Running head: Exploring supply chain opportunities in the UK utilities sector

Supply Chain Management Case Study Presentation

Abdur Rehman Sher Mian Ammar

Ms. Saba Rana Supply Chain Management, Section F March 03, 2014 Lahore School of Economics

Exploring supply chain opportunities in the UK utilities sector Abstract :

Since the privatization of public services in the UK , only a few studies have examined the supply chain management industry studied. This article examines the case of the development of the concept of supply chain management and the role of emerging economies over the Internet electronic support this . Using a case study approach and interviews with executives in seven facilities , water and electricity in the UK. Can priority areas of the supply chain companies , such as electronic markets to explore support the goals of the supply chain and the barriers to adoption of e- commerce solutions. Research shows a strong focus on water and electricity companies in the industry in order to control the cost of entry . So that is . The management of recruitment and other activities of the value chain To identify the main obstacles to the adoption of e -business and the problem and provide real benefits to suppliers and technical difficulties on the market . This is Should focus 1exploratory the study area and will continue to work in this area , are the solutions for the supply chain facilities , how to develop the skills and how they e - commerce support. The study concludes that the operators of electronic markets have a convincing argument for a greater role in managing the supply chain through the Internet not yet been entered . SMC leadership is stronger, resulting in business before that happens .

Introduction &Background :

The privatization of the assets of national ownership , which began in the 1980s under the Conservative government of the time and the service sector and the commitment last year by the national privatization program . The study focuses on the provision of electricity and water, the assets and activities that are to be used in national surveillance , and was privatized through IPOs in 1989. This program is the creation of the concept of competition in the industry for the first time with the aim of Users' choice for consumers and leading companies and increase performance. The regulatory framework establishing a legal framework . By bodies such as Ofwat , the water regulator ( Ofwat , 2002) provide and supervise the planning , pricing and financial practices in the industry Despite the appearance of the structure of competition in these sectors and normative approach sector companies in the EU to get the old "public". For example, the rules for the practice of buying must be covered on public procurement in the European Union, an entire sector of the guidelines outline the responsibilities of public institutions follow-up in relation to the work of the tender and the award of contracts for providers ( Anonymous, 2002).

Exploring supply chain opportunities in the UK utilities sector

As already privatized utilities subject in the United Kingdom , the legal framework , and much of the scientific literature in this area primarily due to the strategic industries and the economy as a result components. The main issues were addressed: Competition and Regulation ( Markou and Waddams Price , 1999; Kunneke , 1999; Waddams Price and Bennett , 1999; Parker, 1999) and the power structure / property ( Newbury 0.1998 ; Morse , 2000). For chances to improve its market share and rising prices is limited at best , and one of the few remaining strategies to improve the financial performance of facilities to reduce costs. Supply chain management has been recognized itself in many industries as an important opportunities to cut costs.

Supply Chain Management and Utility :

It has Supply Chain Management and its importance is documented as a function of integration on a large scale in the literature . Too much work together The focus of recent research on the supply chain for the benefit of the members of the supply chain in order to improve the efficiency. It is now recognized that the level of the individual companies that you can improve the logistics activities can be done , but the level of the supply chain network , or that many companies are now looking for quantum leaps in performance. Supply has received relatively little attention Chain Management industry and the privatization of public utilities sector . You can get the exception, because some of the studies , and after privatization in the UK , and to study the impact of the EU Directive on Public Procurement More discussion of this study, made the purchase and delivery of strategic technical and administrative , including improvements , and always yet the purchase and delivery make professionalism. But the stress on the last working mainly on supply management, rather than managing a broader concept of supply chain , which includes, among others , space planning, forecasting, inventory management, production planning , storage and transport and change. This study seeks to extend the debate on the United Kingdom and utilities to increase understanding of the issues and priorities in the supply chain.

