Enabling High Performance In Utilities Through Supply Chain Management

Supply chain best practices associated with demand planning, work management and material segmentation offer significant advantages in helping utilities achieve high performance.

The 21st century has been tough on public utilities.

Part of the problem has been a sluggish economy and investors' view that public utilities are a slow-growth play. But it also is true that many utilities' mergers and acquisition efforts did not produce the value that many foresaw. Companies also may have overestimated the potential benefit of new business models. And industry marketplaces for utilities have yet to develop significant, sustainable value-creating capabilities.

Other forces also have put pressure on utilities. New rate structures, for example, are forcing many to become more efficient.

For all these reasons, utilities are seeking ways to cull more costs from their operations while improving productivity and service. And many are counting on the benefits associated with better supply chain management, which can lower operational costs and also improve working capital—no matter how the industry changes or who merges with whom.

Many efforts by utilities to improve their supply chain management methods and tools have been unsuccessful. The missing link is often the effective integration of supply chain management with utility operations. Accenture has identified three industry-leading practices that can help utilities achieve this more frequently. These practices define high performance as it applies to utility operations.

• Improve demand planning capabilities: Demand planning helps utilities increase the accuracy, granularity, scope and value of their material forecasts.
  
  
• Focus more tightly on work management integration: Utilities often make effective work management a priority—even though their behind-the-scenes efforts are disorganized, poorly supported and unnecessarily expensive.
  
  
• Develop a clearly defined approach to material segmentation: Most utilities that implement material segmentation strategies benefit from tighter inventory controls, stronger service and better overall management of their material base.

Accenture believes that developing world-class demand planning, work management integration and material segmentation processes and technologies will be the cornerstones of high performance in utility industry supply chain management.

A principal reason is that nearly half of all a utility's work falls within the improvement purview of these three capabilities. They enable utilities to accurately manage all aspects of the planning time line—from daily execution to long-range operations and material planning. While barriers to changes in technology, process and organization still exist, many utilities are making significant progress and reaping substantial benefits. Tomorrow's industry leaders are—or will be—among them.

Dana Hanson is a partner in the Accenture Utilities industry group and leads the company's Utilities Supply Chain Management service line. He works with clients to help them become high-performance businesses through innovative supply chain management strategies and solutions.

Todd Knapp is a manager in the Accenture Utilities industry group. He helps utility clients implement supply chain process and technology solutions that improve their performance.

Erik Olson is a partner in the Accenture Supply Chain Management service line who focuses on the utilities industry. He teams with clients to help them develop industry-leading supply chain management capabilities.