Higher oil prices will change the way that Procter & Gamble operates its supply chain. The world's largest consumer products company describes its current operations as being 'upside down'. 'They were implemented in the 1980s and 1990s, when oil was 10 bucks a barrel', according to Keith Harrison, P&G's head of global supply.
'With oil at $140, the world has changed. The environment has changed,' added Mr Harrison, who is responsible for an $80bn global supply chain. Transportation cost is going to create an even more distributed sourcing network'. As a result, P&G has launched a comprehensive review of the design of its supply operations, in response both to rising energy costs and its increasingly global expansion.
'We've kicked off a study that really asks: what is our business going to look like in 2015?' says Mr Harrison. It will cover issues such as 'what happens if oil is $200 a barrel, and may end up making major changes to P&G's current supply system, which is based on 'large single-category regional production sites with long supply chains'. The chemical industry needs to keep a close eye on this development, given P&G's importance as a global customer.