Public Utilities Case Study
Problem: The customer was a large public utility formed from the merger of an electric utility and a natural gas company, both of which served several of the largest metro areas in the US. Facing continuing pressure to rein in costs, the utility wanted to benchmark the supply chain processes of both its electrical and its natural gas operations to identify best practices as well as areas where the firm could boost productivity and reduce costs.
Solution: Using a benchmarking methodology that employs both the SCOR (Supply-Chain Operations Reference) model as well as the CSCMP (Council of Supply Chain Management Professionals) best practice guidelines, Keough Associates evaluated a dozen major supply chain processes at each division, with a focus on inventory, warehouse management, and order fulfillment. In each area we assessed, Keough Associates also provided quantitative data on key metrics (like procurement cost per PO) gathered from other leading public utilities, so that the firm could compare its performance against both best practices and the quantitative results of other utilities.
The results of this benchmarking effort surprised the senior executive team, as one division turned out to be very near best practice in many of the areas evaluated, while the other was below average almost across the board. And the quantitative data (especially around the various elements of supply chain cost) bore out the premise that one division was operating less efficiently and at higher costs than its sister company.
Keough Associates developed a high-level plan to assist in the sharing of best practices between the two divisions, bearing in mind the complex political landscape that was still unfolding as these two companies struggled to meaningfully merge their operations. We also recommended sun-setting the lower-performing company’s legacy business system and scheduling a migration to the sister company’s best of breed SAP implementation. And we provided a series of key performance metrics and an executive dashboard that would track the performance of both companies in near-real time – allowing executives unprecedented visibility into the day-to-day operations of their business.
Result: This utility is currently in the process of implementing our recommendations. The company anticipates considerable business benefits once the two firms have the opportunity to standardize on the same ERP system and harmonize their respective business processes.