Today, the transportation of goods consumes 15 million barrels of oil a day—roughly one-fifth of total production. Wow.
This staggering amount reflects the fact that supply chains of many manufacturing sectors went global when oil was cheap. In 2008, when oil hit $150/barrel, this variable in the supply chain equation proved that a supply chain model predicated on cheap oil is no longer viable. It also exposed the opportunities to increase margins and reduce risk by decoupling a supply chain as much as possible from energy.
Tobias A. Meyer, an associate principal in McKinsey’s Frankfurt office, has published a fascinating interactive to illustrate the challenges and show the opportunities to reduce energy costs in supply chains. Meyer has made an important contribution to McKinsey's ongoing study of efficiency in supply chains. McKinsey has "looked at numerous opportunities to reduce the amount of oil used to get goods from a manufacturer’s dock to a retailer’s shelf. These opportunities are available not only to manufacturers but to wholesalers, distributors, carriers, and third-party businesses. [They’ve] grouped these opportunities into six levers to illustrate possible next steps. Of course, the players in a chain operate independently from one another, so achieving all of these gains would require coordinated efforts and investments—a considerable challenge."
The six levers (divided into two groups) are:
Supply chain set up
- Increase value density
- Reduce average transportation distance
- Change the mix of transportation modes
Transport assets - Address asset technology (e.g. rail, tanker, trucking)
- Assess usage of individual assets
- Assess usage of collective assets
Improving energy efficiency has become a top concern for executives, Tobias Meyer's interactive is a helpful tool to begin exploring levers for potential energy-efficiency gains in each stage of the supply chain. The ability to obtain the maximum gains will be contingent on the supply chain participants coordinating activities and sharing better information. The technology tools necessary to do this have been emerging over the past 5 years, and are becoming mature enough to help make a significant difference.
