4 Tips That Will Help You Ace Energy Procurement

Prices in the energy sector are highly volatile, which makes formulating procurement strategies a difficult task for companies. The energy sector is a broad market consisting of different subsectors. While the range of activities in the energy sector is broad, two distinct features set the energy sector apart from other industries: First, the world’s energy requirements are on the rise and are expected to continue so for a long time to come. Secondly, the growing need for renewable and clean sources of energy has resulted in new regulations and statutory emission requirements to regulate the supply of power from renewable sources. The changing economic landscape has seen many projects being restructured, downsized, suspended, or abandoned altogether. While the energy sector is far from immune from the effect of economic pressures, it benefits from a series of factors, which means that its expansion and further development is assured. Here are four tips for companies to better manage their energy procurement strategies:

Set the goal

Due to the uncertainties in the energy sector, it is vital that for companies to set the goals of procurement strategy well in advance. Since every business is unique, either due to their tolerance for risk or the budget they have available, it is essential to tailor the strategy to fit the requirements of each organization. Throughout the procurement stages, these targets can then be referred back to for any clarification.

Market comparison

Though in most businesses loyalty is rewarded by suppliers, it is not the case in the energy sector. Therefore, when it comes to the energy sector, comparing the markets is often the best approach. Also, to avoid increased prices when re-signing contacts with a current supplier, it is advisable to check what other suppliers are offering before making the deal. Undertaking price comparisons while creating energy procurement strategies will help companies get a broader picture of the market.

Flexible contracts

Though fixed energy contracts can offer several benefits for companies, such as avoiding risk as prices fluctuate, ease of management, and a fixed rate for a fixed contract period, many companies are now turning to a more flexible approach. Flexible price contracts offer businesses a method of procuring energy that helps them to keep them on top of market movements and eliminates the risk of fixing the price during a peak point in the market. Wholesale power can be purchased in smaller amounts, throughout the period of the contract, allowing companies to buy energy at the best times and take advantage of favorable market prices.

Analyze data

It is imperative for every company to have clear-cut data on the energy consumed by them before formulating procurement strategies. This will help businesses gain better insights on the type of energy contract that they require. Companies can resort to energy management software that can help them to monitor consumption patterns and identify potential areas for savings. By analyzing energy consumption data, businesses can also keep track of overconsumption and take corrective action to rectify this.

To know more about the strategies for better energy procurement

Top Transformer Manufacturers Powering the World’s Energy Needs

A transformer is an electrical device that transfers electrical energy between two or more circuits by using the principle of electromagnetic induction. It is an extremely important equipment which distributes power efficiently across the electric grid. In modern power stations, power is generated at a low-voltage and step-up transformers are used to increase the voltage to transmit power over long distances with minimal loss. Then, another step-down transformer is used to reduce the voltage before it is distributed to homes and industries. Power transformers, distribution transformers, measurement transformers, and protection transformers are the major types of transformers based on usage. The rapid expansion of power generation and distribution projects in the APAC region is expected to drive the demand in the global transformers market. Transformer manufacturers are supplying their products to utility companies who are replacing their old and aging transformers with modern ones. The market looks lucrative for transformer manufacturers (Source: A recent procurement intelligence report from SpendEdge, which estimates the market to grow at an impressive annual CAGR of 8.5%).

Top Transformer Manufacturers

Siemens

Siemens is a German multinational firm and one of the largest industrial manufacturing firms in Europe. Industries served by Siemens include aerospace, automotive, chemical, mining, oil and gas, food and beverage, cranes, cement, and pharmaceutical. Amongst the largest transformer manufacturers, the company offers products for all output and voltages. The company designs its product with environmental sustainability and efficiency in mind and also comply with EU norms and guidelines. Power transformers, reactors, phase shifting transformers, HVDC transformers, distribution transformers, and tractional transformers are some of the products offered by the company.

