Supply chain benefits from low oil prices

Oil and the Supply Chain Industry

Introduction

The price of crude oil is one of the biggest factors in the supply chain industry. Over the past year and a half, the price of oil has been on a steady decline. For the first time in many years, crude oil recently went below $30 per barrel. After a rally on January 21, the price of oil is now back above this important benchmark. However, there are many people who believe that the price will go back down towards the $25 a barrel mark.

Saving Money with Low Oil Prices

There are many ways that companies can save money with low oil prices. For companies that use a lot of FOB transportation, this is a huge area of savings. There are large retailers in the United States that spend hundreds of millions of dollars per year just on fuel. Just a couple percent drop in oil can make a huge impact on their profits. With oil prices at their lowest point in many years, many companies are experiencing a huge decrease in fuel expenses against last year.

Planning for the Future

Companies need to think about the future when it comes to the price of oil. Although the cost is low now, the price will be going back up sometime in the future. If companies get accustomed to the low price of oil, they could be setting themselves up for disappointment and lower profits. Always invest in your supply chain in order to lower the cost of transportation over a long period of time. Reducing the miles between your distribution centers and stores is a great way to accomplish this goal.