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SCDigest Expert Insight: Supply Chain by Design

About the Author

Dr. Michael Watson, one of the industry’s foremost experts on supply chain network design and advanced analytics, is a columnist and subject matter expert (SME) for Supply Chain Digest.

Dr. Watson, of Northwestern University, was the lead author of the just released book Supply Chain Network Design, co-authored with Sara Lewis, Peter Cacioppi, and Jay Jayaraman, all of IBM. (See Supply Chain Network Design – the Book.)

Prior to his current role at Northwestern, Watson was a key manager in IBM's network optimization group. In addition to his roles at IBM and now at Northwestern, Watson is director of The Optimization and Analytics Group.

By Dr. Michael Watson

November 10, 2015

CSCMP Report: Five Take-Aways on Natural Gas Trucks from the AB InBev and Owens Corning Talk

AB InBev and Owens Corning Show Their Commitment to Their Environmental Goals by Sticking to Natural Gas Trucks

Dr. Watson Says:

...these two firms are going to be in a great position while others struggle to react...
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With the current low price of diesel fuel and the expected continueing drop in the price of oil, I was wondering how much interest there would be in the CSCMP talk on natural gas trucks.  My question was answered quickly-- the room was only about a 25% full.  Rodney Goulet, who was helping run the session, pointed out that two years ago at CSCMP, these talks packed the room.  Of course, diesel was about 2X its current price with forecasts taking it even higher.

It is too bad the session didn’t draw more attendees.  The three speakers were very informative—the audience learned a lot.  Patrick Cozzens from Modern Transportation Services gave the carrier perspective, and the shipper perspective was presented by  Billy Lawder from Anheuser-Busch (AB InBev) and David Uncapher of Owens Corning. 

Here are the key take-aways.

Previous Columns by Dr. Watson

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Learn Python, PuLP, Jupyter Notebooks, and Network Design

EOQ Model and the Hidden Costs of Fixed Costs

CSCMP Edge - Nike Quote: "It is All an Art Project Until you Get it on Someone's Feet"

Supply Chain by Design: Why Business Leaders should think of AI as an Umbrella Term

AB InBev and Owens Corning are serious about their commitment to the environment.  Several years ago when diesel costs were very high, it was easy for companies to say they were looking at natural gas trucks for environmental reasons.  Now that the cost advantage has mostly gone away, only the serious companies are still committed.  They are investing in what they say matters.  They think this is the right thing to do.

Natural gas trucks have come a long way in the last few years.  The new Cummins engine has a similar hauling capacity as diesel engines.  The fuel efficiency is getting better.  And, there are innvoations the are driving down the cost to service and repair the trucks. 

The infrastructure still needs building out.  There are 75,000 places where you can refill a diesel truck, but less than 200 for natural gas. 


With such a sparse infrastructure, you have to carefully design your transportation network.  Both firms had to carefully determine where to use the natural gas trucks.  They had to make sure the driver could make the deliery and refuel when needed.  With so few refueling stations, this had to be part of the optimal design. 


AB InBev and Owens Corning are making it work.  They are moving a significant amount of volume on natural gas trucks in 2015 and expect more in 2016 and beyond.  Both companies have invested a lot to make it work.  They have collaborated with the carriers, with Cummins, with the refueling providers, route desisngers, and so on to make sure it can work.  There have also been a few unexpected benefits to the drivers:  the engine runs quieter, the single fill fuel tank is nice, the drivers don’t come home smelling like diesel, and there is a lot of prestige in driving these trucks.  (This is not something to ignore in an environment of driver shortages.)

Final Thoughts

When talking about the low price of diesel, Lawder pointed out that nobody knows what is going to happen to the price of oil in the in the next two to five years.  AB InBev was doing this because they were committed to a cleaner burning fuel. 

But, I walked out the room thinking that when the price of diesel doubles sometime in the future, these two firms are going to be in a great position while others struggle to react.

Let me know your thoughts at the Feedback section below.

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