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Supply Chain Analysis Helps A Hydro Energy Client Enhance Operations and Increase Reliability

Overview of the Hydro Energy Industry

The global hydro energy industry has started experiencing a resurgence, following years of stagnation and bad press. Technologies with lower environmental impact, such as small hydro, run-of-river, and low head turbines have proven to be extremely popular, even to the critics of hydro energy. Moreover, there has been an upsurge in pumped storage projects as standalone options. However, innovation in the sector has been lacking and has mainly been in the use of computation for diagnosis, monitoring, and control of plants.

Let’s look at a few key factors that are expected to influence the growth forecasts of the hydro energy industry in the coming years.

Increasing customer expectations: Prominent hydro energy companies are facing relentless pressures to maintain a secure, reliable, and affordable supply to the customers as the demand for energy services is spurring significantly. Also, with customer expectations increasing, leading companies are facing the need to switch the suppliers frequently to meet the rising demands of the individuals.
Increasing competition: Today, with the entry of prominent global leaders, the hydro energy industry is witnessing an increase in the level of competition, as the new entrants are attempting to gain a significant share of the market space. Additionally, the shift toward renewable sources of energy is resulting in the entry of a higher number of competitors; thereby, affecting the current supply landscape.

Many such factors are compelling companies in the hydro energy space to leverage the use of supply chain analysis solutions. Supply chain analysis solutions help firms facilitate better controls of procurement spends and compliance monitoring. These solutions also help companies develop an end-to-end follow-up procedure to resolve any discrepancies in the supply chain.

The Business Challenge and Journey

The client, a leading hydro energy provider, had developed an extremely complex, global production and distribution network with multiple storage locations and various modes of transportation for delivering their offering to customers. As a result, they wanted to get a better handle on its logistics and distribution network.

To help the client enhance operations and increase reliability, SpendEdge’s supply chain analysis experts developed a robust market research approach. The research included primary and secondary research coupled with qualitative and quantitative data collection methodology.

During the course of this supply chain analysis engagement, the hydro energy provider designed a strategic blueprint of the future supply in six key areas: sales and customer service, operations, planning, supply chain network, organization structure, performance management; and IT. The client was also able to set up a hierarchy of key performance indicators that aligned with their business goals.

Key questions answered in this supply chain analysis engagement

The Results

SpendEdge’s supply chain analysis engagement helped the hydro energy client identify numerous improvement opportunities at the functional level, as well as within each SBU. Furthermore, the recommended strategy blueprint resulted in improved service levels, streamlined planning and operations processes, enhanced operations, and increased reliability.

To know more about our supply chain analysis solutions

SpendEdge’s Spend Management Solution Helps a Renowned Renewable Energy Provider Gain Better Insights into Purchasing Activities

Overview of the Renewable Energy Industry

The renewable energy industry at large comprises of energy sources including wind, hydroelectric, solar, and liquid bio-fuels. Today, organizations within the renewable energy space are investing heavily in R&D to meet the growing demands for cost-effective and environment-friendly energy sources despite the availability of fossil fuels. Apart from the regulatory government support, the growth of renewable energy industry is also marked by the growing concern to minimize the steadfastness of fossil fuels for energy consumption.

However, several factors are expected to disrupt the growth of this sector. The factors include:

Increasing competition: With the entry of global leaders, the renewable industry is witnessing an increasing level of competition with new entrants attempting to gain a major segment of the industry by providing cost-effective solutions. Additionally, the shift from monopoly to a more competitive environment is opening up the space for new market entrants in this sector.
Increasing customer expectations: Today, renewable energy providers across the globe are facing relentless pressures to maintain an affordable, reliable, and secure supply to the customers owing to the increase in the demand for renewable energy services. As a result, leading companies are facing the need to switch suppliers frequently to meet the demand of the customers while being cost-effective.

Many such factors are forcing companies to leverage the use of spend management solutions. Spend management solutions help companies implement best-in-class procurement platform to enable strategic sourcing, manage contracts, suppliers and increase compliance. These solutions also help firms accomplish a competitive edge over the peers operating in the industry space by assisting them to reduce maverick spends across their business units.

The Business Challenge and Journey

The client, a leading renewable energy provider with business operation spread across the globe, wanted to develop a bespoke spend analysis platform to reduce the time taken for their sourcing and procurement activities. With the help of spend management solution, the client also wanted to implement a procurement platform to enable strategic sourcing, increase compliance, and manage contracts and suppliers across their business units.

