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Puzzled by
Transformation?
Black Hills Energy
Tommy KileDirector, Supply Chain
A Blueprint for Putting the Pieces Together
Project AtlantaPresented to SIG by Tommy Kile, Black Hills Energy
Pure
Play
Acquisitions
Recovery Company strategy is recovery of
synergies from acquisitions and
integration.
2018
Company strategy is
growth through
acquisitions and key
divestitures.
2005 - 2016
Company strategy is growth through
partnerships with communities, builders,
customers, etc. to grow.
2025
Overview
• About Me
• About Black Hills Energy
• The Challenge
• How We Got Here
• Defining the Problem
• What We’ve Done
• 2025 Tech Roadmap
• Supply Chain Procurement Staffing As Company Grew
• Benefits to Customer
• Plenty Left to Do
• One Way Forward…READY!!!
Black Hills Corporation is a customer focused, growth-oriented utility company with a tradition of exemplary service and a vision
to be the energy partner of choice. Based in Rapid City, South Dakota, the company serves over 1.25 million electric and natural gas utility customers in more than 800 communities in Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. Employees
partner to produce results that improve life with energy.
.
Black Hills Corporation Overview
Black Hills Corporation Fast Facts
• Began serving electric customers in Deadwood,
SD in 1883
• Black Hills Power incorporated 1941
• Listed on NYSE since 1980, trading under
symbol BKH (Black Hills Corp.)
• Only NYSE listed company headquartered in
Rapid City
• Market capitalization of approximately $3.2 billion
• Increased annual dividend for 48 consecutive years
• Marketed as Black Hills Energy collectively, but many legal entities exist due to acquisitions and regulatory activities.
The Challenge: Company & Supply Chain at Cross Roads
The Company
- Keep growing at an industry average
pace?
- What do we look like as a “Pure Play
Utility” with a focus on capital projects?
The Supply Chain
- Increased workload on the horizon
- Different underlying companies had
different views of supply chain
- Supply Chain Maturity; lots of Excel and
manual processes
- Not aligned with the business
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
To
tal C
ap
italizati
on
($B
illio
ns)
Five utilities: four gas utilities
in CO, IA, KS and NE and one
electric utility in CO
(Aquila - $940MM)
Transition to “Pure Play Utility”
Communications business
(Black Hills Fibercom - $103MM)
Seven IPP gas-
fired power
plants
($840MM)
Energy marketing
business
(Enserco - $166MM)
Electric and gas
utilities in WY
(Cheyenne Light, Fuel
& Power - $90MM)
Williston Basin (Bakken)
assets ($243MM)
132 MW gas-fired power plant
in WY to serve both CLFP and
BHP (Cheyenne Prairie
Generating Station - $222MM)
Gas utility & pipeline assets
in WY
(MGTC - $6MM; Energy
West - $17MM)
380 MW gas-fired power
plants in CO to serve COE’s
Pueblo Airport Generating
Station (PAGS) ($487MM)
Pipeline assets in
east Texas
($41MM)
Wygen II – 95 MW coal-
fired power plant in WY
to serve BHP
($183MM)
Wygen III – 110 MW coal-fired
power plant in WY to serve
BHP
($246MM)
IPP 40MW gas-fired
combustion turbine (CT-II,
$22MM)
Acquisition
Generation Build
Strategic Divestiture
* Total capitalization as of Sept 30, 2016; SourceGas acquisition closed Feb. 12, 2016
48% ownership
of Wygen III
($129MM)
23.5% ownership
of Wygen I
($51MM)
Ongoing divestiture of oil
& gas assets
Four gas utilities in AR, CO, NE and
WY
(SourceGas - $1.89B)
60 MW Peakview Wind Project
in CO ($109MM)
40MW turbine at PAGS
($65MM)
49.9% ownership
of Colorado IPP
subsidiary
($216MM)
10
Procurement Functional Maturity at Black Hills CorporationOverall functional maturity
is the average maturity of
all activities assessed.1
• Measured on a scale
ranging from 1 (low) to 5
(high), maturity is an
organization’s performance
relative to CEB’s best
practice research. Maturity
scores are refined with a
(+) or (-) to indicate
intermediate levels of
maturity.
• The next page has
individual maturity scores
for each activity, allowing
you to quickly identify
strengths and opportunities
for improving maturity.
What Is Our Procurement Function’s Overall Maturity?
1 See the following page to determine which functional activities were assessed at your organization.
INTRODUCTION EXECUTIVE SUMMARY PATH TO MATURITY NEXT STEPS APPENDIX
Number of respondents at Black Hills Corporation = 16
Number of organizations participating in the CEB Ignition™ Diagnostic for Procurement = 216
CEB Benchmark = 3-
11
Which Performance Gaps are Critical to Address from Customers?Im
port
ance to B
usin
ess P
art
ners
STRENGTHS
PERFORMANCE
GAPS
© 2018 Gartner Inc. and/or its affiliates. All rights reserved.
