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


To assist the category teams in their sourcing efforts, Exelon also developed a database to allow the company to view its spend enterprise-wide, rather than broken down by business unit. Gaining this kind of cross-unit visibility has been one of the toughest technical challenges associated with the transformation initiative, according to Adams, because of the variety of backend systems running in the different business units. For example, he says, the company's 10 nuclear power plant sites were developed or acquired at different times by a combination of Unicom, PECO Energy and AmerGen Energy. "Every one of their supply chain data systems was different, so pulling all that data together and making it ‘apples-to-apples' was a significant challenge," Adams says. Exelon is ameliorating this challenge to some extent by migrating all its units to the PassPort enterprise resource planning (ERP) system from Indus. The functionality within PassPort has helped automate the spend data aggregation process to a certain degree, but Reidy and Adams both say that the supply chain team has had to do a considerable amount of manual work to, for instance, match part numbers from different plants.

The Strategic Sourcing group also has looked to various online tools, such as online reverse auctions and electronic requests for information and requests for proposal (e-RFIs and e-RFPs) to assist in its efforts. In PCs/servers and cell phones, for instance, Exelon conducted e-auction events to facilitate the pricing negotiation process, finding that with well-defined commodity specifications, the online auction process enabled efficient concurrent negotiations with multiple suppliers. In all, Exelon tested more than half-a-dozen different tools, according to Robinson, evaluating the various solutions on the market based on a range of criteria, but with usability figuring high on the list of priority features, given the need to convert the entire organization to a single tool. After running various online events for different categories of spend using each of the e-tools, Exelon settled on solutions offered by Kansas City, Mo.-based Perfect Commerce to drive its strategic sourcing efforts.

For herself, Robinson sees part of her role in the organization as being a catalyst for introducing supply chain practices that go beyond best-in-class for the utility industry, thanks to her background in the consumer electronics world prior to coming to Exelon. Adams agrees: "Krista has spent a significant amount of time in the consumer electronics supply chain business, which is very different from a utilities supply chain experience. That offers us the opportunity to infuse new thinking." Or, as Robinson explains it, only half-jokingly: "Because Exelon is looking to benchmark [itself against] industries beyond utilities, Craig gets the unfortunate benefit of having me say a lot, ‘Why are we doing that? Well, how about this? How about that? Have we considered this?'"

Standardizing and Automating Processes

Elsewhere at Exelon, the Supply Operations group has been focusing on standardizing processes enterprise-wide for its portion of the company's supply chain. David O'Brien, who heads the group, joined PECO a little more than 15 years ago and spent his early career with the company in engineering and project management on the electric transmission and distribution side of the business before getting into the supply side eight years ago. O'Brien is no stranger to organizational change, having been through the 2000 merger with Unicom and having helped manage the consolidation of the supply chain functions at PECO and Unicom. He says that part of his role today has been to focus on achieving staffing efficiencies in the company's supply operations by streamlining processes and eliminating redundancies. To date, O'Brien says that the group has reduced its staffing on the order of 20 percent under the current transformation initiative, on top of roughly 30 percent reductions that resulted from the PECO-Unicom merger.

To achieve these results, the group has focused on standardization, which has meant implementing best practices consistently across Exelon's supply operations, sometimes taking a best-in-class process from one unit in the company and introducing it throughout the organization, and other times applying practices from outside the company. Standardization also has meant working with internal customers and suppliers to reduce the number of stock-keeping units (SKUs) that the company is buying. Cross-functional teams from Exelon, including staff from the supply organization as well as field operations or engineering employees that actually use the products in question, will meet with a team from the supplier organization to look at product specifications and explore standardization opportunities. For example, Exelon once used some 500 different types of wire and cable on the energy delivery side of its business. By working with internal staff and outside suppliers to understand the overlap in functionality amongst all those different wire and cable products, the supply operations group was able to eliminate about 80 percent of the SKUs, resulting in consolidated buying volumes for the remaining products. The manufacturers benefited, because they were able to produce longer runs of fewer products, resulting in efficiencies for the suppliers and better lead times, availability and pricing for Exelon.

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