- Posted November 23, 2008 by
This iReport is part of an assignment:
Pain at the pump
U.S. servicemembers are being robbed.
Original Message----- From: Random Dude Sent: Monday, October 27, 2008 15:10 To: 'Broccoli, Jerry L.' BroccoliJl@aafes.com Subject: RE: Gasoline Prices and Marketing Efficiency Mr. Broccoli, Never did hear back from you on the difference between what is paid at Cp Fuji or Humphreys vs. an AAFES pump. http://www.cnn.com/2008/US/10/26/gas.prices/index.html Even with the yen rate in the toilet, it's still cheaper to buy gas off base now if you pay attention to the prices. It's shameful that AAFES readily adjusts prices up when they've already paid a lower cost for fuel but fails to adjust down when the prices fall under the rationale that they'll lose money on fuel supposedly bought at a higher cost. Out of curiosity, how much of this "we've bought it for too high a price" gas do we have left before you can negotiate a better rate? It makes no sense that you're allowed to adjust your prices weekly if the supply is bought monthly or further out. Specifically, who are the AAFES board of directors? Is there a way to provide them with direct feedback? Random Dude -
Original Message----- From: Random Dude Sent: Wednesday, September 03, 2008 11:14 To: 'Broccoli, Jerry L.' BroccoliJl@aafes.com Subject: RE: Gasoline Prices and Marketing Efficiency Mr. Broccoli, Unfortunately, your email didn't "give 87 mercedes-benzsic a better understanding of AAFESsic policies and practices". I've had to deal with AAFES here for 17+ years now on Okinawa and have a better understanding than most here do; of course by my own estimation. I woke up to the awe inspiring view of Mt. Fuji this morning at the Cp Fuji Combined Arms Training Center and a $3.13/gallon price on the gas pump for the same MOGAS that you deliver on Okinawa, just that it doesn't come with the AAFES markup or the GoJ $0.25 per gallon discount either for that matter. If the fuel farms get it at that price, why doesn't AAFES? Same fuel, same trucks delivering it. We had the same thing at Cp Humphreys in Korea. Osan, the AAFES run gas station was always $0.50 per gallon or more higher than the POL fuel point at Cp. Humphreys. I don't buy the explanation even a little bit; but understand that this is the official response crafted by AAFES Public Affairs/Media Relations (or whatever it's called these days). That is evident after comparing the first 3/4 of your reply to me with the replies received by others on the same subject; they are carbon copies. Yours is an unenviable position of having to answer questions on policies like this. On the GoJ salary funding thing; no GoJ doesn't pay directly, but instead establishes a fund; got it. My real question then is what percentage of an IHA's wages are paid from that fund? Of course, this construct you outline is much different than the graphic shown at http://www.lmo.go.jp/english/purpose/index.html which is the website of the Labor Management Organization for USFJ employees. This shows that the GoJ, namely, the Ministry of Defense pays the wages to MLC, MC and IHA workers. Either way, the loadshare of the cost is bourne by GoJ. At 12 cents per gallon, I'm paying $2.16 per tank of diesel for "operational costs" of gas pumps. Multiply that by around 40 tanks per year and you're looking at $86.40 per vehicle per year. We'll back it down to $75 per vehicle per year since many don't have big gas tanks, even though they probably fill up more often. So, with over 20,000 SOFA registered vehicles on Japan, that's conservatively (because there are many more than 20,000 SOFA vehicles in Japan) $1.5 million in operating expenses for the gas pumps. That's a pretty sizeable number. What's that operational cost cover? I realize that AAFES uses this cash cow to plug leaks elsewhere and I'm not saying anyone is pocketing a dime. It just stinks that I can't ship back 200 or so gallons of $3.13 gas from here at Cp Fuji. Thanks for listening and clarifying, Random Dude -
Original Message----- From: Broccoli, Jerry L. BroccoliJl@aafes.com Sent: Tuesday, September 02, 2008 11:22 To: Random Dude Subject: RE: Gasoline Prices and Marketing Efficiency Mr. Dude, thank you for the opportunity to respond to your concerns reference AAFES on Okinawa. AAFES' mission is to provide authorized patrons with quality merchandise and services of necessity and convenience at competitive prices, while generating earnings to supplement appropriated funds for the support of Army and Air Force morale, welfare and recreation (MWR) programs. With that in mind I would like to address your issues. Gas pricing: The gas pricing policy change was made last year moving from monthly to weekly surveying at the request of overseas drivers, maintaining consistent survey methods. The AAFES overseas gas pricing policy meets both objectives of our mission. The policy, as approved by its military Board of Directors, is to set prices based on the U.S. Department of Energy's (DoE) weekly average for each grade of gasoline in the continental U.S. plus the unique incremental costs which AAFES incurs in each overseas market. These incremental costs are bona fide costs that include (where applicable) costs related to the gas coupon management program as well as labor costs, depreciation and other miscellaneous expenses associated with providing gasoline to our customers overseas. Based on the DoE weekly reviews, AAFES gas prices may change weekly at fueling locations in Germany, the Netherlands, United Kingdom, Turkey, the