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IT's Role in the New Oil Reality |
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No matter where you look these days, the price of oil is having a dramatic impact on the economy.
In April, I attended a conference where i2 Technologies chief executive Pallab Chatterjee asked supply chain executives, ‘what would your companies do if oil climbed to $125 per barrel?’ At the time, oil was flirting with $120 per barrel – a big jump from its roughly $90 per barrel trading range in January of this year. Oil at $130, $140 or even $150 per barrel seemed like a long shot at the time, but Chatterjee’s message was that companies needed to start thinking about what they would do if oil climbed past thresholds which made importing products from far-flung markets uneconomical.
Of course, since that time oil did indeed climb past $140 per barrel and even flirted with $150. At the time of writing this blog it is sitting at about $136 per barrel, following a two-day run when oil lost almost $10 per barrel.
It is unclear where exactly the price of oil will eventually settle. Will it be at $200 per barrel a year from now as some analysts have predicted, or will it settle closer to current levels as the economy sputters in response to the associated increases in costs?
What is clear, however, is companies need to have a game plan – or playbooks as Chatterjee suggests – to deal with the new oil reality. And the CIO will play a key role. See related stories on oil’s effect on global supply chains.
This role goes well beyond adopting “green” strategies to run data centers and computing systems more efficiently. It involves putting in business intelligence systems to help supply chain leaders make timely decisions about where to source parts and materials. If changes need to be made, such as sourcing parts from Mexico instead of China, IT needs to be able to support the workflows and processes required to bring new suppliers onstream.
The price of oil is creating a crisis for some sectors – look no further than the airline industry which is expected to ground hundreds of gas guzzling planes in the coming months.
Providing supply chain leaders with the right information and tools to make decisions will be crucial in the months ahead and CIOs will increasingly be called upon to help their companies through this crisis.
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