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


In addition, the Supply Operations group has focused on automating its buying process, particularly for the low-dollar, high-volume goods that it purchases on a regular basis. "We try to identify the population of materials that we really shouldn't have anybody reviewing manually," O'Brien explains. "If we can put a strategic blanket purchase order in place, we'd like to just automate the process such that the end-user creates the demand in our system for the materials, we send those orders directly to our supplier through [electronic data interchange (EDI)] without having to have someone manually create a purchase requisition and a purchase release, our supplier receives that [order] electronically and, of course, processes the order and ships directly to our end-users, ideally packaged for the specific job that it's needed for." Exelon has taken advantage of certain functionality within the PassPort system to help automate its procurement process and connect with its suppliers through EDI, although for smaller vendors the company has set up a Web portal that allows, for example, a supplier to create an online invoice that then comes into Exelon's system looking like an EDI 810 transaction that the utility can process electronically within PassPort.

The Need for Speed

Former Chief Supply Officer Reidy and current CSO Adams agree that the cultural change associated with the transformation initiative presented a challenge at the start of the project, both within the new supply organization and in the different business units. "We had folks who had been identified with an individual business unit now being identified as professionals in supply rather than with the business unit, and we were asking them to do things differently," Reidy says. "Trying to instill a common process was challenging." For his part, Adams — who previously served as a vice president in the energy delivery business and therefore brings a business unit perspective to his new job — says that at the start of the initiative he saw some trepidation on the business unit side about the impact that the transformation process might have on service levels in the supply chain. In the end, however, the speed with which Exelon implemented the initiative meant that visible positive results came swiftly, and those quick wins helped alleviate doubts within both the business units and the new supply organization.

Not that the rapidity with which Exelon pushed forward with its supply chain transformation was without challenges of its own. The speed of the transformation meant that employees in the supply organization and throughout the company had to adjust to new roles and new processes within a short timeframe. "We moved very quickly once the decision was made, and that didn't necessarily allow a lot of time to make sure all the t's were crossed and the i's were dotted," acknowledges Reidy, "and when you do that, you may leave some folks in the wake. So I think that we could have benefited from a little bit more up-front planning on how the transition of all these folks from one organization to another would actually happen.

"On the other hand," Reidy continues, "if we didn't do it quickly, we wouldn't have achieved the benefits that we did, and we wouldn't have been as immediately successful as it appears today." Adams seconds that opinion, saying: "Any time you're doing something that's a radical culture change, if you let it drag on, it's just painful. Moving quickly was the right answer." Adams further suggests that the key in these types of transitions is to make the new decision-making process clear to all affected parties from the get-go, and to continually reinforce that clarity to ensure that everyone is adapting to the new environment. At Exelon, this process got a boost from an enterprise-wide initiative called The Exelon Way, in progress concurrently with the supply chain transformation, which called for an ongoing, company-wide effort to improve performance, boost productivity and reduce costs while maintaining a focus on customer service, reliability and safety.

Safety First

Reliability and safety, of course, are always a prime consideration for any utility. At Exelon, for example, reliability affects any drive toward standardization in parts, since a power plant or substation may rely on older or even unique pieces of equipment, and when a piece of equipment goes down, the right part has to be available and repairs have to immediately happen. "We may have to stock oddball parts, and we have to balance that with trying to move toward more standardized equipment," O'Brien says. "You just have to be moving in the right direction and, over time, you migrate toward more standard parts and equipment. It's not like throwing a light switch."

As far as safety, Adams notes that it's an absolute necessity for a company like Exelon, particularly during a transformation like the supply chain initiative. "As an electric utility operating 20 percent of the nation's nuclear fleet, the public trust to operate those facilities safely is sacred for us as a company," he says. "And any time you have the kind of cultural change [like the transformation initiative], there is always a risk of losing that focus on safety. But [at Exelon] it was kept very tightly intact, and I would say improved."

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