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Energy Sector Case Study "The Utilities Future - Supply Chain Logistics" Post COVID-19

Francis Wszelaki's picture
President CEO - past / Adjunct Professor / Instructor / Technical Advisor Columbia Power / University of Toledo / Marcus Evans / FieldCore General Electric

As an Energy executive I have worked in all aspects of the utility industry as a top-performing and highly transformative business development professional with leadership expertise in...

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  • Feb 1, 2021 11:45 am GMT
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This item is part of the Special Issue - 2021-01 - State of the Industry, click here for more

This article examines emerging energy sector supply chain management issues of the utilities industries, United States and Canada, in the COVID-19 world.  

Key Words: Energy Sector; The Utility Industry, Supply Chain Management and Operations Management.

Introduction

Utilities are essential for our livelihood. The survival of individuals and communities depend on the steady, safe and reliable supply of electricity.  The utility companies across North America even though prepared to respond to major events were greatly challenged by the COVID-19 pandemic.  Protecting their workers and supplier’s workforce was priority realizing the pandemic would impact supply chains over a protracted period.  Energy Industry experts cautioned that utilities supply chains would see a variety of disruptions that could impact their ability to support the generation and delivery of electricity.  The utility executives through the functional workers responded over the past months well and will need to respond to the pandemic as winter approaches.  Their efforts to manage the pandemic are notable.  Utilities are keeping the lights on is clear however, the new utility normal will come from the pandemic lessons learned.  As we manage our way through the COVID-19 it is expected that the future utility business models will be transformed by changing their level of sophistication wanting their supply chains to more adaptable and more resilient while energizing us.

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The COVID-19 pandemic and its impacts  

At the on-set of the COVID -19 pandemic the Utility Industries in the US and Canada were carrying out normal operations, performing scheduled maintenance and constructing power related project according to their corporate strategic plans.  The Supply Chain Management organizations were working with the various Business Units in support by procuring and supply services, materials and equipment.  As the pandemic began to unfold in January 2020 and quickly ramp up in February the Utility Industry were working with from Federal Energy Commission (FERC), North American Electric Reliability Corporation, the North American Transmission Forum (NAFT) and the Department of Energy (DOE) while obtaining specific guidance from the Center for Decease Control (CDC) to ensure electric service was going to be available and reliable.  The following were areas the Utility Industry were directly impacted and the issues they had to deal with.

 Managing COVID-19 

Utility COVID-19 Issues and Problems

  • Load patterns shifted due to the United States and Canada’s nationwide lockdowns and State / Province stay at home orders
  • Base load plant shutdowns shifted generation to renewable sources raised challenges for maintaining bulk power system voltage and frequency control
  • Financial implications shifted revenue streams, increased personnel fixed costs and challenged customers to pay.
  • Stoppage of new plant construction projects and in progress planned assets disrupted supply flows.
  • Trucking firm ability to employ commercial drivers licensed to support plant operations and system maintenance moved to critical utility supplies.
  • Logistic firms; air freight, over the road and rail were challenged to meet health care material needs for personal protective clothing.
  • Identification of “essential”, “mission essential” required modified work environments, access testing protocols and personal protection requirements to allow control center and field work to continue.
  • Remote problem solving by subject matter experts was delayed and hampered due to limited access to areas to trouble shoot and test.
  • Normally anticipated weather events impacted the timely restoration of service to customers due to social distancing and personal safety requirements (e.g., California wildfire, Midwest derecho, tornados, thunderstorms, floods & hurricanes)
  • Work site access restrictions and additional disinfecting programs impacted work crew’s ability to operate systems and maintain equipment
  • Availability of PPE, testing products and cleaning materials, strained the supply chain system to monitor and protect crews.

Energy Sector Innovative Responses

Leaders recognized that unlike previous power related events COVID-19 would challenge industries and consumers in a global way.  Utility C-suite executives responded by establishing an incident command structure similar to those used during major power outages.  A cross-functional approach where Supply Chain Management was combined with Business Units and Corporate functional departments (Finance, IT and Human Resource) ensured services were not interrupted and restoration of service could be centrally managed.  This alignment gave Supply Chain leaders more direct control in each Business Units Process of transmission & distribution, generation operations and new enterprise capital projects.  The alignment strategy with functional units allowed for a cohesive and collaborative supply chain and logistic approach to be taken.  The following areas were defined.

  • Established essential worker safety protocols and test regiments
  • Modified at home worker approaches to doing business to balance family needs
  • Set up a virtual supply chain customer services center with remote worker involvement.
  • Maintained power system requirement with virtual operations as deemed secure and safe – protecting the grid.
  • Appropriately paused new power projects and continued to operate assets to protect workers and save lives.
  • Workforce scheduling “stay” at home to balance family and work needs.
  • Increased on-line training of employees to improve knowledge and skills
  • Established remote problem-solving subject matter experts’ hot lines; including original equipment manufacturers (OEMs), suppliers and vendors.
  • Supported continuous improvement efforts in work management processes to supply chain practices.

