McKinsey Quarterly

Increasing the energy efficiency of supply chains

| Article

Supply chains have become increasingly global over the latter half of the century, as the globalization of trade was fueled by cheap oil. Today, the transportation of goods consumes 15 million barrels of oil a day—roughly one-fifth of total production.

In an ongoing study of energy efficiency in supply chains, McKinsey looked at numerous opportunities to reduce the amount of oil used to get goods from a manufacturer’s dock to a retailer’s shelf. These opportunities are available not only to manufacturers but to wholesalers, distributors, carriers, and third-party businesses. We’ve grouped these opportunities into six levers to illustrate possible next steps. Of course, the players in a chain operate independently from one another, so achieving all of these gains would require coordinated efforts and investments—a considerable challenge.

Finally, we examine potential gains in supply chain energy efficiency under three scenarios, based on low, medium, and high oil prices and electricity costs. In any scenario, however, companies would do well to set up energy-efficient supply chains, as their benefits greatly outweigh any downsides.

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