24 June 2010 | Andy Allen
A report into the UK’s utilities supply chain has concluded there is an “endemic fear of change” among utility operators.
Research by consultancy CEVA Logistics found cost reduction remained the priority within utilities and their construction contractors and there was strong resistance to strategic innovation.
In response to regulators calling for them to cut prices, utilities now have to achieve cost targets by reducing working capital. One way they are doing so is by outsourcing functions such as procurement.
“Where utility asset owners have outsourced whatever they can in order to focus on their core business, the result has been that the supply chain has become increasingly disjointed,” said the white paper.
“There is now a large number of small contractors, each with its own supply chain.”
The report also identified a lack of talent within the industry. One unnamed leading construction manager was quoted as saying: “The utility industry as a whole is a ticking time bomb because the average age of workers is 55 and there are not enough skills for the future.”
Research also revealed that utilities are increasingly concerned that the credit crunch has damaged the stability of some of their major suppliers. Utility managers fear with fewer players in the marketplace prices will be forced upwards.
They also worry that capacity has been cut back so far that manufacturers are no longer able to deal with a sudden uplift in volume or short manufacturing runs.
The white paper can be requested here.