|
Managing higher fuel costs
Lisa Wichmann
As this editorial is being written on a Thursday afternoon, many drivers are anxious to see what Friday will bring in terms of weekend gas prices. In a situation unheard of a decade ago, weekend warriors and cottagers may be thinking twice about hitting the highway.
For supply chain managers, the anxiety is far worse. Not only will their weekend plans be more costly, but the higher fuel prices will be staring them in the face Monday morning as they crunch their bottom line numbers.
Until recently, higher crude prices were largely the complaint of trucking companies, particularly owner operators, shippers and purchasers of petroleum-based commodities. But in 2008, we're finally starting to realize how rocketing crude prices will irrevocably change the world.
We've got a GM plant in Oshawa, Ont. shutting its doors for the simple
reason that North Americans aren't as eager to buy pick-ups and muscle cars as they used to be.
Consumer taste is leaning more toward fuel-efficient vehicles, and it's a shame it took automakers here too long to respond. The ripple effects of the closure will be felt by automotive suppliers, and virtually every business in the region, as incomes decline.
Over in Asia, people are spilling out onto the streets to protest fuel price increases. Gas is up 41 per cent in Malaysia, and diesel has jumped a whopping 67 per cent. Schools and businesses in India have been closed temporarily while the protests rage, giving rise to more concerns over political instability.
In the US, airline companies are dropping out of the sky, with one bankruptcy after another, wreaking havoc on corporate travel programs as capacity tightens and fares go up.
Trade with Asia isn't looking as hot as it used to either. The cheaper wage advantage is slowly eroding, and ocean shipping costs are going nowhere but up. A news story in this issue shows it now costs $8,000 to land an ocean container from Shanghai. That will climb to $15,000 if crude hits $200 a barrel.
We're seeing companies wrestle energy procurement away from plant and
facilities managers and put it squarely within the purchasing department. Executives are realizing the crisis requires a skill set only purchasers have. Those skills involve understanding term payments, being able to negotiate, getting insight into suppliers' cost models and pressures. Purchasers are being asked to hedge the energy market, extend terms, and collect data on their facility's energy consumption patterns, to uncover ways to schedule more favorably.
Where global sourcing is concerned, supply chain managers are taking a keen look at Mexico, the US and Canadian sources, not to replace their overseas vendors, but to get the supplier discovery process, which can be a laborious one, off the ground.
Forecasters are calling for a hotter than usual summer. And every supply chain manager knows, the heat is definitely on.
Contact the editor at lisa.wichmann@pb2b.rogers.com
|
