Stop Losing Money on Small Propane Drops

Small, frequent deliveries are quietly eroding margins across the retail propane industry. On paper, a 60-gallon stop still generates revenue. In practice, it often fails to cover the fully loaded cost of rolling a bobtail: driver time, truck depreciation, insurance, dispatch labor, and working capital tied up in inventory. With tighter driver availability and higher insurance scrutiny, the financial and operational drag of undersized drops is no longer a minor inefficiency. It is a structural leak. Operators who treat minimum drop policies as optional customer service concessions are subsidizing behavior that works against route density, safety discipline, and long-term profitability.

The Real Cost of a 60-Gallon Stop
The issue is not the gross margin per gallon. It is the cost per stop. Every delivery triggers fixed activities: pre-trip inspections, routing, documentation, compliance checks, and billing. Even in well-optimized systems, a residential stop often consumes 25 to 40 minutes of combined drive and on-site time. When a driver is making small, reactive deliveries instead of full-route, optimized runs, the number of stops per day drops while fixed labor costs remain constant.

At the same time, insurance carriers increasingly evaluate fleet risk based on miles driven, not gallons delivered. A truck making 12 small drops across a broad region presents greater exposure than one making eight well-planned fills within a tight service zone. Higher miles per delivered gallon can indirectly affect loss ratios and future premium negotiations.

Inventory cost compounds the problem. EIA data consistently shows seasonal price volatility in propane markets, particularly during winter heating cycles. When customers call for 30% or 40% fills instead of allowing monitored or scheduled fills at lower tank levels, retailers must manage more frequent product replenishment and hedging decisions. Small drops increase working capital strain without increasing margin contribution.

Minimum Drop Policies and Customer Psychology
Many operators avoid minimum delivery fees because they fear customer pushback. In practice, resistance is often overstated. Customers generally accept fees when they are predictable, clearly explained, and consistently applied.

The key is framing. A minimum drop policy should not be presented as a penalty. Rather, it is a cost recovery structure that supports safe and reliable service. When positioned correctly, most residential and light commercial customers understand that rolling a delivery truck for 40 gallons is not operationally sustainable.

Problems arise when policies are inconsistently enforced. If dispatch waives the minimum for vocal customers but charges others, word spreads quickly. The result is a gradual erosion of pricing discipline and route efficiency. Over time, customers learn that requesting partial fills is negotiable, and the retailer absorbs the inefficiency.

Companies that have moved to clear thresholds, such as a 100-gallon minimum or a delivery fee below that threshold, often report improved route density and fewer will-call emergencies. Customers adjust their ordering behavior when incentives are aligned.

Dispatch, Routing, and Driver Impact
Small drops do much to complicate route planning. Modern routing software can optimize the geography involved, but it cannot eliminate inefficiency if delivery volumes are fragmented.

Will-call customers who habitually order small amounts introduce variability into otherwise optimized routes. Dispatchers end up inserting off-cycle stops that extend driver hours and increase overtime exposure. This also affects compliance with hours-of-service requirements for CDL drivers operating under federal regulations.

From a safety standpoint, more stops mean more driveways, more backing maneuvers, and more exposure events. Each additional stop is a potential claims event. Over an entire delivery season, the difference between 9,000 stops and 11,500 stops across a fleet is significant from both a safety and insurance perspective. Therefore, reducing small drops is not just about margin. It is about lowering exposure per delivered gallon.

What Operators Should Do Now
First, quantify your true cost per stop. Include driver wages and benefits, fuel, maintenance, insurance allocation, dispatch labor, and administrative overhead. Many retailers underestimate this number. Once calculated, compare it against the gross margin generated by typical 50- to 80-gallon deliveries.

Second, establish a clear, written minimum delivery policy. Define the gallon threshold and the associated fee. Apply it uniformly across comparable customer classes. Exceptions should be rare and documented.

Third, transition chronic small-drop customers to monitored or routed delivery. Tank monitoring technology has matured and can materially improve fill optimization. The investment is often justified by reduced emergency calls and improved drop size.

Fourth, communicate the change proactively. A short, direct letter explaining the operational realities – fuel, insurance, and labor costs – will go a long way in helping establish credibility. Most customers prefer transparency over surprise charges.

Protecting Margin Without Damaging Relationships
The propane industry has always balanced service culture with operational discipline. Small drops test that balance. Absorbing unprofitable stops may feel customer-friendly in the short term, but it undermines long-term stability. With volatile wholesale pricing, tightening labor markets, and increasing compliance costs, retailers need disciplined delivery strategies now more than ever.

Minimum drop policies are not about squeezing customers. They are about aligning delivery behavior with the economics of running safe, compliant fleets. Operators who address this now will see stronger route density, lower exposure per gallon delivered, and healthier margins through the next heating cycle.