Supply Chain Improvements: Defined by Progress

December 31, 2003 Staff

Supply Management at Progress Energy realizes that, as the energy industry becomes more competitive, the effective management of the entire supply chain becomes an increasingly important contributor to the top management team’s efforts to maximize shareholder value. In fact, Progress Energy Supply Management, whose mission is to “achieve world-class performance” and “contribute positively to increasing shareholder value,” refers to managing the enterprise supply chain. The enterprise supply chain includes “the management of all external goods and services from initial need identification to final supplier payment.”

In an effort to increase the flexibility and efficiency of the company’s supply chain, supply managers are focused on a Supply Chain Improvement Program (SCIP). Progress Energy’s resolution is a good example of what Bruce Richardson, senior vice president of research at AMR, Inc., also recognizes as enterprise supply chain management. In a Modern Materials Handling article, Richardson described it as a “strategic wave” that “will impact supply chain management going forward (1).”

The Progress Energy SCIP is scheduled to run from 2003 through 2005. The company has identified and set concrete goals for the program in the following areas:

Reduction of procurement overhead
Reduction of inventory
Savings in cost of goods and services

Improvement in customer satisfaction

At the core of SCIP is the idea that, as supply management accomplishes its SCIP goals, the Progress Energy enterprise will enjoy a significant, positive impact on both capital and operating expenditures through supply chain optimization. It is likely that an ambitious undertaking of this sort would be unsuccessful without the full support of top management.

Thus, SCIP is organized as follows:

A program steering committee is composed of key stakeholders of the program and is at the top level of the program organization structure.
A program sponsor reports to the “program steering committee.”
A program director reports to the “program sponsor.”
A program management office works with the “program director” and others. It is responsible for performance management, issues tracking, communication support, change management and other duties.
Project leaders report to the “program director.”
Technology enablement also plays a supporting role.

Initiative teams comprised of cross-organizational employees execute the plan for each given task.

Project leaders are responsible for the identification and completion of SCIP initiatives in the following primary areas: strategic sourcing, procurement, inventory and materials management, and accounts payable. SCIP initiatives are characterized by:

Multiple improvement projects
Multiple business unit stakeholders and participants
Unified leadership and direction
Consolidated goals and performance reporting
Integrated planning and scheduling
Integrated program management and reporting

Focused accountability for results

“Supply chain professionals will never be less visible inside their companies than they are now,” said AMR’s Richardson. Since supply chain management has caught the attention of managers at the corporate level, he expects to see “a new emphasis on benchmarking, continuous improvement, and the optimization of business processes.”

The Progress Energy SCIP offers evidence that Richardson has hit the nail right on the head with his statement that enterprise supply management is a “strategic wave” that “will impact supply management going forward.”

References:

(1) Anonymous. (June, 2003). Next wave of supply chain strategies. Modern Materials Handling.