Note: Scatterplot is divided into four sections using lines placed at the
median importance and performance gap scoresTop Performance Gaps
Performance Gap (Importance – Effectiveness) According to Business Partners
MAINTAIN
OVERVIEW | EXECUTIVE SUMMARY | PRIORITY ALIGNMENT | FUNCTIONAL EFFECTIVENESS | PERFORMANCE IMPROVEMENT | APPENDIX
What We’ve Done
• Implemented new Supply Chain Operating Model
• New Job descriptions & Job families
• Alignment across job families to allow for advancement
• Built Supply Chain Tech 2025 Tech Roadmap
• Implemented and/or improving key technologies and tools
• Auto-Sourcing/EDI
• eProcurement
• eSupplier
• Strategic Sourcing
• Rapid Ratings
• Improved our Sourcing Knowledge:
• Sourcing Industry Group
• SIG University
• Certified Sourcing Professional (CSP)
• Certified Supply Management Professional (CSMP)
• Certified Third Party Risk Management Professional
• Sourcing Resource Center (Beroe, HfS, etc.)
What We’ve Done
• Garner/CEB Engagement
• Business Alignment Tool
• Supply Chain Maturity Assessment
• Best Practices
• ProcurementIQ – Strategic market information
• Attended Industry Conferences: UPMG, USMA, ISM, SIG, Vets in
Energy, etc.
• Completed 2017-2018 Evolution Projects
• Quick Wins (10K hours harvested from wasteful processes)
• Category Management / Strategic Sourcing
• Touchless Transactions (40% reduction in PO touches)
• Conducting company-wide contract spend association audits
• Created Supply Chain Tech 2025 Roadmap
PROJECT 2018 2019 2020 2021 2022 2023 2024
Strategic Sourcing Module and
Procedures
eSupplier Enhancements
eProcurement Implementation
eForms / RPA
ClearPoint Scorecard & Report
Builder
Oniqua Inventory Analysis
MERLIN Performance
Scorecards
Rapid Ratings
CAPS 3.0 / Alternative Solution
S2P (Inc. Spend and Analytics
(Cloud based)
Interfaces & Integration (EDx,
APIs, Further Leverage Current
Tools, etc.)
2025 Tech Implementation Roadmap
Strategic Sourcing (2008)
Manager
Strategic Sourcing
Strategic Sourcing
Negotiator
Strategic Sourcing
Negotiator
Strategic Sourcing
Negotiator (Capital)
Senior Buyer
T&D Electric – (RC)
Buyer
Colo. Gen/Gas – (RC)
Strategic Sourcing
Supervisor T&D
Senior Buyer
T&D Gas – (Omaha)
Strategic Sourcing
Manager - Mine/Gen
Buyer
Mine – (Gillette)
Buyer
T&D BHP – (RC)
Buyer
T&D CLFP – (RC)
Buyer
T&D Gas – (Omaha)
Buyer
Mine – (Gillette)
Buyer
Generation – (Gillette)
Strategic Sourcing
Negotiator (Capital)
Buyer
Generation – (Gillette)
Buyer
Generation – (Gillette)
Buyer
Mine – (Gillette)
Buyer
Mine – (Gillette)
20 FTEs w/$1M Market Cap
Procurement and Strategic Sourcing (2018)Tommy Kile
DirectorSupply Chain,
Procurement and Strategic Sourcing
Manager, Strategic Sourcing (Gas)
Sr. Strategic Sourcing Specialist
Sr Strategic Sourcing Specialist
Strategic Sourcing Specialist II
Strategic Sourcing Specialist II
ManagerStrategic Sourcing
(Elect, Gen and Renewables)
Sr. Strategic Sourcing Specialist
Sr. Strategic Sourcing Specialist
Strategic Sourcing Specialist II
Strategic Sourcing Specialist II
Andrea Stahl Strategic Sourcing Specialist I
Supplier Diversity/ Development Specialist
ManagerStrategic Sourcing
Sr. Strategic Sourcing Specialist
Strategic Sourcing Specialist II
Strategic Sourcing Specialist II
Contracts Analyst II
Contracts Analyst II
Sr. Buyer
Sr. Buyer (Non-Reg)
Sr. Buyer
Sr. Buyer
Manager Supply Chain Systems
& Admin
Quantitative Analyst I
25
Procurement
FTEs
w/$3.2M
Market Cap
Benefits to Customer
• Simplified and more proactive customer experience
• Better and more frequent communication
• Well rounded employees with cross functional experience
• Guided buying and contracts
− Appts
− Phone Calls
− Desk Side
• Enterprise visibility into Supply Chain and 3rd Party Risks
• Better Visibility into Supply Chain
• Strategic Sourcing: shows all sourcing events and status
• Intransit Visibility: where’s my part through tighter 3PL
integration
• Lowered Total Cost of Ownership
• Spending more time on capital projects since that is where the
business needs us to focus most
Plenty Left to Do
• Address and permanently fix audit issues dealing with enterprise
contract mgt
• Continue to standardize processes and eliminate waste
• Staff and train Gas PDO Strategic Sourcing team
• Build Upon Success of Electric PDO
• Continue to find technical solutions to make our dept more efficient
• Acquire and integrate quantitative analyst into BHE and Dept.
• Continue to educate our staff on:
• Technology (Blockchain, AI, RPA, ITV, etc.)
• Continuous Improvement
• Advanced strategic sourcing and category management
techniques
• Third party, cyber and supply chain risk management
One Way Forward…READY!!!
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