Cover Story: Come Together

Energy giant Exelon is just one year into a 36-month initiative to consolidate its supply organization and drive new supply chain efficiencies, but already the savings are adding up


Winning senior executive sponsorship for the project was Job One for the supply chain leadership. Oliver D. Kingsley, Exelon's president and chief operating officer at the time, was skeptical of the initiative at first. When Kingsley had come to Exelon, he had assumed oversight of the supply chain that supported the company's nuclear division, while the proposed consolidation would place that division's supply chain under BSC. Yet ultimately, Reidy says, the business case for bringing all of the company's supply chains together under one roof proved sufficiently compelling for Kingsley that he signed onto the project. "The initial challenge had been given to all the supply chains to work together to achieve a certain level of benefit, and we had enough evidence that if we structured [the supply chain] differently, looked at our spend differently and operated in a more standard way, that we could surpass that [level of benefit] many times over, and that made a believer out of [Kingsley]," Reidy says.

Reidy also pushed strongly within the company to establish a chief supply officer to oversee the unified supply chain organization. First, the CSO would have ownership over the company's spend of (at that time) about $2.3 billion. And second, Reidy believed that a CSO could drive standardization of supply chain policies and processes throughout Exelon's various business units. Moreover, the chief supply officer would have a critical role in changing the way that the company's supply chain function acted and was viewed throughout the company. "Changing the organization from 'what do you want and I'll get it for you' to 'let me help you figure out the best way to get what it is I think you need' is a big shift, and the chief supply officer is responsible for that," explains Reidy, who was named as the company's first CSO in 2003 to head up the initiative. (Craig Adams stepped into the CSO role in July, when Reidy was promoted to her current position.)

Ramping up Strategic Sourcing

As Exelon currently is organized, the CSO reports to Pamela B. Strobel, president of Exelon BSC. Executives below the chief supply officer include a Vice President of Supply Strategic Sourcing, Krista Robinson, who joined Exelon in mid-2004, and a Vice President of Supply Operations, David O'Brien. Robinson, in her newly created position, heads up the Strategic Sourcing group, which is charged with sourcing all categories across the company, driving a total cost of ownership approach to the supply chain and managing the company's supplier relationships. O'Brien oversees the Supply Operations group, which provides "tactical support" to Exelon's other business units, including materials handling (logistics and warehousing) and non-strategic purchasing (for example, of low-dollar, high-volume items). In addition, the company's Business Operations and Governance Group, formerly Supply Support, comprises e-business functions, supply projects and diversity initiatives, as well as policies, programs, systems and decision support systems. The newest member of Supply's executive team, Delia Stroud, vice president, Supply Business Operations and Governance, leads these groups. Stroud, who joined Supply in September, previously served as lead counsel for PECO Energy since 2000.

On the strategic sourcing side of the supply chain group, Exelon organized its sourcing specialists around spending portfolios encompassing more than 70 different materials and services, with managers overseeing such categories as fleet, valves, wire and cable, facilities, equipment rental and environmental, among many others. Category managers assumed responsibility for all the operational issues involved in their spend categories, giving them ownership and allowing them to bring consistent processes to the way in which the company delivered those goods and services to its internal customers across business units. The strategic sourcing team also addressed corporate and IT categories of spend, including outplacement services, advertising and marketing, and travel and lodging, as well as such IT categories as PCs/servers, cell phones and telecom. The sourcing specialists employed a seven-step strategic sourcing process that enabled Exelon to look at capturing value from a total cost of ownership perspective. For instance, in travel and lodging, the category manager looked not only at car rental rates but also at the availability of counter-less service (to minimize wait times), minimum surcharges (such as fuel), and free pick-up and drop-off at certain locations.

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