SUPPLY CHAIN SERVICES

Transcription

1 EB-00-0 Tab Page of SUPPLY CHAIN SERVICES INTRODUCTION Supply Chain supports THESL s asset management strategy by ensuring that all required goods and services are available when needed, while at the same time optimizing inventory size and handling costs. Strong Supply Chain operations are vital to ensuring that the catalogued materials are ordered and delivered in a cost effective and efficient manner. 0 SUPPLY CHAIN CORE FUNCTIONS Provide an uninterrupted flow of required materials, supplies and services; Keep inventory investment to an optimum; Maintain and improve quality of materials; Find or develop competent suppliers; Standardize, where possible, the items and services bought; Purchase required items and services at lowest total cost; Identify and develop sustainable packaging and products; and Accomplish the purchasing objectives while minimizing administrative costs. 0 SERVICES Procurement, Vendor Sourcing and relationship management, Inventory Control, Distribution & Logistics Forecasting and Planning, Outsourcing, and Warehousing/Storage/Materials Handling.

2 EB-00-0 Tab Page of Supply Chain s centralized structure provides for: Greater buying specialization; Consolidation of requirements; Coordination and control of policies and procedures; Effective planning and research; Common suppliers; Strategic focus; and Low cost of purchasing. 0 ACTIVITIES Supply Chain is structured under two main functional areas: ) Supply Chain Demand & Acquisition Services; and ) Warehouse and Logistics. 0 Supply Chain Demand & Acquisition Services Historically, Demand and Acquisition Services were segregated into two distinct areas within Supply Chain. In late 00, the key functions of these areas were harmonized. Before the harmonization, buyers were responsible for the acquisition of goods and services, and material analysts coordinated the movement of inventory with identified demand. The harmonization of these two roles integrated and streamlined the responsibilities of the two areas. The harmonization allows the department to provide enhanced focus and understanding of capital material commodities and operational goods and services from the initial point of demand through to vendor relationship management. Typical activities associated with this area are: Statistical analysis; Managing inventory stock levels; Re-order analysis;

3 EB-00-0 Tab Page of 0 Forecast inventory requirements and collaborate with internal customers and vendors to optimize inventory levels; Disposal of all surplus and obsolete material; Vendor sourcing and assessment; Administration of competitive bidding processes; Developing strategic supply/service agreements and Contracts; Processing Purchase Orders; Expediting materials Providing reporting to the business units and executives; Ensuring adherence to the Procurement Policy; Developing supplier alliances; and Vendor performance management. 0 The success of this area is driven by creating and maintaining the following: A perpetual inventory system to ensure that the inventory levels are determined via accepted inventory control techniques and algorithms, which minimize the occurrence of out-of-stock inventory and work schedule delays; Key Performance Indicator ( KPI ) metrics established for inventory SKU accuracy, inventory fill rate, Supplier On Time & Full Performance; Supplier Receipt Discrepancies; departmental service metrics; Inventory classification criteria for better in-depth analysis of the inventory; and Daily inventory cycle count program and report cycle count performance, reconcile inventory variances, conduct root-cause analysis and maintain supporting documentation; Demand and Acquisition Services costs are recovered through a cost allocation program administered through the Finance Department as described below in this schedule under the heading Cost Allocation Program.

4 EB-00-0 Tab Page of Warehousing & Logistics Warehousing & Logistics receives, stocks, and issues all inventory materials for both capital projects and maintenance requirements. Material is distributed to field crews from three warehouse locations. 0 The major activities associated with this service are to: Pick, stage, and load electric distribution material onto fleet vehicles; Unload, inspect, receive, and store electric material from vendor vehicles; Deliver and distribute materials to and from job sites and other warehouses; Issue miscellaneous (over-the-counter) items such as tools, clothing and safety items; and Perform daily inventory cycle count activities. 0 There are two key initiatives in the Warehouse & Logistics area. First, THESL s Main Warehouse has moved to a two-shift operation. This change addresses the need for a longer service window for picking work orders and consequently providing more flexibility to the business. Second, by the end of 00, a Warehouse Management System will be in operation at all three THESL warehouses. This software solution is based on hand-held / barcode technology and provides real-time visibility of inventory position and adds efficiency to the receiving and picking functions of the area. Use of this software will assist with resource and inventory prioritization, and improve customer service to THESL crews.

5 EB-00-0 Tab Page of COSTS Table : Supply Chain Costs ($ millions) Department 00 Actual 00 Actual 00 Bridge 0 Test Acquisition Services...0. Warehouse/Demand Management/Administration..0.. Total The 00 Supply Chain budget increased by about $0. million versus 00 actual expenditures. This increase was due to higher labour costs coupled with Supply Chain assuming responsibility for the stationery budget and purchasing for THESL. Overall Supply Chain costs for 00 are projected to increase a further $0. million versus 00 due to incremental payroll for new hires who started work in mid-year 00. The 0 test year budget reflects a $. million increase above 00. This increase is driven by: () the full-year impact of new personnel hired mid-00; () the additional occupancy charges for the expansion of outdoor space at one warehouse facility; and () the removal of transformer reclaim credits. Cost Recovery Supply Chain costs are fully recovered from user departments through the use of the inventory on-cost rate and the cost allocation cost-recovery program. 0 Inventory On-cost Rate The costs associated with operating the warehouse, and general administrative functions are recovered through a materials on-cost recovery program, which is applied to the cost of inventory materials at time of issue. The current on-cost rate for 00 inventory is percent, down from percent last year. The decrease is driven by increased capital and maintenance programs and support of electrical contractor activity. Due to the increased labour costs, including new personnel hired to improve order fill rates, matched with

6 EB-00-0 Tab Page of decreased material spend, as summarized in Exhibit C, Tab, Schedule, the on-cost rate will revert back to percent in 0. Table : On-cost rate (%) Year On-cost Rate Cost Allocation Program Supply Chain Demand & Acquisition Services costs are recovered through a cost allocation program which apportions these costs based on the percentage of purchase orders transacted by each user department..