June 28, 2004
S&C President and CEO John Estey Addresses Annual USMA Educational Conference.
“Let The Buyer Be Aware” is the title of the keynote address S&C President and CEO John Estey presented at the 9th Annual Utility Supply Management Alliance Educational Conference on May 25, 2004 in Austin, Texas. Having been asked to provide a supplier’s view on electric utilities, he did so from the perspective of the transmission and distribution segments of the business.
Mr. Estey began by explaining that the electric supply industry is a decentralized complex “machine,” with thousands of players who must work together to keep supply and demand in check at all times. These players work with highly engineered products that, if not handled correctly, can kill people and cripple economies . . . an important distinction from other industries where new supply-chain management techniques have been touted. This complex system demands a long-term outlook, and equipment that can run reliably for 30 or even 50 years, in an always-on state.
There have been several external impacts on electric utilities in recent years that changed their thinking to inappropriately short term in planning for T&D systems. The moves to “deregulation” and Wall Street’s obsession with short-term results, plus the use of outside consultants to help make strategic decisions, were particularly harmful in this regard and have impeded progress in improving the supply chain. Further exacerbating the situation when it comes to procurement, many electric utilities do not have effective internal alliances between their procurement, engineering, operations, and construction departments — which do not typically work as a cooperative team. A lack of trust between buyers and suppliers, downsizing, and high turnover rates at utilities have also contributed to the lack of greater supply-chain success.
But all is not lost, explained Mr. Estey. He offered his audience real hands-on solutions to these problems.
“There is no silver bullet to achieve cost savings . . . There are, however, many ways to build strong companies through a thoughtful, team-oriented approach to procurement. Together — with trust, a focus on the long term and a determination to take the time to actually work on the issues — we can make a positive difference in supply-chain management, and finally move this industry forward in this important area.”
Mr. Estey concluded his address with a discussion focused on coming up with ways to tackle the supply-chain challenge and better serve customers, while still improving the utility’s bottom line over the long term.