During the last decade shareholder value was the big driver for big companies. With the oil price peak I expect that purchasing will face the next big challenge … perhaps the biggest challenge ever. Especially big companies, who are not too good in reacting fast on the changing environment, will have big problems. It is a little bit like the evolution and the dinosaurs.
I remember a speech eight years ago from Heinz Traudt, the former Director International Purchasing of BMW. It was about the e-procurement project of BMW and he also explained the value chain of airbags. Until the airbag was mounted into a car in Munich or in the US, the drapery was produced in Africa, then it was delivered to South America to be sewed and after that the bags were at last mounted in Germany or in the U.S. The airbags were traveling approximately 10.000 miles, until finally assembled into a brand new BMW.
There are thousands stories like this. For instance about our delicious shrimps: They are trawled in the Northern Sea. Then they are shipped to Tunisia for peeling. After that, they return to the Northern Sea to the Northern European harbors. After a short stop for packaging in another factory the shrimps are finally distributed to the super markets. This means an additional 4.000 kilometer journey for the crustaceans, instead of 10 to 700 kilometers. I guess that we can celebrate a big misgiving, when we tell these stories someday our grandchildren (perhaps we should make a pact to never tell them).
When it comes to logistics, we were not too innovative lately. 95 % of global logistics is based on petrol. There are concepts rising like the company Skysails, who tools up vessels with large towing kites. Perhaps there will arise also the cargolifter concept again. Cargolifter was offering logistic services with zeppelins.
What about power supply?
The energy sector does not look as bad as the logistics. At least on the first view. Depending on the countries between 30 to 60 % is depending on oil. But when you have a closer look on the sources: most of it is based on gas, uranium and coal. These resources are as finite as oil. In Europe the spend of renewable energy is currently on a level of 6.5 %. The role model countries for using renewable energy are Austria and Sweden. Austria copes with more than 20% of its demand by renewable energy sources. The problem is the scalability. Although the big countries like France or Germany are taking some effort to become less dependent on fossils, they are stuck on a level between 5 to 10%. The good news is: innovation is going on in this sector, using wind, wood, bio resources, etc. The question is: is it enough to feed the enormous appetite for power of our societies? Another problem arising is that we risk famines, as too big agricultural crop lands are used for biodiesel production.
Purchasing can drive change
To talk about abstinence was in the past not too popular. But we have to think about our behaviors and as you can see already now, the high gasoline price makes at least private consumers think. Purchasing is in charge to drive the change in companies. Companies, focusing on smart purchasing and supply chain strategies will be prepared for the changes created by peak oil. They will adjust and fit faster to the new environment. Darwin was once getting his inspiration from an economist to come up with his evolution theory and now evolution comes back to economy. Once more: the fittest will survive.
Today another discussion about oil exploration was in the media. The conservative U.S. candidate McCain wants to get hands on potential oil resources nearby Alaska.
Tomorrow I will come up in the last part of peak oil, how some companies are preparing already for the further rise of oil prices.
