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TRANSCRIPT
Introduction – Pasi Kaukojärvi
Work Experience
• 2011-present FORTUM, Corporate Purchasing
– Head of Procurement, Wind & New Ventures
– Strategic Purchasing Manager
• 2006-2011 NOKIA NMP, Global Sourcing
– Senior Purchasing Manager
– Quality & Technology Manager
• 2000-2003 NOKIA NETWORKS, Global Sourcing
– Senior Component Engineer
• 1997-2000 VTI HAMLIN
– Process Development Engineer
• 1992-1997 MICRONAS
– Team Manager, Process Engineer
• 1991-1992 VTT Semiconductor Laboratory
– Research assistant
Education
• 1989-1993 HELSINKI UNIVERSITY OF TECHNOLOGY
(HUT), Finland
– Master of Science in Technology
– Major in Semiconductors and Electronic Materials
• 1990-1991 LEEDS POLYTECHNIC, England,
– Scholarship student from HUT
– Electronics, Business Studies and Management
• 2007 Europian Institute of Purchasing Management
(EIPM), France
– Management & Strategic Purchasing
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• http://www.fortum.com/en/mediaroom/media-library/video-
portal/pages/default.aspx
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Fortum in brief
Forerunner in clean energy
64% of power generation CO2-free
- in EU 97%
Some 8,000 energy professionals
Nordic and Baltic countries, Russia,
Poland
Core competences in hydro and nuclear
power, combined heat and power production and in operating on
energy markets
Energy-related products and expert
services
1.3 million electricity sales customers
Figures: 2015
Global megatrends shaping the energy sector
Climate change and
resource efficiency
• Decarbonisation
• Renewables
• Circular economy
Digitalisation, new technologies
• Competitive solar and wind
• New digitally-enabled solutions
• Storage
Urbanisation• Growth of cities – especially in Asia
• Need for sustainable utility services
• Electrification
Active customers
• Customers make conscious choices
• Decentralised production
• Demand response
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Solar EconomySolar based production with
high overall system efficiency
Geothermal
Hydro
Wind
Sun
Ocean
Traditional
energy productionExhaustible fuels that
burden the environment
Coal Gas
Oil
Advanced
energy productionEnergy efficient and/or
low-emission production
Nuclear
today
Nuclear
tomorrow
CHP
CCS
Bio
Copyright © Fortum Corporation
All rights reserved by Fortum Corporation and shall be deemed the sole property of Fortum Corporation and nothing in this slide
or otherwise shall be construed as granting or conferring any rights, in particular any intellectual property rights
Energy is an enabler
Storage
Active
ConsumerDemand
Response
Lo
w
Eff
icie
ncy
Hig
h E
ffic
iency
High Emissions Emission free
Interconnectors
Smart
applications
Fortum worldwide
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Expert services globally
Nordic countries
• Power generation capacity
8,484 MW(+ Fortum Värme* 639 MW)
• Heat production capacity
1,974 MW(+ Fortum Värme* 3,891 MW)
• Electricity sales customers
1.3 million
India
Power generation capacity
15 MW
Baltic countries
• Power generation capacity
93 MW
• Heat production capacity
812 MW
Poland
• Power generation capacity
197 MW
• Heat production capacity
1,129 MW
Russia
• Power generation capacity
4,903 MW
• Heat production capacity
12,696 MW
Figures: 2015
*Joint venture AB Fortum Värme samägt med Stockholms Stad
Fortum purchasing development
• Operative sourcing in place– Common processes, mandates
and templates
– Tools for spend visibility and
tendering
• New concepts initiated– Lead buying
– Global sourcing
• Achievement of set goals
• Strategic purchasing - pull from the
rest of the organization to create
value– Strategic purchasing with proven high
• Effective organization – strong co-
operation across divisions and
functions -> Category Mng
• Competence development,
Leadership– Continuous capability building and
talent de
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What is strategic purchasing?
Quality
Purchase
price
Strategic purchasing goes below
the surface…
Specifications
Strategic
need
Make-or-
buyInnovation
Delivery time
Order
processTransport
Inventories
Internal demand
Life cycle
costs
Transactional
focus“Strategic purchasing is a systematic
and collaborative process for
to buy commodities and services at
the lowest total cost of ownership
and the highest value to our
business”
• Determining supply requirements,
• Identifying external and internal
improvements,
• Selecting the most competitive
suppliers, and
• Managing supplier performance
Sustainability
Fortum sourcing categories
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Solar
Wind
Turbines & Generators
Construction & Civil Works
Automation
Distribution Network Services
Service & Maintenance
Electrical Materials
Consulting
Indirect
Real Estate & Facility Mng
IT
Fuels
Ideas of further value creation in Purchasing
1. Strengthen current operations
• Category Management role
• Cross country & Cross BU synergies
• Volume benefits
• Systematic supplier management
2. New Products and Innovations
• Flexibility vs consistency. Like
contracts and processes
• Time to market. Market & supplier
scouting
• Internal & external collaboration
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Volume Speed
Value creation in electricity value chain will change dramatically
Future
NowEnergy
Flexibility/Capacity
Environmental/CO2-free
Consumer market
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Price pattern is getting more important than average price
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Source: Nord Pool Spot, Bloomberg Finance LP
Nordic (hourly Nord Pool spot system price)
German (hourly EPEX spot price)
December 2014
Declining technology costs and more efficient technologies
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0.50
0.70
0.90
1.10
1.30
1.50
1.70
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
$/W Solar module average selling price
The curve represents an average of the selling prices reported by the following companies:
Canadian Solar, Yingli Solar, Hanwha Solar, China Sunergy, Jinko Solar, Renesola, Trina
Solar
-60% in selling prices in 11
quarters 0.70
0.80
0.90
1.00
1.10
1.20
1.30
H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013
€/W Cost trend of onshore wind turbine prices, by contract date
Data exclude Asian turbines.
Battery storage costs are also decreasing
Outsourcing & Collaboration Drivers for Sourcing
Focus on Core Business
In-house only operations and
activities that are strategically
important; like power & heat
generation, energy trading etc.
Cost Optimization
Actively analyze and optimize
daily operations to improve
efficiency and value creation
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Complex & Fast Changing
Environment
Business environment is very
dynamic and innovations are
created even faster and
everywhere
Managing external resources is increasingly more relevant competence
and complex process
Five steps of good collaborative sourcing
2. Contract
3. Develop
ment
4. Execute / operation
5. Review &
KPIs
1. Synergy / business
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“Win – Win
& Win
mindset”