You might be hearing the term "Allocations" or phrase “Your Products are being put on Allocation" being talked about recently, but what does this mean? Basically, when a manufacturer is struggling to keep up with the demand of the products they produce, they may choose to place their supply network or distributors on allocation. This means that they are limiting their distributors on the amount of product they can buy from the manufacturer over a particular time period.
The reason they do this is to create a fair and equitable distribution of their products across their distribution channel. In other words, they are not going to play favorites or allow certain distributors to buy up all the product while leaving other distributors with nothing. Allocations also help protect against hoarding and price gouging of limited products.
Lubricant distributors are currently having their orders placed on allocation by many of the major lubricant producing companies in the United States such as Mobil, Shell, and Phillip 66; just to name a few.
There are many reasons large producers of lubricating oils are stating why they are having problems keeping up with the current demand. For one, a retraction in demand due to the pandemic forced manufacturers to make considerable cuts in production as well as personnel, followed by a post-pandemic ramp-up which has been slower than expected due to supply and employee shortages.
Now compound that with a once-in-a-century ice storm that hit the Texas gulf coast in February of this year affecting most of the petrochemical business, and you end up with some finished lubricant manufacturers being down as much as 40% of their normal production levels. Whatever the reason this is happening, this is real, and it should be a major concern for people and businesses that rely on lubricants to operate.
Lubricant distributors are seeing allocation in some cases down to 60% on the products they buy. This means that a distributor can only buy 60% of the product they would normally purchase over that same period of time. This can create a huge issue for end-users when they suddenly realize they cannot get the product they need to keep their equipment running.
This is an unprecedented issue that I have never seen in my 30 years in the Lubricants business. Petroleum Service Company (PSC) was one of the first companies to recognize the real pitfalls to lubricant allocations and that it should be taken seriously.
So how can you protect your business from running out of the necessary lubricants you need to keep your equipment and business running? First and foremost, you need to evaluate your current lubricant supplier and make sure they can handle your needs. If you have any concerns, you need to build a relationship with other suppliers quickly before they are unable to take on new customers.
You should be concerned if you are dealing with a lubricant distributor that only offers one or two brands. This does not leave very much flexibility to offer comparative products. I work for PSC, and we offer multiple brands of lubricants from the top manufacturers in the industry. If one of our customers' preferred products goes out of inventory, we can confidently offer them the same quality product from another brand.
You should also pre-plan any oil change-outs. Prior to draining any piece of equipment, make sure you can get the products in the quantity you need. At PSC, we carry an extensive inventory in a wide variety of container sizes. You do not want to be in a position where you have to buy a drum when all you need is a pail.
Finally, you can look at reducing your lubricant consumption by extending drain intervals with the use of premium products. Did you know that by converting to synthetics you can extend your lubricant life up to 8 times? PSC can help guide you to the best products for your equipment and provide tools such as used oil analysis, that will allow you to get the most out of your lubricants.
Bottom line, with lubricant prices going up monthly and hitting all time highs and knowing that you might not be able to get your products regardless of what the price is; having a strong supplier is the most important thing. PSC has been in business for over 91 years and has seen a lot over nine decades.
We are still here because we Endure, Evolve, and Innovate. If you want to put your equipment in the hands of one of the most reliable lubricant suppliers in the country, look no further than PSC. You can visit us at Petroleum Service Company