In a post earlier this week titled the Atlanta Gas Supply Shortage, I described the widespread panic that has resulted from the gasoline shortages being experienced in the southeastern part of the US. In this post, I wanted to expand on the previous post with a discussion of the impacts to the local business community, specifically on the supply chain.
What are the impacts of the gasoline shortage to the Atlanta area’s supply chain?
- Discretionary Purchases – With
gas shortages consumers are less likely to make discretionary trips to
the shopping mall. Not only will retail sales will suffer, but
inventory levels are likely to increase as well. The combination of
low sales and supplier fulfillment of shipments on-order or in-transit
will have a doubling effect on stock positions. - Food Spoilage – Many food service and restaurant operators are suffering from lower
business during the gas shortage. Not only are consumers making fewer
discretionary trips, but many of the restaurants located next to gas
stations are not accessible, because gas lines up to 50 cars long are
blocking the entrances and exits. Perishable food items with a short
period of freshness will likely spoil before the crisis ends. - Lost Sales – Convenience stores operated by petroleum retailers are struggling as
well. They can only draw traffic into the convenience store when they
have fuel in stock. The lack of convenience store sales has a big
impact on service station profitability. Although gas prices have
risen dramatically in recent years, the petroleum retailers capture
little incremental profits from gas sales. Most of the margin
expansion has occurred upstream in the refining process.
It could have been much worse. There have been
some shortages to diesel fuel used to by commercial truck operators,
but most of the gasoline shortages in Atlanta were for the unleaded
products used to power passenger cars. What would be the impacts to
the supply chain if diesel products experienced a widespread shortage?
I was watching a special on CNBC the other night with Maria Bartiromo
titled the Hunt for Black Gold.
One of the energy experts interviewed stated that if there were a
widespread fuel shortage it would take only three days to run out of
food! If trucks cannot get diesel to transport goods, replenishment
activities would come to a halt. One of the consequences of
demand-drive supply networks and lean manufacturing models is that
safety stocks of inventory are no longer prevalent in the supply
chain.
Responding to Gasoline Shortages
So what can retailers and manufacturers prepare
for a fuel shortage? How can planners try to avoid the supply chain
disruptions from unpredictable transportation challenges?
Risk mitigation strategies such as diversifying
the manufacturing plants, supplier base and transportation utilized in
your supply chain will provide some level of resiliency against
unforeseen gas shortages and transportation bottlenecks. A more
expensive option is to buffer additional inventories at strategic
points in the supply chain. But the truth is that no amount of
planning or hedging can provide 100% avoidance of transportation
related disruptions. As a result, supply chain managers should place
as much emphasis on preventative measures as they do on their ability
to quickly to react to disruptions when they occur. When a gasoline
shortage arises, transportation managers should be able to quickly
adapt their supply chain models to route around the bottlenecks. A
key factor that will influence the agility and responsiveness to supply
chain challenges is the level of information you have about your
transportation processes. Of course much of this information comes
from outside the enterprise and is communicated via B2B e-commerce
technologies.
GXS