Active Roles of Supply Chain Management

Traditionally, supply chain management is not necessarily at the forefront of Utility C-level executives’ priorities.  Normally considered important in support of the functional business units, the COVID-19 pandemic changed that perception.  Utility supply chain departments now were the focal point to protecting the workforce with personal protective equipment, maintain critical orders and establish supplier delivery protocols for commercial products delivery.  Business units were actively supported in several ways:

  • Contracted services and supplies necessary for increased work- place cleaning and sanitizing.
  • Set up and configured safe and socially distant local “point of use” business unit receipt and pick-ups for parts, equipment and materials.
  • Established mutual supplier assistance programs across State and Provincial lines.
  • Set-up an “at home” workforce to carry out centralized functions for procurement, sourcing and inventory services.
  • Integrated in field services groups and warehousing to interact with asset work management for planning, scheduling and executing of jobs
  • Established secure social distancing protocols for warehousing staff and vendors (receipt, delivery and storage)

Scenario Planning integrating the Business Units

The Supply Chain managers became active in the Utility Business Units (transmission & distribution, generation operations and new projects) scenario plans the COVID-19 pandemic progressed and overwhelmed the communities they served.  The command center approach using scenario plans allowed for Supply Chain leaders to be at the table allowing them to educate those involved regarding the challenges and complexity of procurement, warehousing and logistics.  In turn the Supply Chain leaders were able to better experience the Business Unit’s operational challenges to customers, government, stakeholders and regulators.  The following describes some of these outcomes:

  • Procurement of critical parts and equipment options while maintaining functionality (fit, form and function)
  • Evaluated and coordinated critical inventory reviews between engineering and suppliers to place just in time orders versus bulk deliveries
  • Centralized Warehousing to point of use Distribution Center expansion
  • Provided strategic sourcing for problem solving groups to improve procure to receive, materials, products and services
  • Improved carrier services to site delivery of critical fluids, gases, fuels and perishable items by integrating local and regional firms. 

Shared Utility Themes Emerged & Lessons Learned from the Pandemic

Lessons Learned Based on the four (4) Themes

Adaptability (Flexible & Responsiveness)

  • In field workforce resource scheduling to support customers and plant operations
  • Engagement of suppliers local to their operating assets
  • Delivery service drivers and warehousing
  • Remote log in access points for essential employees

Resilience (Quick recovery from disruptions)

  • Critical PPE stock levels depleted quickly
  • Contract obligations for the lay-up of equipment / systems for new projects and outages
  • Financial – emergent spend authorizations and tracking
  • Customer ability to pay – revenue & earnings

Sophistication (Building Dynamic Capabilities)

  • Stay at home workforce being product and accountable
  • Renewable energy impact to steam generating stations
  • Supplier options limited based on antiquated standards
  • Remote problem-solving efforts lacking

Transformation (Innovative & Growth Throughout)

  • Remote problem-solving efforts lacking
  • Internet bandwidth limitations
  • Inconsistent State and Federal Government for lockdowns did not consider the entire North American grid network
  • Digital, physical and virtual systems were not as integrated to support the efforts of Supply Chain

Utility Supply Chain Corporate Model

Although the COVID-19 pandemic put enormous pressures on the Utility Industry, it has and continues to handle the challenges well.  Based on their outreach the Supply Chain Management organizations were able to perform tasks remotely while ensuring their essential workers delivered and distributed materials and services to support the business units.  Supply chain senior leaders improved their image to the C-suite executives and functional group directors by demystified their processes while building transparency in understanding the business units they served.  The performance of the Utility Industry’s supply chain management to the COVID-19 pandemic gave people the confidences that Utilities were able provide services, perform outage restorations, continue to build new clean energy alternatives and maintain existing plant assets.

There are two key observations and multiple lesson learned from the COVID-19 pandemic.  The requirement for social distancing being the need for certain supply chain groups to working remotely was proven.  The second being C-suite executive having firsthand experiences that supply chain management are mission critical to their Corporations present and future growth.  That recognizing a remote workforce is their future and the fact that Utility supply management is a mission critical function a strategic redefinition is needed.  Going forward the Utility Business Units will have to work with the Supply Chain leadership to define and developed the Industry’s workforce of future.  The important lessons learned will be workforce adjustments for Utility Supply Chain Managers to transform towards even after the COVID-19 recedes.  

