Utilities must embrace supply chains that include planning, inventory optimization, and logistics.
Laura Powell is principal, Global Solutions Team, Business Process Outsourcing, at consulting firm CapGemini. Contact her at Laura.Powell@capgemini.com.
The advent of the Internet in the early 1990s introduced the concept of e-procurement—online catalogs, centralized supplier hubs, and auctions of all shapes and sizes—and the utility industry embraced these cost-saving measures wholeheartedly. At the time, utilities equated supply-chain management with online e-procurement. As a result, they focused on strong strategic sourcing initiatives combined with e-procurement to “lock-in” contract compliance and negotiated savings.
Sadly though, that’s pretty much where they stopped. By and large, utilities failed to implement the more complete and transformational integrated supply chains that have been adopted widely by other industries.
Supply chains in most industries extend beyond sourcing and e-procurement to include planning, inventory optimization, and logistics. When linked together with technology, this creates an “integrated supply chain” that provides visibility from customer to utility to vendors/strategic alliances, generating great value for the company.
On a scale from 1 to 10, the utility sector is at about a “2” in terms of taking e-procurement to the next logical step and achieving the full promise of the integrated supply chain. The good news is that the era of mergers and acquisitions likely will force utilities to improve their e-procurement functions and realize the need to embrace an integrated supply-chain model.