安达信中国电力行业分析

November,2001,BusinessConsultingProvidingManagementConsultingServicestothePowerIndustryinChina,1,Agenda,SectionI.TheSituationinChinaandtheChalllengesforPowerCompaniesII.TheOpportunitiesforImprovementII.ImplementingBPRandERP,2,I.TheSituationinChinaandtheChalllengesforPowerCompanies,3,ThemajorstakeholdersevidentinotherpowermarketsareyettofullydevelopinChina,Utility,Government,Customers,Employees,Environment,Shareholders,CaptivecustomerscannotchoosetheirsupplierofpowerLowexpectationsofserviceLowconsumptionpercapita,EmployeesarecaptivewithlittlechoicetomovebetweenemployersStaffTurnover1%inmostcompanies,ThePRCgovernmentisyettoenforcemajorenvironmentalregulationsasareevidentinmostotherderegulatedmarkets,FewpowercompaniesarefullyprivatisedNoprovincialutilitiesprivatised,Plansforreformhavebeenspokenof,butnoconcretedecisionyetmade,Regulators,Effective“selfregulation”throughSPCCNoindependentregulatorybody,4,Fromourworkwithanumberofprovincialutilities,weobserveanumberofareaswhereopportunitiesexisttosignificantlyimproveoperatingperformance,Inabilitytoaccuratelyaccountfordifferentfunctionalsegments(Generation,Transmission,DistributionandRetail)LackofqualityfinancialinformationgenerallyandinadequatemanagementreportingManagementtotechnicalKPIsandsomefinancialones,butabroadgroupofperformancemeasuresnotusedExcessiveduplicationofeffortbetweenbusinessunits(eg.accounting,purchasingconductedatmultiplelocations)DuplicationofdataentrythroughlackofintegrationoftechnologyExcessivemanualprocessingofmajortransactionaltasks,andsomeareascompletelylackinganyformoftechnology(ie.paper-basedrecords)Non-standardprocesses(drivenbydifferingusesoftechnologywithinthesameorganisation)Remunerationbasedonstandardnationalsalaryscalesimpactingabilitytorewardemployeesbasedonperformance,5,III.TheOpportunitiesforImprovement,6,Whatisa“WorldClass”or“BestPractice”utility?,Thetransitiontobecominga“BestPractice”powercompanyisan“evolution”driven,inmostcases,bythederegulationofthemarketandtheintroductionofcompetitionTheevolutionstartswithoperationalexcellence,anddevelopsintoinnovationandacustomerfocus,toafocusoncreatingvaluefrommultiplebusinessactivities,OperationalExcellence,FocusonShareholderValue,InnovationandCustomerFocus,ObligationtoServe,Monopoly,Competitive,STATEOFDEREGULATION,MANAGEMENTFOCUS,7,From.,To.,FunctionalManagementManagebusinessfunctionsasdefinedbyregulatoryaccountingcategoriestocomplywithauthorisedexpensebudgets.,ProcessManagementDevelopandmanagebusinessprocesseslinkeddirectlytotheutilitysoutputstofocusresourceallocationpriorities,improvequality,andcontrolcost.,BudgetControlNegotiatecostswithgovernmentandthenconrolexpenditurestoachieveauthorisedearnings.,StrategicResourceAllocationApllycapitalandoperational,andnon-financialresourcestoachievecompetitiveadvantageconsistentwithstrategicobjectives.,Thereareanumberofshiftsingeneralmanagementpracticesrequiredtomeet“BestPractice”,BookingfinancialperformanceorcontributiontogovernmentAchieveearningstargetsasrequiredbygovernmentrevenuecontributionneeds.,CreatingShareholderValueIncreasecashflow,reducerisk,andretainorpayoutcashbasedonavailableinvestmentopportunities.,8,Thereareanumberofshiftsingeneralmanagementpracticesrequiredtomeet“BestPractice”,RegulatoryAccountingCollectandreportinformationprimarilytocomplywithregulatorycontrolsandgovernmentaccountingstandards.,ManagementReportingCollectanalyseandreportinformationnecessarytosupportmanagementdecisionmakingandperformancetracking.,MonopolyDevelopmentDevelopgeographicterritorybypromotingloadgrowth.,BusinessDevelopmentDevelopprofitablenewmarketsorservicesthatleverageofexistingbusinessassetsandcorecompetencies.,EmployeeadministrationEncouragecomparabilityofcompensationamongemployees,maximisecompanyexperiencethroughseniority,andavoidlabourrelations-basedserviceinterruptions.,HumanresourcesdevelopmentDevelopandmaintainafocused,agileandeffectiveworkforceoperatinginaculturethatsupportscontinuedcompetitiveness.,From.,To.,9,Belowwehaveprovidedahigh-levelsummaryofBestPracticesthatAndersenseesemployedinleadingutilities,Bestpracticeutilitiesare:FocussingonAssetManagementpracticesthatoptimizecapitalandoperationalexpenditurebybetterunderstandingcustomerrequirementsandapplyingmorerigorousplanningmethodologiesFocusingFinanceactivitiesonaddingvaluetothebusiness,andputtingnon-coreservicesintoaSharedServicesmodeltoimproveservicedeliveryandcost,andtostandardizeprocessesOptimizingtheirSupplyChainthroughbettersuppliermanagement,focussedprocurementstrategies,andusingweb-enablingtechnologiestostreamlinethepurchasingandlogisticsprocessDevelopingHumanResourceManagementactivitiesawayfromtransactionprocessingandtowardsstrategyandchangemanagementMeasuringandmonitoringperformancethroughPerformanceManagementframeworksthatintegratecorporateandbusinessunitperformancetargetstoensurecompanyobjectivesaremetEmployingstate-of-theartTechnologytosupportbusinessdecisionmakingthroughprovisionofreal-timefinancialandoperationalinformation,10,Utilitiesarefundamentallyasset-basedbusinesses,requiringlong-term,high-valueinvestmentdecisions,strongprojectmanagementskills,andback-officeprocessesthatcanprovidecost-effectiveandtimelyservicestotherestofthebusiness,CorporateOffice,SystemPlanning,Construction,MaintenanceandOperations,Procurement,Accounting,HumanResources,Approve,AssetPlanning,AnnualPlan,Maintenance,RepairandOperations,EngineeringDesign,PurchasingStrategy,MaintenanceandConstruction,TransactionProcessing,AnalysisReporting,FinanceandAccounting,TransactionProcessing,RecruitmentandTraining,PerformanceManagement,HumanResourceManagement,CorporateAdministration,StrategyDevelopment,PerformanceManagement,11,LeadingutilitiesarefocussingonAssetManagementpracticesthatoptimisecapitalandoperationalexpenditurebybetterunderstandingcustomerrequirementsandapplyingmorerigorousplanningmethodologies,CorporateOffice,SystemPlanning,Construction,MaintenanceandOperations,Procurement,Accounting,HumanResources,Approve,AssetPlanning,AnnualPlan,Maintenance,RepairandOperations,EngineeringDesign,PurchasingStrategy,MaintenanceandConstruction,TransactionProcessing,AnalysisReporting,FinanceandAccounting,TransactionProcessing,RecruitmentandTraining,PerformanceManagement,HumanResourceManagement,CorporateAdministration,StrategyDevelopment,PerformanceManagement,Leadingutilitiesare.OptimizingcapitalandoperationalexpenditurebybetterunderstandingcustomerrequirementsandapplyingmorerigorousplanningmethodologiesImprovingassetmanagementinformationtosupportdecisionmaking,allowingthesecompaniestobetterprioritizewheremoneyshouldbespentandwhatoperationalimprovementwillresultfromthatinvestment.Ensuringatransparentlinkbetweennetworkinvestmentandtheobjectives/businessdriversoftheorganisation,12,PortfolioofAssets,$,?,Wheredoweallocatelimitedresources?,AssetManagement,Whatperformancetargetsdoweneedtomeet?Dowehavethenecessaryassetinformationtomeasureperformance?,Doperformancetargetsneedtobethesameforeachproductorcustomer?Doweunderstandwhatcustomersexpect?,Arewetooconservativeinmaintenanceroutinesandplanningstandards?Dowehavethenecessaryassetinformationtounderstandtheimpactofcurrentpractices,RequiredPerformance,CustomerSegment,WorkPractices,ReliabilityQualityofSupplyService,IndustrialCommercialResidentialOthers,N-1planningManufacturernameplateratings,BetterExpenditurePrioritisation,InvestmentAnalysisRealisticBudgetsUnderstandingofValueDelivered,Increasedanalysisofcapitalallocationshavethepotentialtoreduceexpendituressubstantially,13,AndersenhelpedTXUinAustraliatodevelopacapitalexpenditureprioritisationmodelthatwillallowthemtodeterminetheimprovementinSAIDI/SAIFIforagivengroupofcapitalprojectsandagivenlevelofspending.FutureenhancementstotheinformationbasewillallowtargetedSAIDI/SAIFIimprovementsbyfeederline,andthereforeabettertargetingofmaintenanceandcapitalexpenditures,Reliability,17,6,11,17,3,0,2,4,6,8,10,12,14,16,18,ProjectPortfolios,SAIDIMinutes,Inactualfact,fewutilitiesaretrulyexhibiting“bestpractice”inassetmanagement,butcompetitionandderegulationaremakingmoreutilitiesseethebenefitsofdoingso,Leadingutilitiesaredevelopingthepotentialtolinkcapitalexpenditurewithdefinedperformanceoutcomes,Reliability,A,B,C,D,E,14,LeadingutilitiesareoptimizingtheirSupplyChainthroughbettersuppliermanagement,focussedprocurementstrategies,andusingweb-enablingtechnologiestostreamlinethepurchasingandlogisticsprocess,CorporateOffice,SystemPlanning,Construction,MaintenanceandOperations,Procurement,Accounting,HumanResources,Approve,AssetPlanning,AnnualPlan,EngineeringDesign,PurchasingStrategy,MaintenanceandConstruction,TransactionProcessing,AnalysisReporting,FinanceandAccounting,TransactionProcessing,RecruitmentandTraining,PerformanceManagement,HumanResourceManagement,CorporateAdministration,StrategyDevelopment,Leadingutilitiesare.IntegratingsystemsbetweenengineeringdesignandpurchasingImprovingprojectdeliverythroughbetterprojectreportingDevelopingprocurementstrategies(strategicsourcing)toleveragespendingacrosstheorganizationReducingthenumberofsuppliers(simplifyingsuppliermanagementandpaymentprocessing)Monitoringsupplierperformance,Maintenance,RepairandOperations,PerformanceManagement,15,Leadingutilitiesareintegratingdesigntoolswithpurchasingandinventorysystemstoprovideaseamlessprocessforprojectcostevaluationandmaterialsrequisitioning,DesignEstimatingSystem,DetailedDesign,Billofmaterials,PurchasingandInventorysystem,Theestimatedcostofmaterialsbasedoninventoryinformationisreturnedtoprovideanaccuratecostoftheprojectrequirements,StandarddesignsandassembliesOn-lineaccessDefinedchoiceofmaterials,ProjectIdentification,Therequiredmaterialsarecheckedthroughtheinventoryandpurchasingsystemforpriceandavailability,Purchasing,Iftheserequirementspushinventorylevelsbelowthoserequired,anautomaticre-ordermessageissenttothePurchasingDept,16,ProjectAccountinginleadingutilitiesallowsreportingandanalysisbyindividualproject,andtechnologycanbringthistothedesktopofeachmanager,ProjectsPastEstimatedDueDateListsprojectsbeyondtheoriginalprojectedIn-servicedateProjectsbyStatusListsProjectsbystatus(eg.New,In-service,Nearcompletion),ABC,Byproject,Bylocation,ProjectDrillbackAllowsresearchintothefeedersystemsforprojectrelatedchargesProjectResourceTypeAnalysisShowsactivityagainstaprojectintheformofJournalEntries,17,Companiesnotfocussedoneffectivelymanagingplanning,suppliers,materialsstorageanddistributionexhibitanumberofthefollowingproblems,NopurchasingstrategyatCorporate,Group,DivisionalorBusinessUnitlevelsThebusinessisunabletobestleveragethecombinedbuyingpoweroftheorganisationwithsuppliersThereisalackofvisibilityanddetailonexpenditureTherearefewcontrolsonprocurementwithmaverickbuyinghabitsThereisalackofco-ordinatedapproachwithotherfunctions.suchasengineering,plantmaintenance,fieldservicesExcessiveinventories,andobsoleteorredundantstockThereisalackofcontrolswithnoorlimitedvisibilityofthetrueinventorylevels,WhatiswrongwithyourSupplyChainManagement?,LostorunaccountableinventoryShortagescausingplantornetworkdown-timeorexpensiveemergencyactionsLowefficiencyandperformancethroughouttheendtoendprocess(purchasingstaffspendasignificantportionoftheirtimeperformingadministrativetasks)HightotalcostbaseandunsurewheresavingsarebestsoughtUnclearimprovementstrategyandfocusareasAntiquatedpurchasingsystemsManualpurchasingprocessesExcessivenumbersofsuppliers(whichdrivesexcessiveprocessingrequirements),Weobserveanumberofcommonsymptomsofpoorsupplychainperformance,18,CommodityActionTeams(CATs)arespecializedpurchasinggroupscomprisedofbothprocurementstaffandoperationalstafftoensureallrelevantexperienceisutilized,CAT,CommodityActionTeamsareflexibleanddynamicworkgroupsresultingin:FocusedstrategiceffortGreaterknowledgeandskillcaptureImproveddecisionqualityImprovedinter-functionalcommunicationImprovedgoalachievementInnovation,Teamsarecomprisedofrelevantstafffrommultipledepartmentswhobringtothegroupoperationalexpertiseandprocessknowledge,CommodityActionTeamsComposition:Illustrative,CATswillmanagetheprocurementstrategyforhighvalueorstrategicitemsPurchasingoftheseitemsacrosstheorganizationisaggregatedtoincreasethespendingpowerofthecompany,19,BothReliantandEnronareexamplesofhowfocussedprocurementstrategiescandeliversignificantreductionsinexpenditures,AndersenassistedReliantEnergythroughacompleteanalysisofallexternalexpenditureandidentifiedandprioritizedopportunitiesforimprovement.Basedontheresults,Andersenfacilitated22clientteamsthroughourStrategicSourcingmethodologyinfourseparatewaves.Theprojectachievedthecorporateobjectiveofimprovingcashflowbyover$30millionperyear.,AndersenhelpedEnronperformacompleteredesignofsupplychainmanagementprocessesforthePipelineGroup.Processesincludedorganizationaldesign,nationalpurchasingcontracts,inventorymanagement,AccountsPayableandsupportingsystems.WefurtherassistedEnronincreatingastrategicsourcingprogramforallofitsbusinessunits.TheprojectformedsevenCommodityActionTeamsintwoseparatewavesandidentifiedover$41millioninannualsavings.AnderseniscurrentlyperforminganassessmentofpurchasingactivitiesforidentifiedbusinessunitstoestablishnecessaryplatformprocessestoimplementtheSAPB2Bapplicationandtofacilitatesupplierintegration.,20,LeadingcompaniesarefocusingFinanceactivitiesonaddingvaluetothebusiness,andputtingnon-coreservicesintoaSharedServicesmodeltoimproveservicedeliveryandcost,andtostandardiseprocesses,CorporateOffice,SystemPlanning,Construction,MaintenanceandOperations,Procurement,Accounting,HumanResources,Approve,AssetPlanning,AnnualPlan,Maintenance,RepairandOperations,EngineeringDesign,PurchasingStrategy,MaintenanceandConstruction,TransactionProcessing,AnalysisandReporting,FinanceandAccounting,TransactionProcessing,RecruitmentandTraining,PerformanceManagement,HumanResourceManagement,CorporateAdministration,StrategyDevelopment,Leadingutilitiesare.ReducingthefocusonadministrativeandtransactionprocessingtasksFocussingtheFinanceDepartmentonbecominga“partner”tobusinessunitsbyprovidingreliable,timelyfinancialinformationtosupportimprovedmanagementcontrolUsingtechnologytoenablemoretimelyandaccuratefinancialinformationAdoptingaSharedServicesmodeltocentralizeandstandardizetransactionalprocesses,PerformanceManagement,21,TheevolvingroleofFinancemeansfocusingoncreatingvalueandreducingcosts,andcreatingafundamentalshiftfromtransactionprocessingtoa“businesspartner”fortheoperatingunits,Financial/StatutoryReporting,ProcessTransactions,ProvideInsightFromInformation,ProvideInformationFromData,ProcessTransactions/CollectData,FunctionallyfocusedPerformancenotmeasuredTransactiondrivenCostvs.servicebenefitanalysisnotmadeLow-skilledInflexible,ReactiveReporting/budgetingoriented,ProcessfocusedMeasuredagainstexplicitobjectivesValue-driven,businessresultsdrivenCostvs.servicebenefitanalysisutilizedHigh-skilledFlexible,ProactiveProfitabilityoriented,Traditional,BestPractice,22,SharedServicesisatermthatdescribestheconsolidation,standardization,andreengineeringofasupportprocessintooneormoreunitsthatservetheentireorganization,BestCompaniesimplementasharedservicesstrategyto:1)standardizeworkpolicies,2)employandconsolidatecommonsystems,3)increasethespanofcontrol(ratioofstafftomanagers),4)takeadvantageofeconomiesofscale,and5)eliminateduplicationofeffort.FunctionsorganisedintoSharedServicescanbetransactional,orcanhaveagreaterdegreeofspecialisationrequired.,HighVolume,RoutineTransactions,SpecializedSkills,Forexample:AccountsPayableAccountsReceivableCreditandCollectionsPayrollProcurementHumanResourceManagementServicesPropertyManagement,Forexample:TaxesInsuranceandRiskManagementLegalServicesMajorProcurementRegulatoryComplianceOccupationalHealthandSafety,23,ManyutilitiesareusingSharedServicesasameansofstreamliningnon-corebusinessprocesses,aswellastofacilitatetheregulatoryseparationofcertainbusinessactivitiesrequiredinthepowerindustry,Board,CorporateOffice,CompetitiveServices,CorporateServices,UtilityServices,UtilityA,UtilityB,UtilityC,AccountingAuditingCommunicationsFinanceProcurementHumanresourcesandindustrialrelationsInformationsystemsLegalRealestate,PropertyGroup,FacilitiesGroup,EquipmentRentalCo.,AirConditioningCo.,EngineeringCo.,EnergyVenturesGroup,GenerationCo.,Wholesale+RetailTrading,FibreNetworkCo.,TransmissionCompany,EnergyCompanyA-apubliclytradeddiversifiedenergycompanydistributing62billionkWhofelectricityto2.2millioncustomers,andwithmorethan$6billioninannualrevenues.,Services,Services,24,LeadingcompaniesaredevelopingHumanResourceManagementactivitiesawayfromtransactionprocessingandtowardsstrategyandchangemanagement,CorporateOffice,SystemPlanning,Construction,MaintenanceandOperations,Procurement,Accounting,HumanResources,Approve,AssetPlanning,AnnualPlan,Maintenance,RepairandOperations,EngineeringDesign,PurchasingStrategy,MaintenanceandConstruction,TransactionProcessing,AnalysisandReporting,FinanceandAccounting,TransactionProcessing,RecruitmentandTraining,PerformanceManagement,HumanResourceManagement,CorporateAdministration,StrategyDevelopment,PerformanceManagement,Leadingutilitiesare.FocussingHRonprovidingmorestrategicservicestothebusinessandactingasan“agentofchange”Developingcompetency-basedperformancemanagementframeworksMovingtowardsweb-enabledemployeeprocesses(self-servicesuchaschangingemployeedetails,inputtingleaverequestsetc)Outsourcingnon-coretransactional/processingservices(benefitsadministrationandpayroll),25,BestPracticecompanieshavesegmentedthetasksoftheHRFunctionintofourkeyareas,TheHumanResourceManagementfunctionhasdevelopedintofourkeyrolesinbestpracticecompanies:Transactional-transactionbestpracticeswouldbeallthethingstheHumanResourcefunctionissupposedtokeeptrackof,butdosowithflawlesseffeciencyeg.entitlements,packaging,employeerecordsadministration,vacationscheduling,payrollinformationetc.StrategySetter-includestranslatingtheoverarchingcorporatestrategyintoaPeopleStrategyincludinganEmployeeValuePropositionandEmployerBrand.Italsoincludestranslatingbusinessunitlevelstrategiesi