Nuclear Renaissance and the Global Supply Chain


Avoiding pitfalls, realizing benefits.

Fortnightly Magazine - December 2010

Increasing demand for clean, affordable, base load electricity, combined with rising public support for nuclear generation, presents utilities with the opportunity to build new nuclear plants for the first time in more than three decades. But unlike the birth of the nuclear generation industry, domestic suppliers of many critical nuclear plant components and skilled workers are scarce. And with some internationally sourced component delivery times increasing, the situation is getting worse. Subsequently, the risk of nuclear generation construction project delays will persist and might increase unless participating company supply chains can effectively reach across international borders.

Power generators seeking to build new nuclear generation face a protracted construction timeline and an estimated $10 to $18 billion 1,2,3 up-front capital investment, making the economic attractiveness of nuclear generation largely dependent on the plant’s construction timeframe and capital financing structure. Therefore, factors slowing new nuclear plant construction significantly impact the overall financial viability of the project and demand preemptive executive action to prevent occurrence.

Long lead times associated with many major nuclear plant components necessitate procurement well in advance of the plant’s licensing; the high-volume, global sourcing challenge might not be immediately evident to utility supply chain organizations. Until now, a deep understanding of global markets hasn’t been essential for most utilities. Subsequently, supply chain methods and experiences center on conducting business at the national or regional level. Successful utilities will minimize schedule delay risks, manage project costs, and realize the often significant supply chain benefits associated with large capital projects (see Figure 1).4,5


Supply Chain Challenges

Utilities seeking to construct new nuclear generation face a significantly different marketplace than existed during the initial build within the United States. No longer are component and personnel resources domestically available in large quantities. Today, barriers to collaboration with global suppliers on the engineering of major nuclear plant replacement components have been observed to hinder procurement of these parts. Given the much larger procurement need associated with construction of a new nuclear plant, utilities pursuing these projects will face a far more complex supply chain management challenge that will likely include:

• Global Sourcing: Utilities seeking to build nuclear plants will encounter few domestic nuclear component suppliers, requiring the supply chain to source components from international vendors (see Figure 2).6,7

• Sufficient Codes and Standards: Differences between the product codes and production standards issued by the NRC and international agencies necessitates additional time spent to ensure appropriate standards are available8 and to certify internationally sourced components. For example, in its inspection procedures, the NRC references a number of standards that vendors and applicants frequently don’t reference in their designs and license applications.

• Difficulty in Qualifying Suppliers: The NRC certifies and inspects domestic manufacturers to ensure their nuclear grade components meet established quality standards. These inspections don’t occur at foreign manufacturing facilities, increasing the risk of receiving substandard and counterfeit parts, and necessitating more rigorous and time consuming receipt inspections. Indeed, counterfeit parts have recently been received and in one case installed in a generation-critical system at an existing nuclear plant.9

• Increased Lead Times: In addition to the lack of domestic suppliers, global production of many critical nuclear plant components is relatively low, necessitating order lead times of up to three years. Some manufacturers suggest significantly longer lead times might be necessary. Additionally, delays in the manufacturing of components for other nuclear generation projects could further extend delivery times. Currently, manufacturer quality issues are driving a delay in delivery of steam generators to one utility replacing those components at an existing nuclear generating station.

• Scarcity of Services: Constrained availability of key labor resources, such as radiation protection technicians and welders, creates construction schedule risk. Utilities seizing the opportunity to quantify and project resource availability position themselves to avoid this risk. Recently, a utility didn’t fully anticipate the availability of welders, resulting in the cancelation of a spring maintenance outage at one of its coal-fired generating stations at the cost of significant generation loss during peak demand months when to-be-replaced boiler tubes failed.

These challenges, combined with the pending retirement of supply chain personnel, emphasize the need for institutionalizing global supply chain processes and employee experience in the near term. Doing so early in the new nuclear plant construction process will ensure the timely procurement of required components and services that could result in fewer schedule delays, better cost controls, decreased inventory, and improved quality.

