Managing Automation - August 2008 - (Page 34)

ENERGY EXPLORING ALTERNATIVES U.S. manufacturers, hit hard by escalating oil prices, agree that new energy sources and government policies are essential for their survival. Figuring out what to recommend is the hard part. BY STEPHANIE NEIL he skyrocketing price of oil is issue No. 1 these days for individual consumers or major corporations. Few predicted that the per-barrel price would rise to more than $140. Fewer still anticipated how quickly prices at the pump would climb in reaction. The only thing for sure is that the price of oil will continue to be unpredictable, presenting a major ongoing challenge to manufacturers. The United States relies heavily on foreign oil imports. According to the Organization of Petroleum Exporting Countries (OPEC), there is enough supply to meet international demand. However, a recent short-term energy outlook issued by the U.S. Energy Information Administration cites concerns that global supply growth may not keep pace with demand growth in the near term. Although Saudi Arabia raised production in July, supply losses in Nigeria and heightened tensions between Iran and Israel raise new concerns about future supplies. Global supply uncertainties, combined with significant demand growth in China, the Middle East, and Latin America, are also expected to pressure oil markets, the report says. This is a situation that is outside manufac- turers’ control and hitting many of them hard, especially the small and mid-sized enterprises that form the backbone of this country. Aside from the cost of electricity to keep production running, escalating oil and gas prices impact supply chain flow, which means companies have to store more inventory, buy raw material in bulk, and change transportation modes and schedules. “The cash flow side of the business is greatly affected by the high cost of energy,” says Richard Sade, vice president of S&S Hinge Co., a Bloomingdale, IL, maker of closures and hinges. One area in particular — distribution — is quickly becoming a sore subject at S&S Hinge, which dispatches about 25 trucks each day. “It costs about $1,400 to fill up a semi truck these days. Six months ago, it was $600,” Sade says. As a result, the company is looking for alternative distribution methods, such as rail services. But that means longer lead times, adding to processing costs on the back end. There doesn’t seem to be a solid solution in sight. “What needs to happen? Reduce the price of a barrel of oil? More drilling? I don’t know,” Sade says. “It is an economic problem and an issue we have to face as a country.” One thing is clear: The next administration ma 34 2008 August

Table of Contents Feed for the Digital Edition of Managing Automation - August 2008

Managing Automation - August 2008 Contents Take 1 After 18 Months, the Oracle/SAP Suit Has Little Effect on Maintenance Sales At 100, Foxboro Reinvents Around Its Customers New Private Equity Firm Eyes Software A Software Suite Just for Manufacturers i2 Chief Focuses on Services Plan Notes It's Time for Action Examining U.S. Competitveness Leveling the Field An Unhealthy Situation Exploring Alternatives Math and Science: Key to the Future Product Scan Advertiser Index Next

Managing Automation - August 2008

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