State of the Nation

by E. W. Phares II

I am most pleased to report that we continue to have strong results during the first quarter of fiscal 2010. Due to our continuing success with Encana in Canada, our sales for the first quarter are 24% ahead of last year and nicely ahead of plan.

This unique opportunity with Encana, which unfortunately is going to be short-lived, has made a distinct positive impact on the beginning of 2010. Wehave been informed, however that they will be changing the process and will probably curtail their requirements to 30% of what it’s been running.

Penetone sales were nicely ahead of last year and somewhat ahead of plan. Our operating income was essentially break-even, however, strong results continue in military, pulp and paper and the beginnings of an improvement in the industrial area.

Petron did quite well the first quarter with sales approximately equal to plan and ahead of last year. Operating income was behind last year, however equal to the 2010 plan. There are strong indications that activity is building in the iron ore and steel industry and we anticipate that this activity, coupled with increased requirements from Mobil, will continue to counterbalance the dramatic shortfall in the cement industry.

Canadian sales are extremely strong, as mentioned above, through Encana which has helped counterbalance the loss of business that has occurred with Sobeys, our significant supermarket customer. We unfortunately have lost business in Ontario and the West, but have been able to retain the chemical and the paper requirements for Quebec, which represents roughly 40% of their needs. Business in general is picking up more rapidly than in the United States and we anticipate, in spite of the drop-off at Sobeys that 2010 will be a good year.

In spite of the continued weak economy in the United States, we feel that our specialty positions in all 3 divisions will continue to grow, including our increased international sales, primarily through Petron.

Thanks again for all of your efforts and we look forward to enjoying a prosperous 2010.

The service side

by Dave Brealey

Many people do not realize the effort that goes into keeping a customer once they have decided to buy from us. The price of the product is a small part of the equation when considering an open gear lubricant supplier.

Petron, as a manufacturer and supplier of Open Gear Lubricants, is committed to producing quality products, but that is only part of who we are and what we do.

In the OGL industry, sales is just the beginning of the process. Once the sale has been completed the service part of the business takes over. Each day can bring a host of problems associated with lubrication problems or failures which can sometimes lead to a trip into the unknown. Yes the unknown, believe it or not. The cause of the largest portion of reported gear damage or failures are unknown. The reason more often than not is the lack of effective monitoring or recognition of problems when things start to go wrong.

The first finger is usually pointed at the lubricant and its supplier, however, we know from experience that our products work well so if the gearing is experiencing some damage, something other than lubricant performance made it fail.

To determine the root cause falls to the Technical Sales/Service technician who must assess the situation and locate the root cause for the failure. The technician has to be knowledgeable on the equipment, operating conditions, lubricating systems, environmental conditions and general maintenance procedures of the customers’ equipment to be able to weed out the real reason why the lubricant failed which in turn caused the damage and sometimes failure to the gear set.

The Technical Sales Service technician is the point person so to speak of the open gear lubrication industry with several goals (after making the sale that is),

1. Maximize uptime of the equipment,

2. Lower maintenance costs through regular monitoring and reporting,

3. Offer optimized lubrication levels

4. Troubleshoot any related problems on the customers’ equipment before they become serious.

5. Offer refurbishing options to the customer to return his equipment back to an acceptable condition thus extending the overall life expectancy.

The troubleshooting is usually the difficult part; there are so many variables that can and do cause a gear to damage or fail even if the gearing is well lubricated. Sometimes the problem is not directly caused by lubrication failure; however, the end result is gear damage or failure. Noticing these problems in their early stages during regular monitoring inspections can cement our relationship with the customer, to the point where relationship, trust and honesty (now those words are not usually associated with a sales person) rules the day.

Once you have their trust the job becomes a lot easier, information sharing is common and a real sense of teamwork takes over. Training of site personnel is encouraged relieving the Technicians workload somewhat and allowing for a much improved oversight of the equipment and operating conditions

Without this service, operating costs soar through the roof, equipment fails prematurely and lubricant costs become excessive. The final yardstick is not lubricant cost but overall operating costs. Help the customer to control these and you will succeed, ignore them and you will lose the customer to someone who can.