Supply chain structures in the public sector :

The study looked at specific sectors and supply chains of different structures alone. (electricity& water)

Exploring supply chain opportunities in the UK utilities sector Electricity:

The structure of the supply chain in the electricity industry of our days consist of several sources of fuel and raw materials and fuels from coal, gas and petroleum and petroleum products , nuclear energy and renewable sources. Generation is the process of converting various types of fuel in the primary current is used . Presented the privatization program of the 1990s, a lot of competition in this part of the supply chain, when they split for the first time by the former monopoly of the Central Council of electricity , which in principle by private companies. Later, he saw more competition in the United Kingdom and additional generators on the market. The transfer function is a part of the value chain , not a competitive activity and it is still under the control of the national network . And the high cost of infrastructure and guaranteed method to secure transfer some of the reasons for this activity regulation of monopoly (which has similarities here with Railtrack in the railway industry in Britain) Maintain hold. The electricity is privatized by a group of actors, including regional distributors , formerly known as the regional power company is known , as well as some home generators and Powergen , which are not directly distributed participation in the regional distribution network after privatization . Is the power distribution network of transport and communication with consumers and business users at the point of consumption. The last episode of the series, the offer is effective in retail activity in the industry. The purchase of the generation and supply of electric service to end customers. The agreement is a sign that we deal with consumers and those who have a business relationship. This could be one of the companies that are to be found independently and national interests in this part of the series in a residential area , a regional action , as well . It can be seen from this brief overview of the industry today is a complex structure of production , distribution and supply, with some companies that work exclusively in one sector of the supply chain and other companies such as Powergen simultaneously in different regions. No integrated chapter structure in the industry sold as a result of the formation of the supply chain in the line of products to be a commodity that can be traded on the open market are similar . In fact, I have some business distribution of electrical energy , either through the mechanism of the auction as a way to see the lowest prices . ( Offers are request suppliers to offer the buyer a way to provide prices online, in real time , with the winner to be the company with the lowest price ) . Are less likely to end up the focus of the supply chain and to maximize individual performance a sector companies as a result.

Exploring supply chain opportunities in the UK utilities sector Water :

Water industry return for the attention of the UK electricity sector and the fact that privatization was a very different structure and disposition of the property. Despite the nationalization of the assets of the water company , in fact, what is now in place a series of regional monopolies control. The role of the regulator of water intended for the provisions of Article 2 of the law of domestic hot water in 1991 , and includes a review of prices , and the protection of customers and the economy and efficiency , competition and license application ( ofWat , 2002) to facilitate , to promote . The industry is to operate in ten regional water companies , water supply and sanitation in the entire series split for consumers. Geographical areas , as well as twelve additional local companies to supply water only. Water industry supplier companies for water and wastewater , where we can see that the structure much more integrated , takes place with the work within the organization. The main difference between the water and the supply chain in most cases , industrial product that gives a poor job or change during the term of the website. The raw water and the finished product , if . For consumption The role of the supply chain to the value of the product through the process of abstraction , storage, treatment and distribution to the buyers , whether private or business receives the product under conditions which . For consumption The flow value is almost exclusively in the hands of the organization, but only if used by third parties and service providers for special functions.

E Market : One aspect of this research interest in the possible role of the mechanisms and especially e-commerce ( Business to Business) B2B marketplaces. Processing markets online breathtaking between 1998 and 2001 , and in the short period of the bubble economy of the Internet. Much is said about the market model on the Internet, and the role of manufacturing in the business, and strengthening written way to reach the standards of the industry and the entire supply chain integration . However, there was empirical evidence to suggest that some member wants to create , or if In fact, they are achieving . Since 2001, the impact many of the market was beginning to come you can not get off the ground or were permanent sources of income and can not be achieved by the investors to abandoned. In fact, in 2002 , and a number of prominent promoters e-Marketplace Barclays plc and GE decided to get rid of their projects. This does not signal the end of his - the market , but those who survived the difficult decisions about how to deal with the preparation of proposals viable business done. Markets and developed a classification proposes three levels of ownership and jobs, as a private, independent trade unions is commonly known .

Exploring supply chain opportunities in the UK utilities sector

In the utility industry , and there are many independent markets ( or public) in place , which , the Asian market is the United States or Europe. In co-operation and support of the European market (the company seeking anonymity ) with a research project . The online market began in the middle - . 2000 and provides information and transaction services for the privatization of formerly public utilities and other industries The main activities in the market for the main display of the company, after the development by providing information and support for participation in the tender , under the auspices of the management of public procurement in the European Union public companies. He was interested in the products and supply chain services for utilities would increase benefit the company in the future.

