[photopress:logistics_price_of_petroleum.jpg,full,alignright]The rises in the price of petroleum are going to have dramatic effects on logistics not just in China but throughout the world. But, because of the distances covered, China will feel a serious effect the higher the price goes.
Dan Gilmore, editor-in-chief, of Supply Chain Digest in a long article looks at the problems that will arise when petroleum reaches $200 a barrel, which is something that now seems inevitable.
Goldman Sachs analysts, and some others, are of the opinion oil will reach $200 a barrel which will change the financial logic behind many transactions.
Dan Gilmore writes that ‘some experts continue to say it’s a bit of a bubble, and we should see a strong price pull back but I am increasingly thinking whatever pull back we get will be small, and again we will hit a higher trough from which prices will rise again.’
In other words he considers $200 a barrel a real possibility.
The world with $200 a barrel oil will be a very different place.
He suggests actions that must be taken. These actions, his words, include:
To have much hope, we will need to take massive actions to reduce transportation miles and costs. If you aren’t maximizing opportunities for consolidation and pooling, and loading your trailers with maximum efficiency, you will be at a huge cost disadvantage.
In the obvious category, we need to look at our supply chain networks, with urgency.
We’ll have to fire some customers. There are simply some customers — more for some, fewer for others — for which rapidly increasing logistics costs will overwhelm their marginal profitability.
Will this finally be the catalyst that drives more transportation collaboration, and/or continuous move planning?
Finally he asks whether all this will actually reverse some of the trend to low-cost country sourcing, as transportation expense overwhelms per unit savings. Manufacturing in some parts of China is going to be at a serious cost disadvantage.
As this is written oil has reach $128 a barrel.
Source: Supply China Digest
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