Evolving supply chains and fuel prices

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As 2012 comes to an end, 4C Associates looks back at some of the predictions  made earlier this year. Craig Bunker considers prediction number 12: “High fuel costs and environmental concerns will drive the need for the next level of supply chain optimisation.”

A recent Jones Lang LaSalle survey, revealed that 95 per cent of supply chain managers believe rising energy and transport costs will be the biggest challenge facing supply chains for the next five years. These results, based on information provided by 50 European 3PLs, retailers, manufacturers and waste to energy respondents, highlight the extent of the issue.

Optimising for Supply Chain Success

Dr. David Simchi-Levi Professor of Engineering Systems, at Massachusetts Institute of Technology, has analysed the impact of rising oil prices and concluded that every $10 increase per barrel of crude oil results in an additional 4-cent per mile increase in transportation rates. As prices continue to rise, and with supply chain representing between 70-80 per cent of total costs for business, cutting fleet expenditure is clearly a priority for many companies.

Throughout the past 12 months, 4C Associates has worked with several high profile clients to reduce costs through the optimisation and restructuring of supply chains. By managing fleet on an economic cost basis, implementing industry best practice and employing the latest technology, 4C has been able to reduce supply chain costs by an average of 10 per cent.

Economic and Environmental Concerns

Increasing transport costs coupled with the economic downturn have put huge pressure on companies to cut their supply chain costs. This has led to a number of businesses working to optimise their current strategy, and implement the latest tools and techniques. Others are considering onshoring key functions.

With costs set to continue rising in 2013, there is little doubt that these trends will intensify. In addition, a continued drive to promote clean technologies and cut carbon emissions will provide yet more incentives to cut wastage in supply chains.

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