No Match Found
Unavailable materials, project delays, inflated costs, eroded capital budgets, prolonged labor shortages, strained operations: It’s a familiar story playing out across many industries. For energy and utilities, the ripple effect hits at the heart of one of the most significant efforts in the industry’s history: leading a reliable, affordable, safe and clean energy transition. Moving forward at the pace and cost expected by your customers, shareholders, regulators and others hinges on being able to source, secure and deliver on these cleaner energy commitments.
Recent government actions, like the Inflation Reduction Act, are intended to curb supply chain shortages by incenting the US production and manufacturing of clean energy materials. Because it includes incentives for all industries to invest more in areas such as wind, solar and storage, the push could potentially lead to increased demand and competition for materials. No matter how supply chain challenges evolve, energy and utility companies should treat the current state as the new reality — one that calls for a new formula for success. This new environment requires easing inherent tensions within today’s supply chain and building a more strategic, digitally enabled foundation for the future. Ahead, we share immediate next steps you can take to move your supply chain in this direction as well as more transformational considerations for your longer-term strategy.
To build this foundation, leaders should strike the right balance between seemingly opposing forces, or tension points. These include:
To help address these tension points, leaders should understand the connection between a more resilient supply chain and the need for more integrated data and insights-driven planning. Both are essential for this complicated balancing act.
Addressing supply chain tensions used to be straightforward. You would source materials and deliver products at the right levels of quality, for the best available price, as quickly as possible. Today, the landscape is very different.
For energy and utilities, calculating supply chain value is more complex than ever. Delays with solar panels or wind turbines could mean renewable energy projects take longer and cost more than you’ve pledged to shareholders or regulators. Difficulty obtaining transformers and metals for customer meters could potentially delay construction of new residential communities. You may find yourself deciding to spend more on materials just so deadlines are met, work can continue and crews don’t sit idle.
Now, supply chain value comes from balancing the level of risk with the cost of safeguarding your organization from future supply chain disruption, while being able to keep your commitments to supplying reliable, affordable, safe and clean energy. It’s about making a series of calculated choices about risk, cost and responsibility that can add up to increased resilience, growth and stakeholder trust.
Given the geopolitical, economic and pandemic-related uncertainties of the past few years, many supply chain functions are still focused on the tactical — how to survive — instead of how to strategically transform and adjust to a new definition of value.
The PwC Digital Trends in Supply Chain Survey confirms this focus. Executives from supply-chain intensive industries, such as energy and utilities, report that near-term issues are still their priorities, while more transformative actions tend to wait. Increasing efficiency and managing or reducing costs in supply chain operations tops the list of current priorities, well above others that could set up long-term success, like integrating planning or automating processes and analytics.
However, this PwC Pulse Survey signals COOs are emerging from reaction mode to shore up operations in the near term, while working to create a more resilient business over time. This includes building teams with more digital skills, revamping supplier relationships, augmenting digital defenses and taking other steps to increase operational resilience.
To successfully shift to strategic mode while you’re in the thick of present-day issues may require segmenting your approach: Focus on actions you can take immediately while beginning to shift focus and resources toward efforts that enable longer-term success.
Keep your supply chain moving forward with these practical and achievable steps you can address immediately. These shorter-term successes should be considered the new table stakes for today’s energy and utilities supply chain.
Align the enterprise on your cleaner energy strategy, helping the organization connect the dots between current market pressures, supply chain challenges, business risks and C-suite priorities. Build awareness around the need for a shift from pure cost and supply management to a broader value equation that includes risk reduction, material and service availability, the ability to maintain or increase uptime as well as complete capital projects on time and on budget.
Embed supply chain earlier in the planning process to increase visibility into materials or service needs and related lead times. Align supply chain, operations and engineering throughout the project life cycle to build necessary agility. For instance, if engineering has plans for a specific electric meter base or wellhead, understanding lead times early in the project can help reduce the risk of delays.
Drive business success by building solid relationships with the critical suppliers, aligning on overall vision and mission. This can lead to better communication, improved shipping priority and availability, lower product costs and enhanced third party-risk monitoring — the value of being a preferred customer. Cloud-based Supplier Relationship Management (SRM) solutions can help facilitate a program that reduces risk, enhances supplier collaboration and drives added value above unit price.
Get ahead of potential supply chain disruptions by using new and existing data sources more effectively for capital planning and other work including preventive maintenance and vegetation management. Building a dynamic data strategy can take years, but one key step you can make now is to start taking control of your data story by creating a data network that can read, clean and analyze data from multiple sources. Boost inventory levels to adjust for potentially longer lead times and to improve efficiency within the system. This could mean increasing stocking levels for transformers or other materials to allow for some buffer when supply chain disruptions occur.
Leading organizations have their eye on building an even stronger foundation for the future. Here are important actions energy and utilities should consider as part of any long-term supply chain strategy.
Break down silos to build a culture that supports truly synchronized, integrated “closed loop” business planning and execution. This means creating a strong connection between where you’re placing your capital bets, the execution of those capital plans, the financial considerations, supplier needs and workforce implications. Next-level planning moves from using historical data and anecdotal experience to responsive and forward-looking data-driven insights that reflect changing market dynamics. For regulated entities, this revamped planning may need to include introducing more supply chain risk considerations into rate case filings and cost recovery calculations.
Enhance advanced supply chain capabilities and digital upskilling to support real-time data gathering and decision-making, predictive analytics, automation and digitally enabled end-to-end visibility agility. For instance, artificial intelligence (AI) can help energy and utility companies improve forecasting, respond to shifts in demand or weather events, automate repetitive tasks and improve overall cost-effectiveness of having the right materials on hand. To take this even further, leading companies are detecting, prioritizing and coordinating responses to supply chain risks through AI-enabled “control towers” that combine traditional supply chain planning data with real-time visibility updates from carriers and suppliers. This can create visibility and help answer the classic question of a maintenance planner, "Where are the materials needed for my repair?" — while helping the business create more accurate work schedules and increase field productivity. The control tower concept can be extended further into a "digital twin," which is a simulation model that can help promote operational resilience. Additionally, blockchain can have practical supply chain applications. While commonly known for its financial uses, it can help energy and utilities enhance the digital tracking of components and materials across an asset’s life cycle.
Evaluate and confirm how each new investment aligns with overall strategic priorities, focusing on the ones that can make operations more transparent and provide more end-to-end supply chain visibility to other functions in your organization. Also, look at where you’ve had technology successes and determine whether those successes can be scaled and replicated elsewhere. Supply chain technology investments can yield mixed results without a clear business case linked to strategy and dedicated change management. PwC research also shows that when leading companies invest more in advanced supply chain capabilities, the investments pay off.
Try to solve for the ultimate tension point: The level of risk you are comfortable with versus the cost of protecting your organization from future supply chain disruption. Leverage the latest modeling techniques to work through different scenarios — extreme events, another pandemic or other unknowns — to align throughout the organization. Scenarios should include conducting a risk assessment of direct suppliers as well as your suppliers’ suppliers, meaning looking end-to-end from metals and minerals to technology components and physical hardware needed to serve customers. Also, when evaluating your plans, consider starting with a blank slate and asking, “What would we do if we didn’t already have these practices and processes in place?” This could lead to organizational shifts or the creation of new roles — such as an embedded economist or intelligence team within your supply chain and operations organization.