Roberta Witty

As much as you might not want to believe it, or know what to do about it, the price of oil is intricately involved in how our global economy works. Everything we do – outside of isolated civilizations – is dependent on oil, from getting to work every day, to shipping raw materials and finished goods, to running the factories and office buildings that provide us our livelihood. Our current business models have been built upon the notion of cheap oil, and few companies are thinking about what happens when oil is no longer cheap – which well might occur in our lifetimes.

Many independent energy experts say that alternative energy and new scientific discoveries for turning shale, waste water, biomass etc. into the amount of energy we need to run our current lives is magical thinking. We don’t have the alternative energy generation infrastructure already in place to run our economy at current levels. And, we can’t possibly have it in place in the timeframe and at the supply levels needed because it takes oil to develop and maintain those systems. What runs the backhoe to dig the wind turbine site foundation, the trucks, trains and airplanes to get solar panels to the site, the furnaces to keep the factory heated during winter, the power systems that provide electricity to run those factories and so forth? OIL!

According to the experts, we are close to, or even past, the midpoint of how much oil we can safely and economically extract from the ground. Therefore, oil shortages, and price spikes, are in our future. As a result, there are social and political implications, not to mention nation state implications – China will be a huge consumer of oil to run their expanding economy and can easily run up the price of oil and make it out of reach for poorer nations. The cheap oil business model is not sustainable in the long run. Strategically, businesses must become less dependent upon the global supply chain.

In order to become less dependent on a supplier half way around the globe, supply chain managers must redesign the product fabrication and logistics processes to include local suppliers. In doing so, you help the economy in the process by creating jobs at home and stopping the blight of small towns. Large, big box retailers must start buying/leasing local, existing real estate and put in place mini stores instead of building brand new massive buildings. The franchise model could then be used to further ignite the local economy. Yes – we will be paying more for goods in a local supply chain business model.

BC managers must be aware of the added risk of a local supply chain: local suppliers are likely to experience the same regional disaster as you do, making it harder for the business to continue during such a crisis. Therefore, businesses need to:
1. Include the supply chain in the development of recovery time frames.
2. Brush off your business resumption plans – the manual and non-technical workaround procedures – that allow some part of the business process to continue when a business interruption occurs.

If you don’t start addressing the oil price issue now, you could risk going out of business in the near future.

Are you following the price of oil as part of your BCM program? If not, why not?

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Category: BCM and IT DRM Research Coverage     Tags: Availability Risk, BCM, Business Continuity Management, Business Continuity Planning, Business Impact Analysis, Business Resiliency, Contingency Planning, Continuity of Operations, COOP, Disaster Recovery, Operational Risk Management, Recovery Planning, Resiliency, Risk Assessment, Workforce Continuity

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