The spend management experts at SpendEdge developed a robust market research approach. The research included primary and secondary research coupled with qualitative and quantitative data collection methodology to help the client gain better insights into their purchasing activities.

During the course of this spend management engagement, the renewable energy provider developed a customized spend analysis platform and made full use of the internal data for improving their management skills and procurement expertise. Additionally, the client was able to implement a strategic sourcing roadmap to drive significant savings in a short time and achieve corporate goals.

Fundamental questions answered in this spend management study include

The Results

With the help of the spend management engagement, the client reduced their operating costs for analysis and reports, which meant the enterprise was getting significantly more business value for less investment. This helped them generate savings of over 3 million dollars.

To know more about our spend management solutions

Top Procurement Challenges in the LPG Gas Market

LPG gas is used as a fuel for many residential, agricultural, and commercial heat applications which includes cooking, heating, and hot water systems. However, the use of LPG gas has numerous other applications including its use as a refrigerant, propellant, vehicle fuel, and petrochemical feedstock. The consumption of LPG gas has been on the rise as it is an economical source of fuel and burns efficiently with very low combustion emissions. Although, burning LPG releases carbon dioxide, a greenhouse gas, the emission is very low per unit of energy produced compared to coal or oil. Currently, the US is the leading producer and exporter of LPG. The most common variety of LPG is bought and sold in the form of propane and butane gas. The global market for propane gas and butane gas is expected to grow at a rate of 3.1% and 2.8%, respectively, during the forecast period. (SpendEdge – Procurement Market Intelligence Report)

Challenges in the procurement of propane and butane gas

Butane gas market

Evaluating supplier’s compliance with labor laws and international standards regarding workplace conditions is extremely important as non-compliance may incur penalties and fines for the buyers. Conducting periodic audits of suppliers’ facilities adds to procurement costs and complexity as well acting as a significant procurement pain point.
Buyers need access to data associated with suppliers including plant utilization rates and total yield capacity of plants. Since the information is critical pertaining to suppliers’ operation, buyers may not always get such data. As a result, suppliers are not forthcoming with such information making it difficult for the buyers to assess suppliers.
In order to promote consumption of domestically produced products, several countries have levied import duties on products including butane. However, domestic prices for butane can be higher due to demand-supply imbalances and inefficiency across the value chain. Varying prices and high import duties add to the complexity of procuring the butane LPG gas.
Prices of butane are consistently changing due to factors such as variations in demand and supply and volatility in crude oil prices. As a result, there are different pricing for the butane LPG gas between the winter and summer seasons. Due to such price fluctuations, buyers have a hard time determining the procurement budget compelling them to hire consultants to forecast future prices, which adds to their procurement costs.

Propane gas market

Propane gas prices are highly dependent on the cost of crude oil, gasoline products, and diesel. The high volatility of crude oil prices leads to fluctuation in the cost of propane, thereby making it difficult for buyers to forecast propane gas prices to estimate their procurement budgets accurately.
The propane gas produced is generally stored in large steel containers or tanks or through underground pipelines in compressed liquid form at the buyers’ operational facilities. Storing propane in liquid form significantly increases the storage costs for the buyers in addition to the maintenance costs. As a result, buyers are facing complications in the procurement of this LPG gas in terms of added costs and efforts for storage.
In a bid to minimize their maintenance costs, buyers usually rent or lease the storage containers from suppliers. Consequently, signing a lease agreement makes it difficult for the buyers to switch from one supplier to the other due to the high switching costs. The switching costs include uninstallation and reinstallation of the equipment and also increases the downtime leading to operational interruptions.
The suppliers of propane gas usually engage with third-party vendors for the transportation and storage of propane. However, buyers are not aware of information regarding the contractual agreements between the supplier and third-party vendor in terms of the type of storage containers used and regarding compliance with transportation laws and regulations. Lacking such information makes it difficult for the buyers to abide by compliance laws and may impact their supply flow of LPG gas and quality of the product.

