Risk Over Reward: The Honor System

With summer in full swing, propane tanks for grills are at peak demand. When a tank runs out of propane on the weekend or after hours, most end-users are not willing to wait until the next business day to restock. In these situations, convenience is king.

Serving customers outside of business hours is an ongoing challenge, but distributors are adapting. Welding & Gases Today put one propane distributor’s “Honor System” to the test, and GAWDA members reacted.

To serve customers after hours, Reliable Propane, a 67-year-old home and water heating supplier in Clarence Center, NY, leaves several “honor tanks” out on the side of its building. A sign invites customers to take a tank filled with 5 pounds of product and return it the following business day, completely free of charge.

Reliable Propane President Ken Albrecht admits that missing tanks are an issue. “As you might suspect, not all of our tanks are returned,” he says. Albrecht estimates that between 35 and 40 tanks are currently unaccounted for.

The GAWDA members we spoke with agree that the “honor system” carries a significant amount of risk. GAWDA President-Elect Craig Wood, industrial division president at O.E. Meyer Co. (Sandusky, OH), says that liability is a serious issue. “People do devious things,” he says. “Propane cylinders are best left under lock and key. I think there’s more risk than there is reward.”

A fellow distributor who asked to remain anonymous agrees with Wood in saying that compliance and security are serious issues. “Without someone present to verify the transaction, customers could try to exchange a cylinder with a missing valve or a hole in it. When a customer comes in to exchange a cylinder, we verify first of all that it’s ours, and second that it is safe.” He says the honor system is not a program his company would use at any of its locations. “We wouldn’t even consider the concept.”

Although the honor system comes up short in the eyes of these GAWDA members, the good news is that there are ways for a distributor to compete with the big-box stores after hours. In fact, many distributors already are.

To handle this challenge, O.E. Meyer has set up cylinder exchange cages at gas stations and carryouts throughout its marketplace. “Most of our 20-pound grilling cylinders are sold through our exchange racks,” says Wood. “We do a milk run every week to replenish the cylinders. The proprietor bills the end-user, and we bill the proprietor in turn.”

The GAWDA distributors point out that buying propane cylinders is all about convenience, meaning customers are not likely to drive out of their way to get it. While a typical gases and welding supply distributor may be open from 7:00 a.m. until 4:30 a.m., cages placed at a convenience store or even a big box store are available to customers seven days a week, and for anywhere from 15 hours a day on up to 24 hours a day. With convenience at a premium, exchange cages spaced throughout the market allow distributors to be where the customer is.

When it comes to the honor system, location is an issue. Reliable Propane’s Albrecht says of the initiative, “Our newsletter goes to five local counties and we highlight honor tanks in the spring edition each year. It is impractical to expect someone living 40 miles away to take advantage of this service. However, it informs customers about who we are, even though we do not benefit from their business directly.”

How do you serve customers after hours? Let us know by leaving a comment.

Gases and Welding Distributors Association