Reshuffled supply chains

At the end of the 20th century, it looked as if the first century of the new millennium would mark the beginning of a truly global economy. Free-trade deals were flourishing and globalization seemed to be an unstoppable force.

Yet as oil prices began to skyrocket, rising to almost $150 per barrel in early 2008, some media outlets began to give voice to the notion that the future could look quite different. Some call it regionalization; others refer to it as building local economies; still others, in the parlance of the food industry, peg it as a growing population of “locavores.”

Whatever one chooses to call it, the trend leading businesses to shorten supply chains is an attractive idea for sustainability advocates. Preconceived notions about reduced greenhouse gas emissions and the growth of so-called “green-collar jobs” on U.S. soil have helped the movement take off over the past couple of years. But in many industries, the business case for moving manufacturing onshore is problematic at best, and even impossible for some.

Increasing costs of transporting goods have forced many industries, including the green building, sustainable apparel and cleantech sectors, to reconsider their supply chain operations.

When the price of oil was hovering around $130 per barrel near the end of May 2008, the cost of shipping a 40-foot container from East Asia to the East Coast was about $8,000, according to a 2008 report released by CIBC World Markets. The expense was three times bigger than shipping costs in 2000, when oil sold for about $20 per barrel. If the price of oil reaches $200 per barrel, as some economists expect it to, the cost to ship the container the same distance would almost double again to $15,000, according to the study.

Higher transportation costs are likely here to stay, and many business leaders are already implementing strategies that could help better position themselves in a carbon-constrained future.