Supply Chain Optimization Opportunities in Electric Power Industry

The Electric Power Industry (EPI) is one of the largest and most important industries in the modern economy, as it provides a key ingredient to illions of companies, institutions and consumer households. This key ingredient, electricity, however, does not come inexpensively or easily. In the capital-intensive electric power industry, the single largest cost area is the purchase of equipment, materials and supplies required for operations. The processes by which a utility obtains those are part of its supply chain. Overall supply chain optimization of the EPI requires that the various business processes associated with power generation such as the purchase of fuels, the management of contracts, and the planning of activities such as maintenance, and operation of physical assets, to be aligned with those of transmission and distribution -- and all must be addressed within an integrated business-focused solution. Supply Chain Management (SCM) within the EPI is the effort to streamline the effectiveness of the entire power delivery process. This paper outlines: first the recent developments in the EPI; and second the concept of supply chain management in general. Further, the paper discusses the SCM literature related to all the basic concepts required for the management of electric power supply chains. This paper, however, elaborates upon several issues from existing EPI SCM literature that should be approached differently. In particular, the emphasis on collaboration should be increased, specifically through the establishment of a fourth party organization that promotes collaborative approaches to effectively manage the entire electric power supply chain.