Supply Chain combines best practices of both companies
The merger of Duke Energy and Progress Energy has provided opportunities to consolidate and renegotiate contracts to save money, adopt best practices and develop new capabilities in supply chain management.
For our combined U.S. operations, we now have more than 20,000 suppliers of non-fuel materials and services, mostly from domestic sources, and spend approximately $9 billion annually. That includes spending on major projects to modernize our fleet, reduce air emissions and maintain system reliability. About half of the annual spend is on materials — the other half on services.
Many of Duke Energy’s large suppliers are well-established companies that share our commitment to sustainability. About 75 percent of our annual spending is with our top 250 suppliers.
Supplier relationships
Developing strong relationships with our top suppliers is key to advancing sustainability in our supply chain. We are building on Progress Energy’s formal Supplier Relationship Management (SRM) program to support this objective.
The SRM program will provide ongoing opportunities to engage suppliers on their environmental and safety performance and our Supplier Code of Conduct expectations, as well as their product offerings and performance levels. We are also implementing a risk management framework to assess our suppliers’ environmental and sustainability practices. This will enable us to proactively engage suppliers on risk mitigation and other opportunities for improvement.
Innovative suppliers
In 2008, we set a goal to increase solid waste recycling from 52 percent to 62 percent. We knew we could achieve this goal only by developing a solution for discarded wood. By working closely with a new supplier to the utility industry, we are now able to repurpose thousands of tons of discarded utility poles, reels, pallets and packing materials as treated wood or mulch. Most of the remainder is shipped to a wood shredding facility and sold as biomass fuel.
Thanks to this solution and close collaboration with other new and innovative vendors, legacy Duke Energy was able to recycle 73 percent of its solid waste during 2012. During 2013, we will develop a solid-waste baseline for the combined company and set a new recycling goal for the future.
Total-cost approach
Like many companies, Duke Energy considers the total cost of ownership, along with product performance, when making purchase decisions. Instead of looking at just the purchase price of a product, this approach considers the life-cycle cost, including maintenance, repair and disposal.
Working with suppliers to find operating advantages often results in environmental benefits. One chemical supplier, for example, proposed using recyclable totes for chemical storage. These new containers can be refilled on site, or taken off site to be cleaned and re-used. Previously, we used 55-gallon drums that had to be disposed of as hazardous waste. In addition, we installed delivery systems at power plants that disperse chemicals based on operational needs, versus a pre-set amount. Minimizing both chemical use and operating costs creates both an environmental and a financial win.
Another initiative encourages suppliers to conduct business with us electronically. This saves paper, time and costs, and also reduces data errors. Currently, we process approximately 42 percent of our supply chain invoices electronically. We expect to increase this percentage as part of our merger integration plans.
We will continue to build strong relationships with suppliers as we seek out innovation that advances both our sustainability and financial objectives.