Energy Sector and the Supply Chain
Demand and Supply go hand-in-hand. One would be forgiven to associate such a statement with best-in-class supply chain supported by best-in-class IT support systems. This could be a distant dream for few other aspirants. However what I am referring to is the not-so-obvious-but-omnipresent power sector.
Having worked in a pumped-storage hydro unit first of its kind in India for two years and subsequently having worked for number of years in some of the supply chain projects all over the world, the seemingly disconnected verticals have something very profoundly similar. Let me try to draw parallels between the two - a pumped storage unit and a resilient best-in-class supply chain.
1. For one, a pumped storage unit can do two things at different times during the day. During the peak power requirement period, the pumped storage unit converts gravitational energy of water into electric power. And during lean periods, it picks water from a lower elevation to a higher elevation converting electricity to gravitational energy. In the process a pumped storage unit flattens power usage profile reducing variations in the distribution network.
In the same vein, a best in class supply chain adopts a hub-and-spoke model. In this model, a "hub" location can consolidate demand from different "spoke" locations reducing the supply variation in the supply chain. The "spoke" locations could have different demand patterns. The net effect is a distribution network that is efficient.
2. A power unit such as a hydro unit, is symbolized by a situation where supply is always equal to demand. The factory or the generation center has governor systems that can detect the grid frequency (a lower frequency represents a situation of demand greater than supply and vice versa) and very quickly change the volume flow rates of water to react adaptively to changing demand.
An adaptive supply chain can, in a similar fashion, detect the offtakes from retail shelves and connect the true demand signals to the factory. The factory can react with adaptive takt rates of production.
3. In a distribution network of electricity, there are high voltage institutional customers such as railway networks, factories or airports and then there are general retail customers.
An efficient supply chain organization also does different kind of planning for their key accounts. A big retail geographically spread out chain would be treated and planned for at an account level compared with small time retailers or direct-sell customers. The latter would need to be consolidated and planned for at a customer grouping level.
These similarities ( and let me touch upon the dissimilarities in a follow-up blog) are definitely worth contemplating, and an excellence-aspiring supply chain still has a lot to learn from a seemingly different sector.