Let's Take the Long View

WE MIGHT BE OUR OWN WORST ENEMY WHEN IT COMES TO WORKING WITH SUPPLIERS in the purchase and installation of equipment and materials for our power-delivery systems.

Most of our utilities have a history of beating vendors up on price. The biggest utilities can be the worst perpetrators as they wield the biggest hammers. The thinking seems to be something like this: “Let's get every vendor concession we can, short of running them out of business.” Of course, we don't tell them that. Instead, we say one thing, quality, and think another, price. The win-win slogan is so abused we've already discounted it to actually mean win-lose. Even alliances created with the best intentions, and built for the long haul, have a hard time transitioning through a utility regime change.

Of course, management consultants have their hands in this. Remember when they came in and pitched a variety of schemes to our utility executives to squeeze vendors for quick price cuts? Now they are coming back with new concepts to pitch such as managed business relationships. Vendors, still smarting from scorched-earth strategies, are not in the mood for new-found “mutual trust.”

Vendors have a right to be skeptical as they call on utility clients. More than one vendor representative has shared his or her company's strategy and product development ideas — only to find they were being leaked to their competitors. Talk about a trust killer.

A CRISIS SHOWS THE TRUE VALUE OF RELATIONSHIPS

We learned, as we responded to the 2004 and 2005 hurricane seasons, of the value of long-term vendor-utility relationships. During a crisis, the shoe is on the other foot. When a utility calls another utility and says, “Give me everything you've got,” it quickly finds out how much trust that utility has actually banked.

As a vendor, whom do you take care of? The utility that pits you against your peers on price or the utility that works with you to develop mutually beneficial products and services (and maybe even represents your interests to the industry at large)? Talk about a no-brainer. Of course, the vendor is polite in response, stating: “I wish I could be of more help, but we're just tapped out.”

LOOK INSIDE YOUR UTILITY

I talked to one utility purchasing manager, hired from another industry, who was purchasing transformers, capacitors, wire and cable as if they were commodities, so long as they met industry standards (no third-party verification required). This purchaser was buying future problems, not solutions.

We have an engineered system, not a commodity system, so we must maintain our technical depth if we are to address critical purchasing decisions that touch on issues that include component interchangeability, ease of installation, ease of maintenance and product life.

When I worked at Georgia Power, our staff engineers rated each product based on value, not first cost. A better-engineered product made with quality materials and lower losses will be worth more over the life of the product, right?

And while you are evaluating products, why not evaluate the health of your vendors. Do you share a common vision with your vendors? Do they invest in research and routinely roll out innovative products? Do they respond quickly when the field calls? If these attributes are of importance, then reward those companies that provide them.

PURCHASING

It is easy to blame our industry's woes on the purchasing folk within our utilities, but that isn't really fair. We have created conflicting departmental goals that pit one department against another, creating internal minefields for vendors to tiptoe through. To make good purchasing decisions, we need input from all involved: planning, engineering, operations, construction and purchasing. Only then can we install the best-engineered system for our investment dollar.

Some utilities get it when it comes to vendor partnerships. A few years ago, I attended vendor appreciation day at Kansas City Power & Light. What a great idea to formally acknowledge the impact your vendor partners are having on the success of your business. The guests were so honored and so appreciative.

Let's not buy on price from second-tier vendors, only to find we're stuck with maintaining and operating shoddy equipment. We took the long view when we designed and built our power-delivery systems, which have served us quite well. Why not again take the long view when selecting vendor partners whose equipment will be serviced and maintained over that same 30-year time frame?

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