It depends.” In this case- It depends on the cost of getting to a drop location and making the fill compared to the revenue that might be generated. Pretty simple, eh? But, not necessarily as simple as it appears on the surface and especially when asking about dropping off 800 gallons where 1500 is preferred.
The dependant aspect of whether 800 gallons is a good drop or not relates to whether it is the (first/only) drop or whether it is the last drop. 800 gallons as a first or only drop is not necessarily a profitable proposition for a bulk supplier. Costs associated with running a 4000 or 6000 gallon transport out on a unscheduled single drop delivery might just exceed any revenue that could be made. This is especially true with lower priced products like liquid nitrogen.
On the other hand, delivering 800 gallons (or even significantly less) as a convenience drop at the end of a route is markedly different. In this case, the costs associated with getting the transport loaded and out into the market place have already been incurred and the liquid is out there. Now, there is just the incremental cost of getting to another location and offloading versus the revenue that could be generated from the drop. Playing to the profit side of this equation are the opportunity costs of not doing the delivery:
- Liquid that would just vent off if left in the transport or be partially lost transferring back in and out of plant storage;
- Slightly higher fuel costs with the load,
- The need to return to the convenience drop site sooner by not having made the drop and not having enough liquid to completely fill the tank when the delivery is made.
All things considered-convenience drops are usually good for the bulk cryogenic liquid supplier as long is the drop is within relatively close proximity of the last scheduled stop or the return route home.
But then……. Are convenience drops good for the customer?
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