Fox River APICS Chapter Peak Oil: Hit or Myth? Mike Sheahan, CLM, CIRM, CFPIM msheahan@emailta.com...
Preview:
Citation preview
- Slide 1
- Fox River APICS Chapter Peak Oil: Hit or Myth? Mike Sheahan,
CLM, CIRM, CFPIM msheahan@emailta.com Transformance Advisors, Inc.
www.transformanceadvisors.com
- Slide 2
- Background & Predictions What is the impact on supply
chains? What can we do to prepare, respond? Peak Oil
- Slide 3
- Oil is a finite resource The critical question is: when is the
date of the maximum daily amount of world oil production the peak?
After that, oil will be an irreversibly declining resource facing
increasing demand which cannot be met. Walter Youngquist
- Slide 4
- Oil Production U.S. Finite Natural Resources
- Slide 5
- Worlds foremost oil producer & exporter Worlds foremost oil
producer & exporter Worlds largest exporter of manufactured
goods Worlds largest exporter of manufactured goods Worlds foremost
creditor nation Worlds foremost creditor nation Self-sufficient in
nearly all resources Self-sufficient in nearly all resources Worlds
foremost oil importer Worlds foremost oil importer Worlds foremost
importer of manufactured goods Worlds foremost importer of
manufactured goods Worlds foremost debtor nation Worlds foremost
debtor nation Jobs fleeing to other countries Jobs fleeing to other
countries U.S. in 2008U.S. in 1950
- Slide 6
- M. King Hubbert In 1956, M. King Hubbert predicted U.S. oil
production would peak in the early 1970s. In 1956, M. King Hubbert
predicted U.S. oil production would peak in the early 1970s. Was
widely criticized by many oil industry experts and economists. Was
widely criticized by many oil industry experts and economists. In
1970, the U.S. oil industry celebrated its biggest production year
in history with no end in sight. In 1970, the U.S. oil industry
celebrated its biggest production year in history with no end in
sight. In 1971, Hubbert's prediction came true. In 1971, Hubbert's
prediction came true.
- Slide 7
- U.S. Oil Production Peak
- Slide 8
- Oil Production World
- Slide 9
- US Energy Information Administration www.eia.doe.gov
- Slide 10
- Slide 11
- What worked before Following U.S. oil production peak, the U.S.
maintained economic growth by importing more oil from other
nations. Following global oil production peak, world will not be
able to compensate by importing more oil from other planets.
- Slide 12
- Slide 13
- Slide 14
- When Does Crisis Occur?
- Slide 15
- Deffeyes: 2005-2009 Simmons: 2007-2009 Youngquist: 2007-2008
T.B. Pickens: 2005-2007 Campbell: 2010 BP: 2010-2015 Hirsch et al:
2016 Global Oil Peak: When?
- Slide 16
- Saudis, Kuwait, Iran, all major fields now in production have
increased the stated reserves since 1971 even though there have
been NO NEW discoveries. How Accurate?
- Slide 17
- Shedding Light on Saudi Arabia 5 super giant oilfields make up
90% of oil output and 3 giant oilfields make up another 8%. 5 super
giant oilfields make up 90% of oil output and 3 giant oilfields
make up another 8%. These oilfields are between 40 and 60 years
old. These oilfields are between 40 and 60 years old. All are
reaching point of decline. All are reaching point of decline. Half
of proven reserves are questionable. Half of proven reserves are
questionable. Remaining oil is harder to produce. Remaining oil is
harder to produce. 2005
- Slide 18
- Out of Gas: The End of the Age Of Oil Peak output occurs as of
supply is gone Peak output occurs as of supply is gone No viable
new sources No viable new sources Proven reserves are questionable.
