Valvoline Prepares to Gain an Edge in Logistics
The rapid growth in quick lubes is having multiple impacts on the company’s supply chain.
After more than 150 years, Valvoline Inc. continues to thrive by providing best-in-class solutions to its customers. Throughout its history, the company has developed innovative products, service and technology-enabled business models to help its customers succeed.
For example, Valvoline was the first lubricant company to invest in the emerging quick-lube market with its acquisition of 81 stores in 1986. Today, its Valvoline Instant Oil Change (VIOCTM) centers rank as the No. 2 quick-lube chain in the U.S. by number of stores.
IPO Drives Changes
When Valvoline was spun-off from its parent company Ashland in a two-step process, beginning with an IPO in 2016 and final distribution in 2017, the impact across the company was significant. The separation itself was a major project, since it had shared the supply chain organization and all IT systems with Ashland.
Although the decoupling process was very complex, the IT and organizational separations took place with few if any issues thanks to the hard work of many associates. However, the positive impacts of the IPO on the priorities and aspirations of Valvoline were much more significant.
For example, although the company’s share is higher in the U.S. than in most international markets, its products are available in over 140 countries. The international business had grown significantly over the last decade before the separation. However, limited capital availability hampered the supply chain’s ability to grow with the business, leading to uncompetitive service levels in some cases. Since the IPO, Valvoline has made supply chain investments to support renewed international growth.
These include the company’s first plant in China, which is due to begin operation in the middle of this year. It also acquired an existing plant in Serbia, which will serve continued growth in Eastern Europe and Russia.
Limited capital had also restricted Valvoline’s ability to grow its VIOC store count, although it had developed a very successful business model. Since the end of fiscal 2015, when Valvoline began making a concerted effort to invest in its quick-lube business, the company has added 443 franchise and company-owner VIOC locations, including its first company-owned stores in Canada. In addition, this past fiscal year, VIOC achieved a remarkable milestone: 13 straight years of same-store sales growth.
The rapid growth in quick lubes is having multiple impacts on the company’s supply chain, including an increased importance of using the store’s point-of-sale information in the supply chain planning process.
Positioned to Succeed
One of the most important drivers throughout Valvoline’s long history is its supply chain. For example, its system of regional blending and packaging plants was designed to keep the manufacturing capability close to the customers, and drive responsiveness to change.
While the company put itself at the forefront of product innovation, Valvoline stretched its innovation into extended supply chain services and activities that added value to customers but were not part of the typical offering from other oil companies.
“We led the industry in providing vendor-managed inventory for retailers over 20 years ago,” Senior Vice President and Chief Supply Chain Officer Craig Moughler says. “We’ve added significant value with pick-to-store programs with retailers, and have been very active with direct-to-dealer/store programs for both retail and OEM customers.”
Valvoline has had an advanced supply chain planning system in place since the early 2000s. This has helped it “provide excellent order fill rates without an excessive investment in inventory,” Senior Director of North America Supply Chain Eric Rossi adds.
Reliability as an Advantage
One strength of Valvoline’s supply chain has been its resilience. Today, “All of our customers have the right to expect a reliable supply,” Rossi says.
For example, when the company’s Deer Park, Texas, plant needed to be closed for five weeks after a large terminal fire, the company still served its customers without any delays.
Valvoline made sure it was ready for such adversity by implementing a business continuity plan (BCP). Some competitors might wait for disaster to occur and then react, but Valvoline’s proactive planning ensured it was ready ahead of time.
Valvoline’s BCP in the United States starts with its regional plant concept, which provides backup production capacity for critical products. The company also helps suppliers where necessary to provide BCPs to ensure that key raw materials are always available where they are needed.
In addition, by having a single ERP and advanced planning system for all plants, Valvoline gains instant visibility into supply and demand, providing the ability to make rapid decisions. The company uses these systems to quickly shift demand from plants impacted by an event to others in the system. “We can figure out without too much disruption how to move orders around when needed,” Senior Director of North American Manufacturing Michael Critchlow says.
These processes, along with Valvoline’s strong team culture, have made its supply chain resilient, in times where some competitors have stumbled. “We’ve become very good about dealing with uncertainty in the supply chain,” Critchlow says.
A Strong Advantage
Valvoline is now seeing changes in the marketplace that will require structural changes in its own North American supply chain. The company is already making changes to give it a sustainable competitive advantage going forward. The result will be a Valvoline version of the Industry 4.0 model, where data from the point of sale is combined with other inputs to drive excellent customer service, efficient manufacturing and lean inventories throughout.
It will also include a set of services to allow customers to manage their supply chains more efficiently.
Although Valvoline has provided vendor-managed inventory (VMI) services to retailers for years, “The concept has been less prevalent in the ‘do-it-for-me’ space,” Moughler says, noting that the company will soon bring VMI to the installer markets, beginning with its own VIOC quick lube centers.
The company also is looking at ways to bring artificial intelligence (AI) to its business. “Like a lot of people, we’re evaluating how AI is going to work for us,” he says, noting that AI will have an important role in supply chain planning going forward.
Moughler sees a strong future ahead for Valvoline and its quick-lube business as well. “VIOC achieving its 13th straight year of same-store sales growth,” he says. “There aren’t very many retailers who can say that. As our quick-lubes business grows, we will make sure that our supply chain supports that growth seamlessly and efficiently.
“We’ll use these unique capabilities to add value for our entire customer base all over the world.”
Sidebar: Valvoline’s History
Based in Lexington, Ky., Valvoline markets and supplies premium branded lubricants and automotive services worldwide. The company started operations in 1866, when Dr. John Ellis discovered the lubricating properties of crude oil.
Seven years later, Valvoline became the first trademarked motor oil in the United States. In 1895, the company established itself firmly in the U.S. auto racing world, when a Valvoline lubricated car won North America’s first-known automotive race.
In the early 1900s, Valvoline became one of the recommended motor oils for the Ford Model T, and later developed Valvoline Racing Motor Oil, one of the best-selling racing motor oils of all time. In 1986, the company moved into the quick-lube market when it acquired an 81-store chain.