Three research questions :

RQ1: What are the supply chain priorities of Utility firms? RQ 2: How can an electronic marketplace support the supply chain needs of Utility firms? RQ 3: What are the barriers to e-Business adoption in this sector?

To explore the purpose of the search and to evaluate how the supply chain in all areas and the priorities of the participating companies , industrial services in the electronic market , to identify the needs of the participants. The study focused on companies involved in the market (through the services of online shopping) and buy companies that are major customers of the futures market for the product management of the supply chain. Since this is an exploratory study of intensive investigation areas - to explore where the emphasis is on the development of new technology is the use of a structured approach to some of the questions , interviews with the participants. I had access to the executives of many companies on the market in e- commerce projects active. The three companies and the current in the water four . Topics include , but are not limited to: the structure of the supply chain and policy , acquisition strategy and structure, and the adoption of e -commerce issues and the role of markets and the impact of supply chain relationship. The interviews were (not included as a director , the company and requested anonymity ) with the participants in the procurement, individual supply chain and information technology or in groups of two or three performed. In addition to asking questions about the structured interview respondents to the market potential of nine service mark Likertscale. When the defendant asked more than one, and asked the company representative to vote on the result and returned after completion of the interview.

Exploring supply chain opportunities in the UK utilities sector

The data collected from the interviews and wrote for the analysis was coded and are first used in a number of arrays and matrices to plan the answers to that of Miles and Huberman (1994) proposed method, the method of approach . How to interview several companies in each sector and can be compared to the answers and results in each category , for a cross.

Results and Analysis RQ1 While talking about the electricity in particular then we would see that there is no physical product which is visible either to suppliers or consumers. Contrary to the other retail products where goods are delivered to consumer through a vehicle but in case of electricity there is no physical logistics used. As we all know that electricity is transferred to its users through transformers, switchgear, cables although this is a delivery network. The three electricity firms studies in this research, it was observed that they do not happen to have an individual department which is named as Supply Chain On the other hand, it was also seen that all three companies have proper layout of logistics and procurement. One of the electricity company operates its own stores system in order to manage the inventory whereas other two electricity companies have outsourced the logistics activity which includes warehousing and transporting to a third party logistics provider. The primary objective and focus of all these companies is to acquire the supplies and to do so they have made their own strategies. The procurement objectives are based on the organizational hierarchy of each these companies. For instance, in one company the procurement manager reports to the finance manager whereas in other company the procurement is supposed to answer Operations or Engineering Departments. The water industry supply chain is controlled from end to end by individual organizations. The water firms operate within strictly defined geographical UK territories but in this case do have a physical product delivered to the end consumer. The structure of water providing companies resembles to the structure of electricity companies. Same like electricity companies, the supply chain tasks are also fragmented in water companies. As a matter of fact, procurement answers to Finance and Operations or Engineering. But, there is one major difference between electricity and water companies and the difference is that water companies do have a physical product which is delivered to their customers. Same like electricity companies, outsourcing has been chosen as a solution for managing the inventory, transporting and delivery of bought-in materials.

Exploring supply chain opportunities in the UK utilities sector

All the utility firms which were observed in this study kept very little control over supply chain activities and they have outsourced the tasks to a third party logistics provider to run their operations. In fact, the Executive Head of one of the utility firm quoted: we should concentrate on our areas of expertise such as product specification and acquisition, as inbound logistics can be managed better by third parties. Among all the utility firms studied in this research, there was one exception of GPU Power who believed the opposite way. They were the only one who undertook their distribution network of emergency service components because they believed that controlling the stockholder policy and closer co-ordination of inbound materials would affect the business performance in a positive way. The businesses with a vast distribution network and high competition have been seen focusing more on supply chain. As a matter of fact, supply chain thinking has become a major influence in the survival of such businesses. The most common examples of such businesses could be automotive, chemicals, food and beverages. On the other hand, the utility firms analyzed in this research paper are UK based domestic businesses which are only focusing on the home market. Most of these utility firms are only operating in very limited and pre-defined regions due to which they have not experienced a very high competition in the market. And their focus is more on waste reduction, yielding management and updating of networks. These utility firms have not experienced the kind of competition for which they might need to expand their supply chain activities. This could also be one very important factor that why these companies are not using a proper integrated supply chain network for their business operations.

