Challenges in Utilities Supply Chains

5 Supply Chain Challenges Impacting Utilities and How to Overcome Them

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Utility companies that require a new transformer are used to waiting for three months or so. Buying a bucket truck might take up to a year. Today, ongoing supply chain challenges mean it might take two or three times as long for these purchases to go through.

Industries everywhere are feeling the pinch from tightening supply chains, fluctuating labor supplies and long waits for essential products. Here are supply challenges facing utility businesses today and how some companies are managing to overcome them.

1. Inventory Shortfalls

LCEC is a nonprofit electrical distribution co-op based in southwest Florida. CFO Sarah Bullock said this about its current supply chain situation: “Longer-than-usual lead times and production constraints have impacted inventory levels, making it difficult to manage infrastructure planning.”

The company is making several changes to coexist with inventory shortfalls, including:

  • Installing improved inventory-tracking systems
  • Deploying idle equipment at offline service facilities
  • More carefully prioritizing work tickets and rejecting new requests requiring unavailable raw materials

Prioritizing new projects and requests is an especially important one where supply issues are concerned. Monitoring technology makes it easier to estimate the practical age of a transformer and anticipate when it may give out. Consequently, it’s becoming easier than ever to know when to postpone the replacement of one piece of infrastructure and allocate resources elsewhere.

2. Long Lead Times

Goods imported from China face an additional weeks-long delay when they reach U.S. shores. Additionally, shipping and processing capacity is seriously compromised at ports. Up to one-quarter of international shipping containers may be appropriated as temporary holding areas for freight backlogs.

One of the principal ways manufacturers are getting around long delays for raw materials and sourcing professionals are ensuring unbroken product supply chains is by looking for domestic partners.

The U.S. is still considered a leading world economy, but a lot of the competitiveness and resilience of its manufacturing infrastructure have been lost in recent years. Utility businesses should begin looking seriously at reshoring more of their supply chains.

5 Supply Chain Challenges Impacting Utilities and How to Overcome Them: #2 Reduce Long Lead Times… Click To Tweet

Long lead times may also be a consequence of utility companies ordering more components than is ultimately necessary at a given time, due to management or configuration inefficiencies. For example, using a different kind of transformer oil could yield a positive return on investment concerning transformer lifetime, oil longevity and required labor.

3. Lack of Communication

Many of the supply chain’s current pain points can be traced to certain events or trends, while others are simply omnipresent and perennial. Even in the vital utilities industries, a lack of proactive communication can impact results and stand in the way of success.

Justin Gibbons is a procurement officer for Iowa’s Denison Municipal Utilities. He described a recent incident in an interview: “We shipped [a transformer] out this past year and never heard anything about it, so after a while, we called the repair shop. They told us that our transformer was sitting in a warehouse … because they didn’t have a truck to pick it up.”

The single biggest problem in communication is the illusion that it has taken place.”

George Bernard Shaw

An engineer from Rochester, Minnesota, has experiences of his own. “At pre-development meetings, we inform the developer or project owner of the lead-time issues with distribution transformers. For commercial projects, we provide the customer … with a load data sheet, and we will not start sizing the transformer until we receive it back.”

Not every service-related slowdown can be solved by talking, but a considerable number might be. If nothing else, a lack of transparency concerning timelines, delays, expectations and chains of custody erodes supply chains by compromising trust. A utility company and every party adjacent to it needs its attention focused on keeping customers’ lights on in times of difficulty — not wondering if they’ll have to shop around for a different vendor during the next emergency.

4. Wasteful Bureaucracy

One probably pictures transformers, pipes and spools of fiber-optic cable when picturing the materials used by utility companies. What probably doesn’t come to mind is envelopes and other supplies required by routine bureaucracy.

Even the envelopes used by utilities for mailing bills to customers have been in critical supply throughout the global pandemic. This has made it difficult for some companies to maintain uninterrupted back-office functions. Some public utility districts (PUDs) are upping their PR campaigns to switch customers to paperless billing for this reason.

“The only thing that saves us from bureaucracy is its inefficiency.”

Eugene McCarthy

Another action undertaken by some utilities in the name of slashing bureaucracy is eliminating the bidding process. Some boards have bypassed certain bureaucratic steps and streamlined others to harden the supply chain and create resilience and redundancy. One PUD in Washington State has approved the following additional measures:

  • Switch to parallel supply chains
  • Refer to or build a list of approved alternative vendors
  • Use second-closest bidders to close gaps in supply chains

5. Labor Challenges

The cost of almost every product and commodity rises steadily. Many of today’s ongoing labor challenges are due to the same issue.

Apart from that, skilled laborers sheltering in place or quarantining while ill can leave utility projects and some daily functions dangerously understaffed.

Like any other resource, there are solutions for a dwindling labor supply if one knows where to look.

One is technology. Utility companies are sprawling entities with miles of infrastructure to secure, maintain and repair. Unmanned aerial vehicles (UAVs) are ideal for inspecting critical infrastructure safely with limited personnel.

Technologies connected by the Internet of Things (IoT) are another trending topic in utilities. Capturing more granular data from greater spans of physical infrastructure helps businesses respond more quickly and accurately to outages and maintenance tickets. This helps guard the company’s supply of time as jealously as it does any other resource.

Reinforcing the Utilities Supply Chain: "Using IoT means more granular data from greater spans of physical infrastructure, helping businesses respond more quickly and accurately to outages and maintenance tickets." -Emily Newton @ReadRevMag Click To Tweet

Another solution is to work more closely to close the loop between students in high school, trade schools, and the utility companies that need motivated and trained planning, engineering, maintenance and technology professionals.

The Bureau of Labor Statistics observes a higher-than-average need to hire new workers in the water processing and distribution utility sectors. This is due to several factors, including replacing workers who age out of the workforce, ongoing challenges related to the global pandemic, and upticks in job resignations up and down the socioeconomic spectrum.

Recommended: Developing an Agile Supply Chain Workforce for the Future

Utility Businesses Can Thrive in the Face of Supply Chain Challenges

Some of the other actions being taken by utilities to close supply chain shortcomings include:

  • Coordinating with other utilities to pool and share resources
  • Interfacing with public officials and, if necessary, educating them on ongoing concerns and events
  • Calling on industry and mutual-aid groups to exchange talent and recommendations

Building resilient relationships with domestic manufacturers and vendors is a great place for utilities to start. From there, they should explore every available avenue to cut where it makes sense to, without being afraid to play the long game with strategic investments.

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Emily Newton