As the US shale gas boom grabs more headlines and its impact is being felt by all segments of the transportation industry, now may be a good time for supply chain managers to starting tuning into this phenomenon.
Sure, a lot of the mainstream conversation currently still focuses on how this new energy source is boosting the US economy (shale gas currently accounts for 44 percent of total US natural gas production) or on the physical movement of the gas from the field to the processing plants. But, those savvy types running different cost-reduction scenarios and what-if logistics modeling, will see another story bubbling up in between the lines of the latest news article and how a domino effect could come into play here.
There are a few ways the high-tech industry may benefit both directly and indirectly from the shale gas noise.
One is by being a supplier to this growing industrial sector. Shale gas operators are maturing and realize legacy systems do not adequately serve their needs.
Second (and third) the wave of manufacturing coming back to the US might create advantages both within high-tech organizations and from suppliers that are onshoring production.
PwC, in its "Shale energy: A potential game-changer" report, points out:
This new source of abundant, low-cost energy is proving to be a significant incentive for chemical producers and manufacturers to shorten their supply chain and bring production facilities back to the United States. A revived manufacturing sector would increase the need for rail and trucking to move more products domestically and for shipping exports abroad.
Two questions could be drawn from this. Does this mean more electronics-related manufacturing will come back, too, and see similar benefits? And, if the chemical industry shortens its supply chain -- and assuming that lowers costs -- and component makers buy chemicals to make their products, should some of this savings eventually pass through the rest of the supply chain?
Let's forget about an obvious benefit. The more shale gas that's used in the transportation and logistics industry, the more chances there are for overall transportation costs to drop, which will make the cost-sensitive supply chain professional smile. PwC found that "the low price of liquefied natural gas (LNG) prices relative to the more expensive diesel fuel has led many companies to switch to vehicles run on natural gas." Citing UPS and FedEx company data, PwC says those top-tier logistics providers use alternative fuel sources, like liquefied natural gas and compressed natural gas engines, in their fleets of trucks.
Lastly, the high-tech supply chain could be a model of excellence to an industry just beginning to learn things like just-in-time delivery and supplier collaboration. Ironically, as the shale gas boom creates all sorts of new and interesting transportation and logistics opportunities, shale gas operators and their management teams are facing a number of supply chain issues their compatriots in high-tech can relate to. EY, in its "Supply chain management in a shale market" report, names familiar headaches related to:
- Driving more operational efficiency
- Optimizing the value chain
- Better coordinating just-in-time delivery
- Pushing beyond the limits of legacy processes
- Developing collaborative supply chain initiatives
- Improving demand planning and strategic sourcing capabilities
- Integrating logistics tracking
These are things that the high-tech sector has struggled with and made notable progress on these last few years.
Maybe it's time for a meeting of the minds and finding ways to bring high-tech's best supply chain practices to the gas industry. The benefits may be just under the surface if you dig a little bit.