Though not necessarily household names, energy and utility companies enable stability in infrastructure and the economy’s success. Within the US alone, there are over 2,200 privately-owned power generation plants, 2,000 government-owned power companies, 6,000 companies involved in the wholesale trade and retail distribution of electricity, and 5,000 commercial water and sewer companies – all accounting for over $400 billion in revenue.
Just like other industries, the energy and utilities sector is in the middle of a transformation:
- Utility investments in high-voltage power lines have been falling since the late 1970s as capital costs are up to $2 million per mile on aboveground lines, and over $4 million per mile for underground lines.
- Demand is steadily increasing at approximately twice the rate of the population, yet generating capacity has not increased at the rate of demand.
- To address this gap, utilities are making significant investments to ensure power availability. For the first time since 1974, new nuclear plant construction is underway in the US, yet other countries are phasing out nuclear as a form of energy and pushing toward alternative sources of clean energy.
- The increased investment in R&D for new sources of power generation and infrastructure has driven a demand for new supplier enablement and oversight.
- Because of the huge capital demands faced by power companies, the sector has experienced unprecedented consolidation.
- The premise is that, for each dollar reduced in operation and maintenance expense from a merger, up to five dollars can be invested in infrastructure upgrades.
- As a result of the ongoing consolidation efforts, a handful of the largest energy giants control over 50% of the generation capacity across North America, Europe, and Asia.
- Alternative thinking has also driven investments in reusable or clean energy. Water and sewer utilities have now turned their waste products into a revenue source. The San Antonio Water System, for example, recently executed a 20-year contract to sell its sewer gas to Ameresco, a renewable energy company.
New paths to success require different suppliers than those traditionally used. To benefit from these mergers, Procurement faces significant pressure to capitalize on the opportunities to further leverage spending power, rationalize supply bases, and find supply chain efficiencies.
Concern over the safety and security of water and power systems has significantly increased recently, necessitating both the hiring of new suppliers (for example, security, water testing) and the increased scrutiny and credentialing of suppliers with access to facilities.
Furthermore, the energy and utility sector is under constant and stringent regulatory requirements. The regulations, coming from various governmental regulatory agencies, can greatly influence operating environments, suppliers used, and the information tracked. Even small business self-certification collection can add significant complexity and workload for the purchasing organization.
HICX understands the pressures that the energy and utility sectors face. Our products are designed to enable you to succeed in high M&A environments through the use of global standards and fast adoption, while accounting for local and regional needs. Further, as new suppliers and new requirements for supplier information and performance tracking arise, HICX’s products can streamline your efforts, provide visibility, and optimize your resource use to shift efforts from transactional/low value activities to strategic initiatives.
Whether energy generation, energy distribution, or water/waste utility, HICX can empower your organization within all facets of supplier management – and we welcome the opportunity to show you how.
Featured Case Study
A large European energy provider, with 10 ERP systems and 50,000+ suppliers, struggled with rationalizing their supplier master, causing redundant efforts and a lack of visibility. With HICX Solutions they were able to centralize their supplier master, enrich their data, ensure compliance, and syndicate supplier information to the appropriate system as needed. By employing standard onboarding processes from a single point, they were able to recover over $165,000 in hard dollar savings, and identify an estimated $2,300,000 in sourcing savings.
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