Impact of Energy Prices on Global Supply Chain Design

Boston Strategies International’s President, David Jacoby delivered the results of BSI’s recent study “Impact of Energy Prices on Logistics & Global Supply Chains” at the New England Supply Chain Conference and Exhibition (NESCON) in Boston. NESCON is produced by APICS (The Association for Operations Management), the Council of Supply Chain Management Professionals (CSCMP)’s New England Roundtable, and The Northeast Supply Management Group of the Institute for Supply Management. The 2016 conference consisted exclusively of the top-rated All-Star speakers from the conference’s 12-year history.

For global shippers, recent dramatic changes in energy costs necessitate a review and reconfiguration of the number, type and location of distribution centers and fleet assets, since the trade-off between transportation costs and inventory holding costs has changed substantially.

energy price trend graph

BSI’s study evaluated the results of 400 scenarios using a network modeling tool to quantify the impact of recent gasoline, diesel, electricity prices, load factors and network design on total supply chain costs. The study mapped the relative impact of key cost drivers according to their impact on total supply chain cost, scaling the variables from one tenth to 10 times their current value.

network sensitivity graph to energy

While current low fuel prices have dampened the pressure to move towards green energy, progressive carriers like UPS, shippers like AT&T, and OEMs like Mercedes-Benz continue their work on alternative fuel vehicle fleets, mostly based on ethanol blends and Compressed Natural Gas (CNG).

Mr. Jacoby engaged a lively discussion on the impact of disruptive technology such as Uber, Drones, and Connected Vehicles on commercial logistics, and presented a framework for logistics planning.

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About the author

David Jacoby has been consulting for over 25 years in operations strategy, of which the last eight have focused on the oil, gas, and power industries. He wrote Optimal Supply Chain Management in Oil, Gas, and Power Generation (PennWell, 2012) and The Guide to Supply Chain Management(The Economist, 2009). He has taught Operations Management at Boston University's Graduate School of Business and served as a Contributing Editor for the Economist Intelligence Unit. He holds a B.S. in Economics and an MBA from the Wharton School.

COMMENTS (1)

Like. CNG/LNG is the cleanest fuel alternative but needs to find find more direct applications world-wide.

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