3 ways utilities can simplify procurement with digital solutions

With so much of our world in disruption, few industries are as vital to maintaining continuity as power and utilities. These companies have stood on the front lines and responded first through the pandemic and natural disasters to keep homes, jobs, and communities stable.

Keeping the lights on in 2020 has been challenging. Let’s address how Covid-19 has accelerated the need to drive cost savings and improve processes for utility companies. Then, we'll look at three ways forward-thinking utility companies are implementing digital purchasing solutions to help cut costs, better equip their workforce, and simplify operations.

Covid-19 accelerates the need for change

The coronavirus pandemic has required unprecedented flexibility, for which legacy procurement processes were not designed.

Covid-19’s impact started in early March when power and utility companies were forced to create two groups of employees—those who were sent to work from home and those who still needed to report to a job site in order to maintain operations. Both groups required unique support to safely and effectively do their jobs. 

Virtual employees now needed supplies, IT equipment, and furnishings shipped to their homes. For employees who remained at their job sites, safety and infection protection became a critical need. In addition to standard PPE, like gloves, glasses, and safety vests, they suddenly needed hand sanitizer, nitrile gloves, thermometers, and face masks. Mission critical workers had to be sequestered in the event that infection rates spiked higher. Companies needed cots, frozen food, mini refrigerators, and more to equip workers to live onsite.

Supporting both employee bases increased costs and operational complexity. Purchasing managers suddenly found that they had very limited visibility into, and control over, what employees were buying as the use of purchasing cards at online retailers and physical stores increased. Many items simply were not available from the company’s existing supply base, so new suppliers had to be vetted and onboarded. 

Just as costs were accumulating, revenue took a big hit. Data from the U.S. Energy Information Administration, compiled by the New York Times, showed that average electrical consumption fell by 8 percent at the start of the shutdown as businesses across the country closed their offices.¹ Research by the Brattle Group suggests that the reduction in load resulted in a potential net income loss to utilities of up to 30 percent.² Delinquencies began to hit the balance sheets from customers who weren’t able to pay their bills. In an environment like this, some industries can choose to close or reduce supply, but multiple state governments continue to uphold moratoriums to prevent disconnections.³

With top-line challenges accumulating, utilities are under immense pressure to modernize their operations.

Here are three ways digital innovations are helping utility providers reduce costs, efficiently equip employees, and simplify operations to reduce complexity for an industry in flux.

1.     Reduce costs on long tail purchases

Because tail spend occurs outside of contracted suppliers, it can be difficult to control. Processing hundreds of POs and invoices, and setting up new suppliers in the system is prohibitively time consuming. Purchasing cards often provide limited visibility at the item level. And since many transactions occur in person, productivity is affected.

Many utility providers are reducing costs and gaining efficiency by shifting tail spend to an online store. When multiple suppliers are brought together in a single store—like we’re used to for personal shopping—it reduces the complexity of buying for an organization, can cut costs, and is more efficient than making trips to a physical store.

For example, businesses and public sector organizations that buy through Amazon Business get access to hundreds of thousands of sellers across categories like MRO, office supplies, and PPE. Buyers can easily compare and choose the best price from among multiple suppliers within a single interface. They can benefit from the process efficiencies of a single checkout and full visibility into purchases, with item-level detail.

2.     Equip a wide-ranging workforce faster

Utilities are finding more efficient ways to source supplies for a variety of end users across wide geographies. Digital solutions help field workers, office workers, and employees working from home to get what they need faster.

The same machine-learning (ML) technology that has transformed personal shopping is now accelerating the way people buy for work. Amazon Business applies ML to personalize and curate the shopping experience for business buyers so they can quickly find and purchase what they need, mitigating the labor costs and risk associated with trips to stores. 

By leveraging Amazon’s industry-leading logistics, buyers can receive most items wherever they are needed in two days or less with an eligible Business Prime membership.

3.     Simplify operations and maintain control

It’s not uncommon for a utility company to have tens of thousands of p-card users. Simply managing compliance with internal purchasing policies and maintaining visibility across such a massive purchasing population has become extraordinarily complex. Utility companies are balancing empowerment with control by relying on automation technology to streamline processes. Approval workflows, automated reordering, and guardrails to help maintain compliance with internal purchasing policies can be built directly into the online shopping experience—working together to reduce lead times.

Technology is also enhancing visibility. Powerful, machine-learning analytics can analyze purchasing data to learn an organization’s buying patterns and provide insights. Powered by cloud-based Amazon Quicksight, Spend Visibility turns purchasing data into visualizations that managers can use to make budgeting decisions, locate compliance issues, and optimize savings.

As utilities work to maintain power through a pandemic and natural disasters, many are driving toward a new standard of purchasing to better serve the communities that rely on them.

“In the next 20 years, more innovation will occur in the utilities sector than has occurred to date since the time of Thomas Edison,” says PwC’s global power and utilities center.⁴ Utility companies are adapting to the changing world and preparing for the future by relying on digital innovations that transform procurement.  

1. Bui, Q. and Woflers, J. “Another way to see the recession: Power usage is way down.” The New York Times. April 8, 2020.
2. “Brattle economists release updated assessment through June 2020 on Covid-19 impacts on energy industry.” The Brattle Group. July, 2020.
3. Szybist, M. “PA needs utility bill assistance to prevent mass shut-offs.” NRDC. September 4, 2020.
4. “Capturing value from disruption.” PwC Global Power and Utilities.” Accessed October, 2020.