There have been a lot of articles on people doing the obvious things to save energy--driving less, buying more fuel efficient cars, turning the air conditioner down. But these have been mostly focused on consumers. Today's Wall Street Journal has a fascinating look at all the things that America is doing to use less oil, including some less obvious things:
Much of the way America has come to live and do business is predicated on low energy prices. After the last price spike eased in the mid-1980s, many consumers, once again, appeared to give little thought to how much energy they used. They traded in their sedans for SUVs and their ranch houses for McMansions.
U.S. companies moved manufacturing overseas where labor was cheap, unconcerned with the resulting need to move products thousands of miles back to their customers. Low fuel costs facilitated "just-in-time" delivery systems -- supplies were delivered as needed, frequently by air rather than truck. The additional fuel costs were seen as a small price to pay to keep inventories low and customers supplied with the latest goods.
The era of cheap fuel began drawing to a close three years ago, and many businesses now are taking a hard look at their energy costs.
. . .
Fuel prices are causing many companies to change what they ship and how they ship it. "You want to reduce the amount of distance, you want to reduce the amount of transportation in the network," says Tom Jones, a supply-chain manager at Ryder System Inc., a Miami-based truck-leasing and logistics company. "That really leads to people doing things differently."
Ryder has adjusted engines in its truck fleet to go no faster than 63 miles per hour, down from an earlier 65 mph limit, and to shut off after they've been idling for five minutes rather than 10. Londonderry, N.H.-based Stonyfield Farm, which leases trucks from Ryder, is using onboard computers to keep tabs on whether drivers are wasting fuel with bad habits like accelerating too quickly, says Ryan Boccelli, the company's director of logistics.
Another way companies are trying to cut fuel costs is by changing their packaging. Procter & Gamble, which makes Tide detergent, shifted to more concentrated detergent last year to reduce transportation costs and to enable retailers to fit more on their shelves.
Companies that ship cheap but bulky goods are adapting the quickest. Three years ago, Kimberly-Clark Corp., maker of Kleenex tissues and Huggies diapers, started revamping its distribution network. Its distribution centers were located next to its production plants. Now the company has eight giant distribution facilities spread around the country. The new setup, which allows the company to rely more on rail, helped it save 470,000 gallons of fuel last year.
Railroad transport, however, can slow the flow of merchandise from warehouses to store shelves. That forces retailers and manufacturers to carry more inventory or risk not having enough to meet customer demand.
How deep the changes go will depend on how much longer oil prices stay above $100. And since as I've said before, the best estimate of the future price is the current price, there's no real way of knowing how long that will be.
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