Proven reserves are questionable. Remaining oil is harder to
produce. Remaining oil is harder to produce. 2004
- Slide 19
- ScenarioResult Wait for peaking Shortages are large and long
lasting Start crash program 10 years before peaking Delays the
peaking, but still produces shortages Start program 20 years before
peaking Avoids the problem and provides a smooth transition
- Slide 20
- Responses to Peak Oil Someone will find more oil Technology and
substitutes will arrive We are in for a bumpy transition Major
disruptions & profound changes Expectations for Change End of
civilization as we know it
- Slide 21
- The Hirsch Report The world has never faced a problem like
this. Without massive mitigation the problem will be pervasive and
will not be temporary. Previous energy transitions were gradual and
evolutionary. Oil peaking will be abrupt and revolutionary. The
Hirsch Report U.S. Department of Energy February 2005
- Slide 22
- Out Of Oil Alternatives? Oil sands / Tar / Shale Bio-Mass /
Bio-Fuel - ethanol Natural Gas/LPG Coal / Coal to Oil Geothermal
Pros: on-going / sustainable / renewable / available / cost
effective when oil is high
- Slide 23
- Out Of Oil Alternatives? Hydroelectric / Tidal SolarWind
Nuclear Fission Nuclear Fusion Cons: cost / resources / yield /
scalability / environment / safety / politics / technology
- Slide 24
- U.S. Energy Consumption
- Slide 25
- Total Landed Cost The sum of all costs associated with
producing and delivering products and services to the place where
they generate revenue your customer's door or point of use. Survey
at the APICS 2007 International Conference: Only 14% have used
total landed cost analysis with various scenarios of future energy
costs
- Slide 26
- The Trade-Offs The big question I have is how a spike to $100
oil might impact sourcing, offshoring, and network strategy
decisions. At the heart of network strategy is the balancing of
trade-offs across inventory, transportation, and operating costs -
while meeting customer service. Almost by definition, the result of
that calculation should be different at $100 oil than it would be
at $30. Dan Gilmore Supply Chain Digest Summer 2005
- Slide 27
- Transportation Costs International: 40 container, Asia U.S. $
20 per barrel = $ 3,000 $135 per barrel = $ 8,000 $135 per barrel =
$ 8,000 $200 per barrel = $15,000 (projected) Domestic: $10
increase in oil per barrel = 4 per mile increase in
transportation
- Slide 28
- Labor vs. Energy A high tech hardware contract manufacturer
found offshore cost savings of only 0.8% on a product where
significant revenue losses might arise if supply chain disruptions
occurred. The reason is that labor costs, as a proportion of total
costs, were small. The far lower average wages were almost
completely offset by increased logistics costs
- Slide 29
- A New Paradigm We have a paradigm that manufacturing will go to
Asia and we are faced with the reality of managing complex supply
chains with long lead times. Could it be that sound strategy
coupled with rigorous total landed cost analysis will favor lean
supply chains that support customers in local markets? Follow the
leaders like Honda and Toyota. Mike Loughrin July 2006
- Slide 30
- Rethinking Network Optimization Dynamically Costs WILL increase
until suitable alternate for petroleum is found Network
Optimization skill-set becomes competitive advantage Managing for
Minimum Cost Increase Competing for Maximum Service Level Protocol
= Dynamic vs. Static
- Slide 31
- Potential Impacts Consolidation of freight Rail, Water + fewer
small loads Rail, Water + fewer small loads Move from air to ground
/ truck to rail Fewer shipments/less JIT Longer lead time to market
Economies of scale/larger lot sizes
- Slide 32
- Potential Impacts contd More frequent re-alignment of
distribution networks & supply chain optimization Shared SCM
resources - 3PL Higher inventory at DCs Improved service/less
expediting Flexible supply chain strategies
- Slide 33
- Potential Impacts contd Pressure on profit margins Trade off
product cost for transportation cost More segmentation of markets
More segmentation of markets > Mass Customization more important
> Mass Customization more important > Limiting
Options/Features > Limiting Options/Features Integrated
packaging/product design Integrated packaging/product design
- Slide 34
- Potential Impact contd Deglobalization Local sourcing
strategies Near/On-Shoring instead of Off-Shoring Manufacturing
more near customer Increase in Capital Costs Squeeze small
firms
- Slide 35
- Potential Impact contd US Made Mexico Made China Made India
Made Vietnam Made Korea Made Mexico Made US Made EU Made SA
Made
- Slide 36
- Supply Chain Management is a core competency Lean Supply Chains
Supplier Relationship Management Customer Relationship Management
Lean Enterprise
- Slide 37
- Call to Action 1.Continue learning - Peak Oil 2.Routinely
assess total landed cost (data accessibility) 3.Craft a lean supply
chain 4.Dynamic Management 5.Focus - SCM skills in your org
- Slide 38
- Bibliography Twilight In the Desert Matthew R. Simmons, 2005
Matthew R. Simmons, 2005 The Long Emergency James Howard Kunstler,
2005 James Howard Kunstler, 2005 Out of Gas: The End of the Age of
Oil David Goodstein, 2004 David Goodstein, 2004 The Coming Economic
Collapse The Coming Economic Collapse Stephen Leeb, 2007 Stephen
Leeb, 2007 Beyond Oil Kenneth Deffeyes, 2005 Kenneth Deffeyes,
2005
- Slide 39
- More than any other time in history, mankind faces a
crossroads. One path leads to despair and utter hopelessness. The
other, to total extinction. Let us pray we have the wisdom to
choose correctly. Woody Allen, 1980 Side Effects: My Speech to the
Graduates
- Slide 40
- The Impact of Oil Price on Supply Chain Strategy Brooks A.
Bentz, Accenture brooks.a.bentz@accenture.com David Simchi-Levi,
ILOG and MIT dsimchilevi@ilog.com Bob Gosier, Accenture
robert.gosier@accenture.com 4th June, 2008
- Slide 41
- In light of this newfound high-cost fuel reality, firms must
rethink their supply chain strategies by questioning long-held
assumptions about transportation costs and putting management
decisions through new economic equations Supply chain executives
must prepare for the new realities. Mike Kilgore & Gary Girotti
Chainalytics Aug. 26, 2006 Rethinking Strategies
- Slide 42
- Today, rail will move a ton of freight an average of 410 miles
on just one gallon of diesel fuel. One gallon of diesel fuel will
move a ton 59 miles by truck