Is your company planning to pump $6-a-gallon gasoline into its hot-shot delivery trucks? Are you keeping in mind that the laws of supply and demand might not actually determine the price of oil when preparing business plans? Well, you should, according to Derek Kaufman, president of C3 Network, a Grand Rapids, Mich.-based company that helps clients launch new products in the transportation industry.

“I really believe that this industry should not be planning on a return to $35 or $40 barrels or sub-$2-a-gallon gasoline,” he says. Kaufman presented “It’s time to decide” at the 2006 Global Automotive Aftermarket Symposium. “Rather, we should be looking at $4, $5, maybe even $6 a gallon in the next five years.”

C3 Network President Derek Kaufman thinks we need to get serious about conserving fuel.

Kaufman asks us to choose one of two sides when it comes to transportation and oil: Are you an innovationist or a peak-oil doomsayer?

An innovationist, Kaufman explains, is someone who says, “I know we’re using lots of oil and that China and India are coming on strong, but we’re not running out of oil. There’s plenty of oil in the ground, we just need to find new ways to find it. And besides, hydrogen’s going to come up alongside oil momentarily and we’re going to be able to tell the people at OPEC to go pound sand, literally.”

And a doomsayer? They would say that the amount of oil produced per capita in the world peaked in 1979, and since that time we have produced less oil for every person on earth than any year before, says Kaufman. The U.S. consumes 25 percent of the world’s oil, which is about 20 million barrels a day. We produce about 5 million barrels and import 15 million barrels.

Running out of time?
Whether or not you believe fuel will reach these levels, Kaufman thinks our industry should “get a whole lot more serious about conserving every drop of oil in our companies.”

Although there is some belief that gas prices might plateau for a period, Kaufman notes it only takes one event to occur to take you out of $2-a-gallon fuel and into $3-a-gallon fuel. “I tried to deliver both sides of the argument in my presentation, but regardless of which side you’re on, in the next 10 to 20 years, the likelihood that we’re going to have pricing pressures is a fact,” he explains in a post-show interview.

So what do we do? Kaufman sees four trends shaping the transportation industry in the next five years. The first is tactical tribology, meaning that friction-reducing additives will become much more high tech in the future.

Kaufman argues that our industry will not only provide time-released additives to re-establish proper acid levels in EGR-type engines, but it will also begin to measure soot content not just as an indicator of possible abrasive wear, but as an indicator of increasing viscosity, which reduces drag and decreases fuel economy.

“Tactical tribology is going to happen in engines, transmissions, drive axles — anything that involves rotating friction,” he says. “It’ll drive high-tech additives from the margins to the mainstream of this industry and will extend the number of decimal points at which we measure fuel economy.”

Although the term additive usually conjures up thoughts of snake oil, Kaufman thinks this will change. “Someone is going to break through that,” he says. “There’s no doubt that the oil companies have done a lot of work on formulating better and better oil. But I think there are quantum leaps out there in friction reduction.”

The second trend, says Kaufman, is that the aftermarket industry is going to move from inventory exclusivity to inventory inclusivity — from restricted access distributed warehousing to open-access wired inventory pools.

“Our approach to inventory has always focused on company turns...for most of our lives we’ve produced parts and we’ve shipped them to some type of central distribution center, and then shipped them to jobbers or straight to dealers,” offers Kaufman. “We need to get way out of the box of inventory thought and look at total industry turns of inventory rather than company turns of inventory. We need to kill the unnecessary shipments, knock down the emergencies, struggle with the price issues that are obviously part of these things and make inventory inclusivity happen in this industry.”

One way to make this happen, he notes, is for a major OEM to pick a mid-level town and form a research council with local dealers, jobbers and their own distribution team to create a common inventory cross-reference file.

“Make the reporting easy through a Web-based tie-in to existing inventory records,” he states. “Write a crossover program that re-sorts the information into a common format for viewing online.”

Once connected, Kaufman says other OEMs and cities can be added to the project. “It only takes one forward-thinking company to get this moving — and maybe some association help to grease the gears of getting the first experiment team put together.”

An idle nation
Kaufman’s third trend would tackle the problem of trucks sitting idle as drivers wait to load and unload their cargo — a financial burden that will only increase as gas prices go up.

Right docking is one method of reducing this idle time, he offers.

“There are many lean manufacturing consulting companies out there — the dock changes are really a matter of lean philosophy,” Kaufman says. “Measure the time in each element of a part getting packaged and readied for shipment. Create an efficiency ranking for truck positioning. Then time everything for a sufficient period of time to understand where your opportunities lie.”

The fourth and final trend is nanotechnology. Kaufman suggests that nano paint mixtures will reduce air friction and shed dirt; nano plastic fillers will reduce the amount of oil in the plastic that we use; and we’ll have nano diagnostic and nano repair robots inside engines. And all of this technology will no doubt only help the industry moving forward.