supplier selection – nuon energy shilen patel, tyler shrubb, amitkumar shah
TRANSCRIPT
Supplier Selection – Nuon Energy
Shilen Patel, Tyler Shrubb, Amitkumar Shah
Nuon Energy
Dutch-based utility companyOne of the top 3 suppliers of energy in the Netherlands with 2 million customersApprox. 4500 employees€3.124bn net sales in 2014
SWOT Analysis
• Growth in renewable energy• Association with Vattenfall
• Electricity and fuelprice risk
• Currency fluctuations• Competition with other
energy suppliers (E.ON, Centrica)
• Geographic concentration of revenues
• High lost time injury frequency rate
• Robust asset base• Balanced fuel mix• Association with
Vattenfall
Strengths Weaknesses
OpportunitiesThreats
MarketLine, 2015
Nuon’s Responses to SWOTCustomer retention by offering “It Pays to Stay” scheme. 10% off their electricity bill and a further 5% off each year afterwards up to 25% as long as the customer remains with NuonHeavily investing in renewable energy sources. Invested EUR 73 million in wind power in 2014
Nuon’s Supply Planning
Supply planning
Supplypositioning
Supplierpreferences
Riskmanagement
Optimisingthe Supply
Base
Procurementmarketing
Reversemarketing
Supplier Developmentprogramme
Current market position
Ideal market position
Kirlkaldy, A., ES4C9 Lecture 7
Steele and Court (1996 p. 32)
Supp
ly’s
impa
ct o
n fin
anci
al re
sults
Low
Low
High
High
Supply risk
Leverage items• Alternative sources of supply
available• Substitution possible
Bottleneck items• Monopolistic market• Large entry barriers
Routine items• Large product variety• High logistics complexity• Labour intensive
Strategic items• Critical for product’s cost price• Dependence on supplier
Competitive bidding
System contracting + E-commerce solutions
Performance based partnership
Secure supply + search for alternatives
Kirlkaldy, A., ES4C9 Lecture 7
Kraljic’s Supply Positioning
Nuon’s Supply Planning
Supply planning
Supplypositioning
Supplierpreferences
Riskmanagement
Optimisingthe Supply
Base
Procurementmarketing
Reversemarketing
Supplier Developmentprogramme
Current market position
Ideal market position
Kirlkaldy, A., ES4C9 Lecture 7
Steele and Court (1996 p. 32)
Optimising the supply baseIn 2011, Nuon had 12,000 suppliers with a total spend of €1bnFirstly Nuon assigned ownership of supplier list to gain more controlOver the following 3 years, reduced supplier list by two thirds Reduced IT consultant contracts from 200 to 16Removed suppliers from the list used for general expenses such as books and sundries and moved to credit card purchases
Suggested ImprovementsThe outsourcing decision matrix
Partnership outsourcing approach Core activity.Do not outsource!
10% of suppliers providing 90% of spend
Transactional outsourcing
90% of nuisance suppliers providing 10% of spend (non-core activities)
Decision based on financial considerations
Low HighOrganisational Expertise
Vitasek (2010)
Nuon can take an inside-out approach to strategic outsourcing
Pot
entia
l val
ue t
o th
e or
gani
satio
n
Lo
w
H
igh
Kirlkaldy, A., ES4C9 Lecture 6
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