Azores, Guam, Korea, Japan and Okinawa. Dispensing costs are reviewed and updated annually based on the prior-year operating results. This policy enables AAFES to keep the price of gas overseas more closely balanced with sell prices in the U.S. In the event that the price to procure fuel exceeds the Department of Energy's weekly average, AAFES sets prices at the "floor" level. "Floor" prices reflect cost plus incremental dispensing costs. "Floor" pricing is the exception to the policy that is enacted only when certain market conditions dictate. "Floor" pricing is consistent with AAFES' mission to provide authorized patrons with quality merchandise and services of necessity and convenience at competitive prices, while generating earnings to supplement appropriated funds for the support of Army and Air Force morale, welfare and recreation (MWR) programs. The price for midgrade unleaded gas in Japan and on Okinawa is likely to stay at $4.06 per gallon through the remainder of this fiscal year, since this is the lowest price AAFES can sell gas at this time without taking a loss. AAFES buys midgrade unleaded gas from the Defense Energy Supply Center for $4.19 and adds .12 per gallon to cover local dispensing costs, bringing the actual fuel cost price to $4.31. A government of Japan subsidy of 25 cents per gallon is subtracted, leaving $4.06 per gallon; the price customers see at the pump. AAFES officials contacted DESC and asked when the wholesale price might be reduced. The answer was not until at least October 1, when the Office of the Secretary of Defense Comptroller, will reevaluate the DESC price. AAFES understands the frustration motorists feel as they see the price of midgrade unleaded gas falling in the United States, without getting a break at our pumps. We hope to see a reduction in our wholesale price soon, so we can pass along the savings to our valued customers. Once again, AAFES overseas fuel pricing policy, as approved by its military Board of Directors, is designed to help accomplish the AAFES mission and keep overseas fuel prices balanced with sell prices found in the U.S. Personnel Cost: The GOJ does not pay the salaries of our IHA associates. A GOJ fund is used to offset a portion of IHA salaries, as well as being used in many other programs across all businesses to offset operating costs which ensure lower prices for our customers through the use of coupons and discounts. Electrical Utilities: Paid for by the installation. Facilities Engineers: AAFES has a team of Facilities Engineers employed for each exchange worldwide. Salaries, facility improvements and new construction are paid with exchange earnings. Warehouse Space: Provided by the installation but operational costs are borne by the exchange. Concessionaires: Fees are negotiated w/each company separately and are based on sales. Fees start at 9% and average 11%. Daiko Service: Contracted fee negotiated based on number of available taxis authorized on base to support the service. School Lunch Program: Operates as per DoD and USDA guidelines. It is a break even operation. Miscellaneous items carried in the BX: Misc. items carried in the BX are usually a result of a special request by one or more of our customers. In order to satisfy their request, we need to place minimum orders. In some instances, the remaining items do not sell. An inventory review is conducted throughout the year to purge aged, no sale and obsolete items. Some items remain as a customer service until inventories are depleted. Merchandise Return Policy: Although AAFES has one of the most liberal merchandise exchange policies, it does have some restrictions to help curb abuses. Customer satisfaction is critical to the success of our organization and our return policy ranks as one of the benefits our authorized customers appreciate the most. Again, I appreciate you taking the time to voice your opinion on AAFES. I hope the explanations to your concerns give you a better understanding of our policies and practices. Jerry L. Broccoli Area Manager Japan/Okinawa email@example.com ________________________________ From: Random Dude Sent: Thursday, August 28, 2008 3:20 PM To: Broccoli, Jerry L. BroccoliJl@aafes.com Subject: Gasoline Prices and Marketing Efficiency Mr. Broccoli, First and foremost let me say that I'm not attacking you or AAFES but am trying to provide the perspective of a long time resident here and customer in a civilized and (mostly) tactful manner. I've been reading in a number of places the cookie cutter response that you've given to folks regarding gas prices on Okinawa and how they seem to rise quickly, yet fall slowly in reaction to the DOE's average price per gallon. Yes, I'm aware that the AAFES Military Board of Directors voted to standardize overseas pricing around the DOE survey. However, I see this as a HUGE conflict of interest when people that work for AAFES or have a significant stake in AAFES are allowed to make decisions like this. Everyone is irate about congress voting themselves these big fat raises; now we have people with direct ties to AAFES voting a measure that benefits AAFES and costs all overseas servicemembers more? Seems a lot like trusting the fox to watch the henhouse if you ask me. All of this is inflicted on an essentially captive audience. Now, I know that you're not allowed to show a profit and that there are many costs involved with running your operation as well. I also know that one of the big measures of AAFES success is how much you can contribute to MWR every year. I know that managers are