Beyond the Tipping Point: Preparing to Thrive in an Oil-Challenged World

In the short term, oil prices look set to remain highly volatile, with a long-term probable upward trend.

This detailed white paper examines how companies need to rethink their supply chains in light of these trends in order to achieve high performance.

In mid-2008, Accenture published a widely regarded white paper, “Past the Tipping Point,” which was aimed at helping companies adjust to the dramatic increases in the price of oil at the time. Nearly two years later, high oil prices have been replaced by highly volatile oil prices in the short term, and the long-term prospect of sustained price hikes.

These trends are driven by the fact that world oil is expected to peak in the next decade, with supplies of easily extracted (and thus cheap) oil likely to run out in 2050. And even if oil supplies held out or new finds were discovered, environmental pressures are likely to mount, and with them tax burdens associated with carbon-based fuel production.

Accordingly, in this paper, "Beyond the Tipping Point: Preparing to Thrive in an Oil-Challenged World," we will discuss holistic approaches to five key processes.

• Network strategy. When oil prices skyrocketed, many organizations recognized the need to focus less on consolidating warehouses and manufacturing plants and more on moving facilities closer to the customer. Is this the paradigm companies should follow given today’s volatility and tomorrow’s near-certain (and probably permanent) price premiums?
  
  
• Sourcing and Procurement. Fluctuating prices—combined with the prospect of record prices down the road—make rapid and accurate identification of total cost of ownership essential.
  
  
• Planning and Forecasting. When a financial cataclysm occurs (like wildly fluctuating or skyrocketing fuel prices), scores of things happen that make planning and forecasting different, more complicated and more essential.
  
  
• Transportation. Most companies will need a different transportation paradigm that emphasizes better utilization through fewer shipments over shorter distances, with more quantity per shipment and less empty miles.
  
  
• Distribution. Every facet of distribution is affected by fuel prices. Accordingly, every characteristic of a distribution operation could change as well.

There is never a bad time to review and then optimize supply chains. High-performance businesses—those that consistently outpace their competitors in growth and profitability—know that better than most. An era of volatile oil prices will increase the distance between high performers and the rest. High performers will:

• Invest to enhance supply chain flexibility.
• Assess and minimize their vulnerabilities.
• Align their actions with long-term strategies (both supply chain and corporate) that are well established—but constantly revisited, reevaluated and updated.

Contact us to find out how Accenture can help your company achieve high performance in an oil-challenged world.

Jonathan Wright is a senior executive in the Accenture Supply Chain Management service line, and head of the Fulfillment group. He has 18 years’ experience in global supply chain transformation, fulfillment strategy and network improvement in the retail; communications; high tech; aerospace and defense; and health and life sciences sectors. More recently he has led the development of the Accenture Green Supply Chain group.