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Supply Chain Risk Assessment Helps a Renowned Alternative Energy Supplier Address Flaws and Curtail Costs Across the Supply Chain

Category Overview

In this era of constant innovation and compliance regulations, firms operating in the power and energy space have started looking for renewable and alternative sources of energy. Additionally, the with the demand for fossil fuels reaching its saturation point, firms operating in the alternative energy space are seeking ways to address flaws and reduce their overall operational costs across the supply chain. Consequently, to understand and devise means to tackle challenges across the supply chain, renowned businesses in the alternative energy space are advocating the need for robust supply chain risk assessment studies. Supply chain risk assessment studies help firms gain real-time actionable strategic insights into the flaws in the supply chain and formulate effective strategies to stay on par with the competition.

With years of experience in offering a wide range of supply chain solutions, the supply chain risk assessment specialists at SpendEdge help players across the alternative energy space to gain better flexibility into the current supply chain process; thereby, helping them improve business performance.

The Procurement Pain Point and Insights Offered

A leading alternative energy supplier client was facing predicaments in identifying the supply chain flaws. As a result, the client wanted to gain better visibility into their supply chain operations and formulate strategic ways to mitigate disruptions across the supply chain. Additionally, the client wanted to categorize the key performance indicators to curtail logistics costs and improve service quality.

To address the specific predicaments faced by the alternative energy supplier client and help them address flaws and curtail supply chain costs, the supply chain risk assessment specialists at SpendEdge tailored a unified research methodology, which involved primary and secondary research coupled with quantitative and qualitative data collection methodologies.

During the course of this supply chain risk assessment engagement, the alternative energy supplier client was able to devise robust supply chain risk mitigation strategies to curtail supply chain costs. Additionally, the client was able to accomplish better traceability of their services, in turn helping them gain a deeper understanding of the regulatory and compliance requirements.

Fundamental questions answered in this supply chain assessment engagement include

Business Outcome

This supply chain risk assessment engagement helped the alternative energy supplier client improve operational objectives consequently aiding them to curtail costs across the supply chain. Additionally, the client also deployed better sourcing and procurement strategies which helped them strengthen their supplier relationship.

To know more about our supply chain assessment solutions

Supply Chain Optimization Solutions in the Global Coke Market

The production of coke can be traced back in history as far back as the 4^th century when the Chinese first used coke for heating and then cooking. Currently, coke is used as a fuel and reducing agent in smelting iron ore in a blast furnace and also in foundries, non-ferrous metal castings, lead and zinc smelters, recycled steel plants, soda ash and calcium carbide manufacturing, and production of pig iron. Various grades of coke such as blast furnace grade, foundry grade, and fuel grade coke have different constituent and varying application. The global coke market is growing at a steady rate of 2.5% (SpendEdge – Global Coke Market – Procurement Market Intelligence Report). Key suppliers within the coke fuel market are looking for supply chain optimization solutions to remain competitive in the market.

Supply Chain Optimization Solutions in the Global Coke Fuel Market

Stockpile Management Software

Coke fuel manufacturers require stockpile management software that provides a 3D view of detailed quality data of stockpiles to optimize stacking and reclaiming decisions. It tracks and visualizes stocks of outbound products of suppliers; thereby, helping them manage their loading and capacity utilization rates in the factory.

Bulk-Terminal Management Systems

Managing terminals is a challenging task as there are multiple last-minute order changes, uncertain arrival times, changes in ownership, and tight contractual deadlines. This ERP system helps coke suppliers manage their products at shipping terminals by ensuring that shipments are scheduled accurately, and shipment volumes are correct.

Advance Planning and Scheduling Systems

Advanced planning and scheduling (APS) help coke fuel suppliers track cost for each cost driver in the production process. This ERP tool assists the suppliers in planning their production volume on a monthly, quarterly, or yearly basis using complex statistics to forecast demand. Consequently, suppliers can adjust their production volumes depending on future prices of energy and raw materials.

China Shenhua Energy, Sinochem, BHP, SunCoke Energy, and Sinosteel Engineering & Technology are some of the key suppliers in the coke market making use of such ERP tools to optimize their supply chain. Additionally, they are also looking at immersive engineering to automate the manufacturing and other processes at coke oven.