A labeler with a difference

by James Tormey

There are all sorts of labelers on the market. However, the one purchased for the Montreal plant is a customized unit. Which label containers from ten liter pails, up to two hundred and five liter (empty) drums. The unit is comprised of two labeling heads and a conveyor. One head applies the product label. The other head applies a label that has both the bar code and the TDG label. (transport of dangerous goods) on it. This will make for a better looking package. This part in the soft ware development stage. But will be ready within a few weeks. There is another plus to this. We will no longer have to purchase TDG labels for most of the products. As they will be printed in house, using our Zebra printer.

The system was purchased to improve the esthetic look of containers. It will also improve our through put. At the moment it takes one minute to manually apply, a product label, a bar code label and a TDG sticker to two containers. Our new system will label twenty units a minute. Or ten times more than what is being done manually. The time saving makes the return on investment for the $39,000 spent on the equipment well worth it.

Penetone attends 2010 pipeline integrity conference

by Mike Bradford

Penetone attended the annual Pipeline Integrity Conference in February which is held every year in Houston, Texas. As sales continue to grow for this Market in the US, attendance at this conference is mandatory. We get to rub shoulders with Pipeline Owners and with the many Contractors who use our products for Chemical Pipeline cleaning.

We also get a chance to see and discuss any new technologies being used for Pipeline Maintenance. The conference was attended by over 1000 people this year which was a new record. Several sales leads were generated from the conference, and we were able to introduce the “Penetone Method” for chemical cleaning.

Supplier review – improving performance

by Roger Wichner

As part of Petron’s ISO 9001 quality system, we review our key suppliers on an annual basis. In 2009, a significant improvement was implemented to make our evaluation process more objective in our appraisal of suppliers. In our new review process, suppliers are evaluated in four major categories:

Cost performance reviews the number of increases/decrease in the year, the timeliness of the notification and the percent of change.

Quality performance reviews the product quality, any Supplier Corrective Action Request (SCAR) that were issued during the year as a result of unacceptable quality, and the supplier’s response to the SCAR. In addition, suppliers are given added value if they have a documented quality system.

Delivery performance is a review that looks at right product, right quantity, on time, with required equipment, with required sample and Certificate of Analysis. To capture this data Petron’s Inventory system was modified to collect this information at time of material receipt.

Supplier’s Customer service is evaluated by means of demerits. Every time there is a documented issue with the supplier’s customer service points are deducted.

Each category has an assigned weighted value and at the end of the year the supplier’s score is tabulated. The supplier’s standing is based on the sum total of all categories. Suppliers who score in the 100 – 80 range are deemed to have “Acceptable” performance and no action is required. Suppliers who score in the 79 – 60 range are deemed to have “Marginal” performance and some action is required by the supplier to improve. Suppliers who score 59 or less are deemed to have “Unacceptable” performance and are placed on probation and must improve their performance or face the prospect of being removed from our approved supplier list.

The completed suppliers review for 2009 determined that 22 suppliers reviewed were “Acceptable”, 5 were “Marginal” and 1 was “Unacceptable”. Suppliers were notified of their performance when action was required and encouraged to make improvement.

This was the first year the new supplier evaluation process was used and we found it to be more useful in evaluating, communicating and objectively helping our suppliers to improve their performance, making them and us better.

Jimmy Hassell wins Salesmen of the year for 2009

by M. Bradford

Congratulations are extended to Jimmy Hassell for winning Salesmen of the year at Penetone for 2009. Jimmy’s sales finished 76% over plan and were 206% over 2008. Needless to say, doubling the territory is a great accomplishment. A majority of Jimmy’s success came from sales to the Pipeline Industry, but he also managed to grow sales covering select Military and Aerospace Customers in Texas.

(Jimmy Hassell’s receipt of this award was inadvertently omitted from the last issue of the Tote Notes. We apologize for this omission. The Editor)