How Utilities Can Transform Procurement with a People Strategy
Let’s admit it -- procurement professionals have a tough job in utility companies.
Most of their time goes in resolving everyday issues. When they arrive in office, there will be a half dozen issues on the desk. This vendor didn’t get paid, that vendor isn’t registered, 15 purchase orders blocked. The list goes on. There is constant pressure from business to fix these vendor issues so that work can continue in the field to keep the grid live and customers happy.
It is no surprise then that procurement’s role in utility firms becomes transactional, not strategic, and the disconnect between procurement and the value it delivers stays as it is.
In this scenario, how can executives transform procurement from a cost center to a value-generating powerhouse? How can procurement professionals make day-to-day operations easier while continuing to innovate?
Procurement’s first step should be toward changing its workforce strategy.
3 ways to find and nurture procurement talent
Most utility workers (including those in procurement) spend their entire careers working for one company, and many do not feel the pressure to compete and improve over time. This means there is no readily available pool of talented workers vying for the same job, unlike what you would see in, say, the IT industry.
Also, due to low turnover rates, the average employee at a utility is older than an average employee in another industry. With an aging workforce, there is the risk of losing institutional knowledge.
But attracting young employees is hard.
Most millennials want to work for a company with a reputation for being socially and environmentally conscious and view utilities as soulless corporations that contribute to greenhouse gas production.
Utilities, thus, need an image makeover, as well as a more dynamic approach in the way they hire and train professionals.
1. Segmenting and connecting the procurement team
The first step toward the people strategy should be to segment full-time equivalents (FTEs) and subject matter experts (SMEs) into three group within procurements.
1. Strategic FTEs and SMEs
2. Tactical and operational FTEs
3. Digitally skilled FTEs
This way, each group will have clear roles and associated tasks. But roles of each group will also overlap so that communication is interlaced. This will provide employees in each tier full visibility into what their coworkers are doing -- on a daily, weekly, and monthly basis
The employee will have exposure to other roles in procurement, allowing the person to change roles as she or he gains maturity in skill sets. It will also provide a way to move FTEs quickly to align the procurement function with business needs. This can also be a path for the millennial worker to rise within the utility as the latest digital skill sets are hard to come by in an aging workforce.
2. Making procurement the hub
The procurement function should become the hub in a utility. This will help it develop a cutting-edge operational model and break down silos among different departments. As a hub, procurement will be able to:
- Create more customer value using fewer resources and optimal organizational structure
- Add and upgrade digital skills of employees
- Align roles and responsibilities with supply chain vision, mission and objectives
- Increase cross-functional collaboration for improved visibility and decision-making across the supply chain
- Incorporate speed and agility throughout the supply chain organization for faster speed to market
3. Filling the skill gap with customized training
Most procurement organizations have customized processes and policies and often do not train employees, except on the job. Basic questions like: “When should I consult with legal?” can cause major disruptions in the end-to-end procurement process and threaten project timelines, especially when procurement policies and trainings are not clearly defined.
The siloed organizational model creates several side effects in a utility that most executives do not realize. The solution is to develop a robust and impactful training program and repurpose FTEs.
After designing a strategic organization model, having clearly defined roles and responsibilities is equally essential.
Building these new skills can take years if done internally, especially in utilities that do not seem to attract millennials. Because of this, leading utilities typically rely on third parties to roll out this training plan at a fast clip.
With this process, procurement people add new skill sets earlier than usual, develop a deeper understanding of operations and are well-equipped to align resources to meet organizational goals.
What’s Your Plan for Procurement and Supply Chain?
As 2020 turns into the year of disruption, GEP’s unparalleled software and strategy solutions — featuring end-to-end digital transformation — ensure your procurement and supply chain organization stays resilient and effective. Find out how GEP can help — talk to us today.
Micah has over 15 years of experience in the energy and utility industry. He is an expert in strategic sourcing, category management, negotiations, SRM, data analysis and visualization.
He has helped establish a strategic alliance to replace and repair thousands of miles of gas transmission pipelines and handled procurement activities for electric transmission and distribution across North America.LET'S TALK