The Supply Chain Departments will need to promote themselves as stewards of value, challenging the rules of engagement with their Business Units.  The value proposition each department will need to embrace moves from the traditional “just in time” approach to a resilient transformational “just in case” model.  This resiliency transformational model envisions a mobile supply chain workforce handling situation in the office, working at sites and remotely working while supplying mission critical support in the field to receive, store and deliver goods and services. 

The Supply Chain Departments should look at further leveraging the expertise of suppliers to develop data driven supplier profiles, with transactional contractor relations that defines the supplier’s maturity that goes beyond performance but to ownership.  The maturing of their workforce to focus on the asset management processes used by the Business Units and Major Enterprise Project Groups needs the Supply Chain Departments to be more engaged. 

The Utility Industry’s evolution 4.0 advancing the digital, virtual physical age of automation will require Utility Supply Chain Management Leaders to spend even more time and resources to function autonomously with vendors, contractors and suppliers.

The integration of Supply Chain Management into the Business Units they support with a direct tie into Corporate Finance will needed to be established at the c-Suite level.  This will allow the Utility Industry realize the full benefits of key themes of adaptability, resiliency, sophistication and transformation.

Management Alignment

Category Management

Supplier Integration

Risk Management

Inventory Optimization

The COVID-19 pandemic has enabled C-suite executives to realize Supply Chain Management is “mission critical” to the Corporation’s survival.  The business model using the integration of insights has five tactical approaches for defining supply chain management.  These approaches include asset management alignment, category management, supplier integration, risk management and inventory optimization.  The Corporate alignment that includes supply chain departments at the C-suite table supports the continuous improvement cycle.  The improvements that are realized allows for minimal disruptions and keeps the Business Units On-Time and On-Budget.  The involvement of Corporate Finance in costs analysis, forecasting of asset expenditures, CapEX spend, and future investments to include Supply Chain Management will enable them to understand their decision-making impact to the Corporation’s investment and growth strategy.  The COVID-19 pandemic indicated to us developing each Corporate Entity as shown in figure 3, allows for a level of supply chain sophistication.  By working together at the C-suite table the Utility senior leadership can handle the status quo of doing business as usual but can also adjust tactically aligning teams when an event occurs. 

Closing Remarks

The information provided in this article revealed the anticipation of the Utility Industry’s future and the situation around the COVID-19 pandemic remains dynamic.  Research indicates C-suite executives believe Supply Chain Management is a mission critical role in the delivery of electricity, an essential service.  The Utilities also realized a transformation is pushing the Utility Industry supply chain organizational strategies to aggressively drive towards innovation.  Part of this transformation of reimaging the Utility Industry, in particular the supply chain staff of future is evolving to a remote workforce were practical.  And that the Utility Industries concept of, the “integration of insights” will drive the Supply Chain Management workforce to promote themselves as sophisticated and transformational.  In closing, “thank you” to all the dedicated Utility workers across the United States and Canada for being adaptable and resilient during the COVID-19 pandemic keeping our electricity on, keep us safe and keeping us connected

About the Authors

Francis T. Wszelaki, formally the Past President & CEO of Columbia Power Corporation and currently the University of Toledo Business College’s Executive in Residence & Graduate Instructor (Engineering & Business) and Bowling Green State University Graduate Instructor (MBA Program); Frank is known as a top-performing and highly transformative energy executive, utility manager and university educator, having exhibited leadership expertise in operations, continuous improvement, organizational development, project management and supply chain & logistics.  Mr. Wszelaki has served the Energy Sector for 30 plus years where his expertise reaches across all aspects of that spectrum, including utility, oil & gas, and petrochemical sectors as well as the customers they serve.  During these years of service Mr. Wszelaki has been responsible for constructing, upgrading, and restoring Billions of dollars in Utility assets. 

Paul Hong is a Distinguished University Professor of Global Supply Chain Management and Asian Studies at the University of Toledo, USA. He has numerous awards including 16th Korea SCM Industry-Individual Award (2017), Fulbright-Nehru Teaching and Research Excellence Award (2016), University Outstanding Research and Scholarship Award (2015), Best Finalist Paper Award from Journal of Supply Chain Management (2015), and Journal of Operations Management (2006). His articles have been published extensively in journals including Journal of Operations Management, Journal of Supply Chain Management, International Journal of Information Management, Corporate Governance: An International Review, Journal of Business Research, Journal of Service Management, and European Journal of Management. His recent books include Rising Asia and American Hegemony: Case of Competitive Firms from Japan, Korea, China and India (2020; Springer), Creative Innovative Firms from Japan: A Benchmark Inquiry into Firms from Three Rival Nations (2019; Springer). His research interests are in global supply chain management, entrepreneurial innovation and interfaces of ToP and BoP.

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Thank Francis for the Post!
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