Last week, I spent the day with an incredible group of procurement and supply chain professionals from across the UK utilities industry. From our interactions at the Utility Week Procurement & Supply Chain Engagement 2018 conference, it became clear that they shared a few common goals. All were looking for transformational change that would help to:
The desired shape of that transformation was also shared: to influence procurement and supply chain activities across the asset lifecycle, from strategic thinking to delivery and into operations. But how best to accomplish that?
During my presentation at the event, I covered a few core concepts which aligned with and provided insight into the realization of their shared goals – as well as exploring the engine needed to drive the sought after transformation.
The utilities space has changed significantly over my lifetime in terms of the way utilities procure and manage asset delivery. Previously, this process was run by an entirely in-house organisation that undertook most activities thru design and construction management, mainly working with the direct supply chain. Later, utilities began outsourcing this activity to Tier 1 contractors, who handle project management and delivery. But with this shift came a loss of control, so today we are at a point where most of organisations are looking at becoming what is called the “intelligent client.” To do that they need to clearly understand - by capability - how they wish to manage and support the supply chain, including the appropriate approach for various tiers and even members within those levels. To successfully manage this change, a common data platform is needed. With such an environment, organisations can adopt different approaches based on project size, duration, supply chain, and organisational competency. In addition, with the desire to manage “TotEx” (rather than a split CapEx/OpEx approach), it is vital to understand the impact change has on the asset delivery project, including its outcomes and its impact on the asset’s revenue returns.
With the intelligent client concept comes the desire to manage the supply chain at any level by going directly to the appropriate level/source. This leads to a need to ensure compliance, governance, and control to a level that is appropriate to each member’s situation.
So, now that utilities are interested in managing the tier 2,3, etc., supply chain organizations, they need tools that support that approach. A siloed patchwork of individual applications is no longer appropriate when trying to manage across a diverse array of suppliers and contractors.
This approach also necessitates a model that delivers more real-time data. And because ownership of data is fundamental, a move to a subscription model is needed to support the key needs around collaboration, compliance, and governance.
In addition, the intelligent client approach is supported by modern best practice in supply chain contracting, with processes such as NEC4 including significant provisions around collaboration, compliance and visibility.
As was discussed at length during the event, change is something that utility organisation must get to grips with (and, you would think, something that should have been sorted out years ago). But in light of the desire to directly manage tier 2 and below of the supply chain, the management of such change - and its impact on other suppliers and the overall asset delivery - is a significant area of focus.
There is a need to move away from current models that involve multiple lines of communication and significant use of siloed data transmitted via email or other offline means. Such practices continue to result in disconnected and opaque management of change, bringing overruns in both budget and schedule and impacting asset revenues.
Key to addressing this challenge is the use of a common data environment (CDE) that delivers a single version of the truth to support change control across stakeholders. With such an approach, organisations can manage the process from the point of an issue right through the RFI, assessment, change notice, approval processes, etc., and ensure everyone has visibility into the resolution path.
How technology can support the above
Any productive and efficient effort to embrace an intelligent model to manage a much broader range of suppliers and contractors requires the right technology to support positive outcomes. Fundamental to such initiatives is a common data platform that can provide collaboration, compliance, governance, control and real-time data for all stakeholders.
Visit Oracle Construction and Engineering to learn more about how we are helping energy companies undertake journeys of digital transformation.