RQ2 Now a day, electronic marketplaces which are operating in different industrial sectors are really struggling to find a way to attract the buyers and suppliers into adopting the services which are not physical in nature and move beyond procurement. The e-Marketplaces were only procurement platforms in their earlier stages but soon enough these platforms turned into website offering tools for operational management and supply chain integration. According to (Laseter et al., 2001) during the initial stages when electronic marketplaces were introduced, it was the concern of many that the transactional procurement processes alone would not be able to generate the revenue which would guarantee the survival of e-Marketplaces. In fact, some electronic portals stated their objective very early i.e. to provide services of supply chain management across the industry. Examples of such e-Marketplaces may include www.covisint.com and www.cpgmarket.com.

Exploring supply chain opportunities in the UK utilities sector

The prime focus of this study was to examine the buying firms because they are the one which decide the extent of transactional services provided by e-Marketplaces. And in order to find the significance of different features offered by these platforms, all the utility firms were interviewed and were asked to fill responses in form of a Likert scale. There were nine services which were identified from the facilities provided by these e-Marketplaces. The mean score of each service as per their importance are shown in the following given table.

The potential benefits of automating procurement activity, documented amongst others by Aberdeen Group (2001), Croom (2000) and Giunipero & Sawchuk (2000) which can be summarized as follows: Creating efficiencies in the acquisition of both operating and non-operating Goods and Services Transaction Cost Efficiencies: Reducing Purchase Order costs Reduction of Maverick Spending Tighter Control of on contract Spend Potential Price Reduction through Spend Leverage.

Exploring supply chain opportunities in the UK utilities sector

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One of the subjects which prompted more discussion and also produced a good score in the interview was Collaborative Initiative. It is also notated as horizontal because the idea behind this was that utility firms should be taking benefit in joint approaches by collaborating with each other at horizontal level in specific areas such as sharing supplier information, and exchanging experiences which would help everyone to make their future strategies and framework more effective. This could be a great opportunity for all the firms in learning from experiences of others and carrying out the industry benchmark. There was this particular case where one of the water companies pursued reverse auction for logistics and the outcomes were pretty much good for them so all the other companies followed the same course of action as of the water company. Another benefit from horizontal collaborative initiatives could be achieved is that it would eliminate the competition in the industry. On the other hand, there were few companies which were against the idea of collaborative initiative because they believed that competition-free industry might not be helpful for their firm. It was also observed during the research that many respondents were not clear about the benefits they could obtain from supply-chain focused applications. They felt it irrelevant when they were asked to compare retail and supply chains. It may not be surprising for me if the firms would say that their market is different from others that is why they do not feel the need of supply chain activities in their industry. In laymans terms, the priority of the sector is clearly procurement, and purchasing and supply considerations drive their decision making. The conclusion is that there is at present limited potential for an extended range of supply chain services and applications within the online marketplace. Therefore, the online marketplaces in this sector need to work on following aspects: deliver a suite of procurement-related services which meet the needs of buyers provide a forum for exchanging industry best practice and e-Business successes demonstrate the potential benefits to Utilities of online-supported contract management, forecasting, and inventory management tools

RQ3 During late 1990s when electronic Marketplaces and electronic Businesses were at their peak and the electronic world was booming. It was the time when no business could think to avoid the significance of e-Marketplace in their business. Later on, it has been observed that there is a decline in the adoption of e-Marketplaces. The rate of adoption of e-Businesses in utility sector has been slow as in many other sectors and the purpose of this study is to find the reasons behind the failure of internet. Respondents who took part in this study also talked about the barriers to e-Business and they also suggested recommendations according to their own experiences. The issues raised and mentioned and the response count with all their recommended implications is given below in the following table.

Exploring supply chain opportunities in the UK utilities sector

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The respondents of the interview faced little problem while identifying the adoption issues and barriers in the way of progress because majority of the respondents never thought about the adoption issues before as they are surrounded by the problems of their own relating to their businesses. If we see particularly in the utility sector then we would be able notice that there is a clear issue of IT-preparedness in the utility firms. Most of the utility firms are still in the early stages of implementing phase or even specifying the ERP system they are going to use. Among all the respondent firms, only two had fully operational enterprise system whereas remaining believe IT to be a hurdle in their business proceedings.