POWER March 2014 - 60

SUPPLY CHAINS
The Future of Utility Supply Chain
Management
Utilities have sometimes lagged behind other sectors in applying advanced management
techniques, but that may be changing as the industry recognizes the importance
of lean, efficient supply chains.
Thomas W. Overton, JD
T
here may be few things about power
plant management less exciting than its
supply chains. But few things can gum
up a plant's operations more completely than
mismanaging supplier relationships, parts
sourcing, and inventory.
Supply chain management has undergone
substantial evolution in the past few decades
along with other changes in management
philosophy that began in the 1980s. Procurement,
once viewed as a low-level clerical
function, is now recognized as a key specialty
in any organization's operations.
But the field is not standing still. Utility
supply chain experts have recognized that
there is still plenty of room for improvement,
and that while some utilities and generators
are leading the way on managing lean, efficient,
smooth-running supply chains, many
others still have substantial savings and efficiencies
to capture.
Speakers at the 12th Platts Utility Supply
Chain Management Conference held Jan.
20-22 in San Diego generally agreed that
supply chain management starts with aligning
internal elements of the utility for optimal
efficiency, but attention needs to be devoted
all the way across the delivery chain.
Internal Realignment
One problem faced by procurement departments
is a tactical, rather than strategic, focus
from senior management. Rather than
taking a holistic view of the total costs of
owning a component, too often savings are
extracted from the budget upfront, with
the procurement department left to make
ends meet on its own. Steve Coleman,
director of transmission and distribution
(T&D) sourcing for Pacific Gas & Electric
(PG&E), stressed that procurement departments
need to become strategic partners for
their internal customers. That means making
procurement a truly customer-focused,
customer-facing organization.
Unfortunately, the traditional approach
of having a dedicated supply chain for
58
each business unit handicaps continuous
improvement and implementation of best
practices because these chains often become
siloed and isolated from one another. These
isolated chains are capable of acting strategically
but are unable to fully capture savings
and efficiencies available through more
centralized operations.
One approach to making this work, though
one that few utilities appear to have implemented,
is to better align supply chains with
their business units within a centralized supply
chain organization. This is done by creating
new roles within the supply chain that
work directly with business units, focusing
exclusively on understanding each unit's
plans and strategies, enabling them to engage
with business unit initiatives very early in the
process to represent supply chain concerns
and demands.
Phil Seidler, supply chain director for
Luminant, and Joe Levesque, vice president
of product development for consulting firm
PowerAdvocate, explained the benefits of
this approach. Keeping these closely aligned
supply chains within the centralized supply
chain organization enables an ongoing
focus on driving value, reducing risk, and
improving supplier relations. The organization
is able to create centers of excellence
around common core functions and realize
efficiencies and continuous improvement
by exchanging information across the individual
chains.
PG&E, for example, has added directors
for each procurement unit to its organizational
chart as well as a chief procurement officer,
moving from a single vice president of
general services overseeing two directors to a
robust center-led, customer-facing organization.
That's allowed it to focus much more of
its attention on strategic procurement, Coleman
explained.
Engaging business unit leaders isn't
always straightforward, since convincing
them that supply chain issues are worth
their attention may be difficult. Seidler
and Levesque listed some ways of meeting
that challenge: understanding business
unit objectives, knowing their business,
and creating a pull relationship using information
that demonstrates the value of
alignment. When procurement has a clear
understanding of the business unit's needs
1. An effective category management process. A category management process
should provide an iterative approach to value creation through all phases of the supply chain
lifecycle. Courtesy: PowerAdvocate
www.powermag.com
POWER | March 2014

http://www.powermag.com

POWER March 2014

Table of Contents for the Digital Edition of POWER March 2014