For many years, businesses have been focused on developing lean supply chains that enable them to carry out operations at the lowest possible cost. That drive for financial and operational efficiency may contribute to the heightened interest surrounding low natural gas prices across the United States. The alternative energy option can lead to cheaper manufacturing and transportation costs. For example, trucking firms that use natural gas and also adopt route optimization software could achieve a system that delivers significant cost savings.
The glut of inexpensive natural gas comes from the support of drilling for the fuel in shale rock formations. According to an article from MIT Technology Review, as well as a recent survey conducted by business law firm Benesch, the Ohio Trucking Association and the National Tank Truck Carriers, the manufacturing supply chain and the trucking industry can both benefit from the new reserves of low-cost natural gas.
Cheaper manufacturing costs can improve production
Many companies can be severely impacted by expensive energy costs, but with the recent shale energy boom, firms may be able to reduce production costs of a range of products and improve their bottom line. Cheaper energy can help companies stay competitive in their industry and remove many pressures that lead to off-shoring.
"Using natural gas as an energy source, rather than a chemical feedstock, could significantly lower costs for manufacturers who use a lot of energy, such as steel makers," the MIT Technology Review stated. The article also noted that cheap natural gas can greatly benefit the trucking industry.
Natural gas creating more opportunities for trucking fleets
The Benesch / NTTC / OTA survey outlined how job growth in the transportation sector could be attributed to the increasing availability of natural gas and its current low price point. The research revealed 97 percent of national respondents believe the shale boom occurring in Ohio, Pennsylvania, Texas, Louisiana and North Dakota will have a positive impact on the trucking industry, as well as the economy as a whole. With natural gas playing a larger role in the transportation industry, trucking firms and more private fleets may increase adoption of alternative fuel vehicles and benefit from lower operating costs.
"We decided to look at trucking because, as many economists will tell you, it is an important harbinger of economic vitality and change," said Richard Plewacki, a partner with Benesch's Transportation & Logistics practice.
Increased revenues and growing client bases for fleets directly reflects the rise in economic activity. However, what may be holding some trucking companies back is the availability of qualified drivers. The study showed 47 percent of national respondents are most worried about the recruitment and retention of qualified drivers and mechanics.
"Increases in trucking activity signal corresponding changes in manufacturing and industry," said Plewacki. "After all, you can't make or sell a product without transportation playing a key role in the process."
Businesses growing thanks to natural gas
Many fleets have struggled to expand their client bases and merchant networks due to the volatile economy. But now shale energy is giving fleet owners the chance to grow their companies. The survey demonstrated 55 percent of national respondents believe they have experienced some growth in business in the past few years due to shale energy, while 97 percent of national survey participants are anticipating a growth in revenues over the next five years. Making improvements to the business to supplement this growth can help trucking firms experience the best results made possible by shale energy.
"High demand for domestic and stable sources of energy are driving shale development at a rapid pace," said Plewacki. "Ancillary businesses, such as trucking, are reaping tremendous benefits and this can only benefit the economy as a whole. There are, however, threats to this prosperity. The trucking industry needs to new ways of finding and retaining drivers and mechanics. Growth isn't possible without this vital human capital. And trucking companies need [to] find and retain legal professionals to help navigate changes in state regulation and maximize their opportunities."