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A Blueprint for Putting the Pieces Together ... A Blueprint for Putting the Pieces Together Project Atlanta Presented to SIG by Tommy Kile, Black Hills Energy Pure Play Acquisitions

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  • Puzzled by

    Transformation?

    Black Hills Energy

    Tommy Kile Director, Supply Chain

    A Blueprint for Putting the Pieces Together

  • Project Atlanta Presented 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*

    T o

    ta l C

    a p

    it a li z a ti

    o n

    ( $ B

    il li o

    n s )

    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 Corporation Overall 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

    p o rt

    a n c e t o B

    u s in

    e s s P

    a rt

    n e rs

    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 scores Top 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)

    Buye

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