To say that a utility company that stretches from Montana to the U.K. would have a complex supply chain would be an understatement. That is why PPL Corp. has been working to improve its supply chain operations.
PPL Corp. is a $12 billion company whose portfolio includes a mixture of traditionally regulated utilities and competitive generation. PPL-owned electric and gas utilities serve 10 million customers in Pennsylvania, Kentucky, England and Wales. PPL’s competitive generation business owns or controls about 11,000 megawatts of generating capacity from diverse fuel sources in Pennsylvania and Montana. From a supply chain perspective, PPL is decentralized with a center-led strategy that influences synergies from one region to another.
The supply chain operations at PPL Corp. have been going through a transformational time period in the last few years. Jaime Bohnke was hired as vice president of supply chain and chief procurement officer to oversee a transition that would turn supply chain into a corporate function.
“I was brought in to look under the covers and influence a new direction,” she says. “We don’t want to have multiple, independent supply chains.”
Positioning the Pieces
After Bohnke’s arrival in late 2012, the company created a supply chain leadership team and built communities of practice in areas such as procure-to-pay, sourcing and supplier management, logistics and supply chain operations. Each area has its own strategic plan and mission, but all work together across an integrated supply chain.
“Those practices are driving tactical and operational activity from our Pennsylvania headquarters, where we own the center-led activities in those spaces across the company,” Bohnke says. “We’re taking a structured approach to knowledge transfer and operational excellence. When the company looks at mergers and acquisitions, we want to be able to put the right framework in place so we can bolt on acquisitions.”
The initial priorities during this evolutionary undertaking at PPL Corp. concerned making sure the right people were in the right jobs and properly aligned with their roles. By putting effective people in an effective structure, the company was in a better place to build an effective strategy.
“We’ve put a knowledge management team in place to help us capture the knowledge of our workforce as we put in a new operating model,” Bohnke says. “We’ve put in an incentive and recognition program that is centered on our core values. We have also added what we call ‘RAA:’ responsibility, authority and accountability. That is focused on helping each other succeed.”
As PPL Corp. has worked to change its supply chain culture, moving away from a shared service model, it has been driving accountability across the business. It has been assessing internal skillsets in a way that is different from a traditional skill gap assessment. PPL Corp. has focused on learning each employee’s perception of his or her skills, creating a new training portal that is used to improve areas where both employees and managers see gaps.
Another change for PPL Corp. has been the commoditization of its procurement operations. It now has category leaders who are accountable for ensuring success in terms of strategy, requirements and contract management. Led from the center of the company, this is eliminating independent purchasing and finding areas of spend that can be targeted for improvement.
“There used to be limited spend analysis and visibility,” Bohnke says. “Today, we have more tools there, and we’re deploying new technology in that area. Our focus is less tactical and more strategic, as we are looking at demand that is forecasted out. We’ve also shifted supplier expectations and are aligning with key suppliers.”
The new e-suite solution that PPL Corp. is in the middle of deploying will help the company improve its sourcing, buying, invoicing and payment operations. The new solution will connect all of the key pieces, creating efficiency and effectiveness along the value chain. The company also is improving its ability to analyze spend data.
“We will be able to tie that data back to our commodity codes so category leaders can see their buckets of spend,” Bohnke says. “We will also be able to do all RFPs and sourcing electronically, all the way from negotiations and legal to the issuance of purchase orders. Suppliers will be able to invoice us electronically and have payment options. The solution will also help us track supplier performance on key deliverables.”
Making the Case
As the transformation of PPL Corp.’s supply chain continues, Bohnke will work to help all pieces of the organization understand the benefits of the new setup. The utility industry often takes a different approach to supply chain than other industries. It can be slower to change, largely due to the regulated nature of the business. Bohnke’s challenge is to consistently demonstrate a business case for why change is necessary and beneficial.
Ultimately, Bohnke says, whatever the industry, whatever you are buying, the principles of supply chain management are the same. She says the utility industry must meet challenges related to balancing its demand requirements with the needs of the supply chain. Other industries have more insight into their products, she contends, but through greater accuracy around business requirements, the flow of materials and services will be more efficient.
“In the end, that will have a big impact on the value chain,” Bohnke says. “We have been able to do a lot in the back office, and we’ve been sprinkling change into operations. We are evaluating our enterprise management system to see if we should move to a single solution or an enhanced hybrid model. By getting more visibility across the company, we can be more efficient and put a strong, solid plan in place to feed the supply chain.”