Supply Chain Assessment

Performing a widely accepted cross-industry based assessment of supply chain functions can help identify enhancements to sourcing processes that balance cost drivers, construction delay risk, and procurement efficiency. Utility supply chain organizations performing such assessments are identifying and incorporating cross-industry best practices and standards as a means to improve their processes.

One example occurring today involves a large regional generation utility embarking on a multi-year process improvement benchmarking study involving companies that have been in the global sourcing marketplace for years, including major players in the retail, heavy equipment, and high technology industries. Additionally, these rigorous assessments often reveal opportunities to leverage the economies of scale associated with a utility’s large construction projects and the procurement and warehousing activities associated with its operating units (see Figure 3).

For most companies, there are four common improvement opportunities identified during a supply chain diagnostic process. First is culture change. Creating a global instead of domestic or regional mindset helps supply chain personnel secure more cost-effective contracts and avoid the significantly higher expediting costs frequently incurred when dealing with overseas suppliers. To be successful, leaders will need to develop and communicate their vision of global marketplace participation and reinforce their vision over time.

A second opportunity is found in organizational development. To achieve the desired performance improvements and results, supply chain organizations often need to invest in training or hire personnel with global sourcing and nuclear plant construction experience. This can best be accomplished with a two-to-three year organizational development roadmap.

A third opportunity involves governance. Although the business strategy is often well articulated by management and understood by supply chain personnel, conflicts sometimes exist with established performance goals and processes. Improved alignment between business strategy, performance goals, and supply chain processes focuses personnel efforts on improving organizational efficiency, realizing economies of scale, and using only top performing contractors.

Finally, process improvement can yield benefits. While most supply chain personnel can identify process inefficiencies, it’s often difficult for those who have performed the same processes using the same systems for years to develop best practice solutions. Implementation of a rigorous assessment with the assistance of personnel from outside the organization can bring forth otherwise overlooked improvement solutions.

Utility executives proactively implementing a program to identify and address both supply chain challenges and opportunities will be better positioned to manage the variable costs associated with their new nuclear power plant construction projects. Such an initiative, however, must be started shortly after the build decision is made, if the benefits are to be fully realized. Beyond simply ensuring timely receipt of critical components and services, such initiatives often identify better leverage opportunities across other major projects and ongoing operations. Additionally, supply chain processes that are upgraded while individuals possessing nuclear plant construction experience are still employed ensures this invaluable knowledge and experience passes on to the next generation of nuclear supply chain professionals.

While nuclear power plant construction serves as a catalyst for a supply chain assessment and improvement initiative, this effort has the potential to reduce supply chain costs throughout a utility’s fleet.



1. John Downey, “Duke doubles cost estimate for nuclear plant,” The Business Journal, Nov. 4, 2008.

2. “New NRG nuclear plant to cost $10 billion,” Eileen O’Grady, Reuters, June 2, 2009.

3. “Nuclear Costs Explode,” Russell Ray, The Tampa Tribune, Jan. 15, 2008.

4. “DOE NP2010 Construction Schedule Evaluation,” U.S. Department of Energy, Sept. 24, 2004.

5. “Licensing New Nuclear Power Plants,” Nuclear Energy Institute, January 2009.

6. “DOE NP2010 Construction Schedule Evaluation,” U.S. Department of Energy, Sept. 24, 2004.

7. “DOE NP2010 Nuclear Power Plant Construction Infrastructure Assessment,” U.S. Department of Energy, Oct. 21, 2005.

8. “Construction Codes and Standards: Avoidance of New Nuclear Power Plant. Construction Delays (Mattson Report),” Energetics Inc. for the U.S. Department of Energy, Office of Nuclear Energy, September 2008.

9. “NRC Information Notice 2008-04: Counterfeit Parts Supplied to Nuclear Power Plants,” U.S. Nuclear Regulatory Commission, April 7, 2008.