Westar Energy is breaking from traditional utility practice and sole sourcing its T&D supply chain service to Graybar, a distributor based in St. Louis, Missouri. The decision was made to form an alliance through a relationship among Westar, Graybar and a supplier network to deliver supply chain management and logistics services.
In the development of the business case, Westar Energy's T&D operations played a major role in evaluating the triangular alliance. Roger Koch, director of Equipment Management, led a team comprised of Bev Golder and Ken Dimick, manager II's from the Materials Distribution Centers, and Victor Eusebio, senior manager of Business Case Development. This team — along with supply chain members Bill Patty, senior director, Mike McCormick, manger of Procurement Strategic Sourcing, and Terry Evans, representative buyer of Strategic Sourcing — developed a process to help support Westar Energy's decision.
Westar is responsible for the material acquisition with the supplier network. Westar negotiates the material pricing directly with the manufacturer and keeps the logistics service as a totally separate process handled by Graybar. This better controls costs and quantifies both the initial acquisition cost of material and the service capability of the distributor.
While it's too soon to produce hard productivity numbers, Westar Energy is already realizing several cost-control improvements, including lower service costs, lower administrative costs, improved service (including delivery times), better quality material and overall improved service to utility customers
To track the success of the relationship, Westar Energy and Graybar have established a series of internal “report cards” that track progress and identify ways to continue to drive value into this arrangement. These report cards measure the performance of both Westar Energy and Graybar in terms of the alliance's cost reduction goals (see top sidebar).
Graybar's first experience with the new utility alliance was an icy one. A rapidly moving ice storm moved through a sizeable portion of southeast Kansas just as the alliance was getting under way. Reports from the field verified that material was delivered in a timely manner and Westar's service personnel were pleased with Graybar's efforts.
Monthly communication meetings between Graybar and members of Westar's engineering, materials and supply chain areas are a key to the success. In an effort to drive costs out of the process, they have set definitive, measurable goals for the alliance in 2004 (see bottom sidebar).
The alliance has been operating for the last 18 months, and each partner is now comfortable with their roles and the supply chain partnership is running smoothly.
Westar Energy/Graybar 2004 Alliance Goals
- Achieve savings through overall inventory reduction.
- Achieve an overall reduction in the level of slow-moving or obsolete inventory items designated by Westar.
- Additional savings achieved through product standards changes, changes in processes, changes in manufacturers, and other initiatives to be reported to Westar Energy on a quarterly basis.
- Continue to look at opportunities to expand Graybar shipments from Graybar's Wichita warehouse to various jobsite locations.
- Continue to evaluate opportunities for Graybar to deliver material directly to Westar's satellite storeroom locations.
- Evaluate opportunities for cross-docking material from Graybar.