evaluated on what they do to maximize profits and minimize shrinkage in it's various forms. A well-run operation is what you strive for, just like all of the "for profit" businesses in the world; that makes sense, to return the max possible to the community. I can certainly appreciate that and think that any rational person can. I understand that AAFES operates in both desirable and undesirable locations worldwide. Wal-Mart can't and won't compare to what AAFES does globally; you won't find Sam Walton wanting to stand up a field PX in Iraq any time soon. What I can also appreciate is how cheap it is for AAFES to run operations in Japan and quite possibly in many overseas locations. Why do I say this? Japan is expensive, right? Well, let's look at it from what I've seen and found out over the years as I know it. Please correct my false assumptions as you encounter them. 1. The majority of AAFES workers are IHA or MLC Japanese Nationals. 75% of their wages are paid for by GoJ, correct? That workforce has to be cheap comparatively when you're only paying for 255 of the wages on 75% or more of the people. 2. There are no electric meters on AAFES facilities; who pays for your power consumption? I'll make the assumption that it's someone other than AAFES unless you can provide insight. 3. AAFES does not have it's own Facilities Engineers to the best of my knowledge and their buildings are built, upgraded and maintained just like all other base buildings, largely via GoJ funds under JFIP and similar programs. 4. Gasoline delivered here falls into the cracks on tariffs. No (or minimal) US tariffs are levied since it's not the US; yet, no (or perhaps minimal) Japanese tariffs are levied because of SOFA. Taxes are a large part of fuel costs in the US. Is it really fair that you compare apples and oranges in terms of what it costs you? 5. Does AAFES pay for warehouse space anywhere? 6. Concessionaires pay a huge premium in order to sell on base; taxi service alone is a huge profit maker for you that has been highlighted in the local news due to the high cost of being an AAFES affiliated taxi. 7. AAFES Daiko service is 1.4 times the cost of a cab whereas local daiko service is about 0.65% of what a local cab costs yet the insurance coverage and certifications are the same, more profit? 8. The school lunch program is another sore spot. Yes, it meets the USDA minimums, but barely. I really feel that we owe children a little bit more in terms of nutritional content and healthy foods. I know that it costs you money to run things here though, but aren't some of those costs unnecessary? 1. Lock de-icer isn't used often in Okinawa, nor are outdoor faucet insulators, plumbing heat tapes, and a whole bevy of other winter items. You pay a cost to ship it here, store it here, inventory it here, put it on clearance here and ultimately destroy it here. At what point is the cost of keeping the item greater than the sunk cost of procuring and shipping? 2. Bags of salt pellets for water softeners? Who has one here, not anyone I've encountered in 17+ years here. Credit where credit is due though; I haven't noticed them this year. 3. In-ground pool chlorine and pool maintenance products? Who has one here, only two I've encountered in 17+ years here and neither have privileges. Kiddie pools have to be emptied daily for safety on base, so there's another possible use shut down. 4. A wide selection of chainsaw replacement parts for chainsaws you don't carry. 5. US sized curtains that generally don't fit Japanese sized windows. Yes, that's what base housing has as well. 6. Insanely liberal return policy dependant on the level of whining from the customer. It costs a lot to take back something that a person has unwrapped, fingered up and then returned. This is routinely abused by customers and managers willing to give in to it. Sometimes at it's markdown price it gets bought by someone; sometimes it sits for 8 years like the extremely outdated computer memory and supplies that date to 1999 in the clearance bin at the PX on Foster. Costs money to maintain all of that inventory doesn't it? Might be cheaper to destroy and write off; especially since it won't work in anything over 5 years old. All of this increases the burden on your balance sheets to the point that an easy way out is to standardize fuel prices to profit more in some areas to cover losses in other areas. I understand that it costs money to send things to Iraq and Afghanistan and everywhere else that AAFES is and that some of the proceeds from our increased fuel costs fund this. That's fine and acceptable by many rational people in my mind. I really feel though that there's quite a bit of untrimmed fat in your operation and that this should be eliminated before voting yourselves a policy like the current fuels policy. Some price increase is inevitable, that's understood; the level we're at right now however is excessive. It seems to me that AAFES took the easy way out by raising prices rather than streamlining operations and product lines. I understand that contributing less to MWR would look bad, but MCCS has managed to create a fairly self sustaining enterprise. You shouldn't have to cover for the USAF MWR systems' ineptitude. Another undesirable side effect is the amount of AAFES delivered stuff that winds up in landfills on this island. That burden is significant and our impact as a whole on the ecology of this island from being consumers is also significant. Thank you for your time and consideration of a customer's viewpoint. Random Dude.