Read more about the procurement and supply chain optimization techniques in coke market along with supplier benchmarking, pricing insights, metallurgical coke manufacturing, and sourcing strategy in SpendEdge’s upcoming report on the global coke market.

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Hurricane Harvey Sweeping Away the Ethylene Production in the Chemical Industry

The recent hurricane Harvey was an incredibly destructive Atlantic hurricane leaving 90 casualties and causing economic damage of about $70 billion to $200 billion. The chemical industry in the US, notably Houston, was hit hard by Hurricane Harvey. Firstly, the Hurricane Harvey chemical spill resulted in the leakage of a large amount of pollutants, endangering the life of people and plants nearby. It is estimated that out of the 132 petrochemical sites located along the Houston Ship Channel, including specialty chemical facilities and refineries, at least one-third and up to half are offline.

How will it affect the procurement and supply chain for the chemical industry?

Shortage of Essential Chemicals

The chemical industry will witness a deficit in commodities as ethylene and propylene, the basic building blocks for numerous chemical will be short in supply. The Hurricane Harvey chemical plant explosion has resulted in the loss of production of ethylene of about 50,000 tons per day. Additionally, about 30% of US propylene, benzene, and butadiene capacity was shut down in the face of the storm. Established players such as Chevron Phillips had to shut down operations, whereas DuPont took its olefins complex offline and Lubrizol suspended operations at its facilities in the Houston area.

Effects Across the Supply Chain

The shortage of such chemicals has affected other industries that are a part of the ethylene supply chain. For instance, the shortage of ethylene has forced a majority of the country’s capacity for making polyethylene plastic to shut down. Additionally, Formosa Plastics also announced that due to the lack of inventory, the company would not be able to meet commitments for polypropylene, polyethylene, and PVC.

Falling Demand for Natural Gas

Numerous factories in the chemical industry shutting down had led to the decrease in the demand for natural gas. A majority of the producers use natural gas as a raw material for the production of ethylene. It has been reported that the demand for natural gas fell by more than 5 billion cubic feet a day, which is a significant amount compared to the country’s regular consumption.

For more information on effects of Hurricane Harvey on ethylene supply chain and procurement of other essential chemicals along with its impact on the chemical industry:

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Top Challenges Impacting Growth of the Iron Ore Market

The iron ore market is enjoying its golden period with the current iron ore prices bagging a tidy profit for its suppliers. A vast majority of iron extracted from iron ore is used in the production of steel which, in turn, is used in the manufacturing of buildings, automobiles, ships, furniture, locomotives, and consumer products. The global iron ore market is growing at a steady rate of 2.3% for the forecast period of 2017 to 2021. However, the growth of this market in North America is mediocre due to moderate growth of end-user industries.

Challenges in the Iron Ore Industry

Increasing Use of Recycled Steel

An increasing tendency of manufacturers resorting to using recycled steel has halted the growth of this market. SpendEdge report on Global Iron Ore Category – Procurement Market Intelligence Report states that around 37% of the global steel production is recycled steel which is influencing the demand for iron ore.

Antidumping of Steel

Governments of various countries in North America and APAC regions have enacted laws that pertain to the imposition of anti-dumping duties on steel products. Consequently, the steel and iron ore export have been hampered due to such anti-dumping laws. China has faced a significant blow due to such laws as it is the biggest importer of iron ore.

Huge Capital Requirements

Iron ore mining requires substantial capital investments due to energy-intensive nature of the extraction process. For instance, the average cost of an iron ore project was around US$236/tonne of capacity in 2014. So in order to set a lower iron ore price, suppliers need to have large production to achieve economy of scale. Such large capital requirement and investments act as a major growth constraint for this market.

Land Dispute in Developing Countries

Getting hold of land from local communities for mining in developing countries such as India and China is an arduous task. For instance, POSCO in India canceled its plan of setting up a US$12 billion for the iron ore project due to local dispute and approval of lease issue. Such issue poses as a growth constraint as around 70% of the mining sites are in the region with water stress affecting the supply of iron ore.

Read more about the challenges in iron ore market along with key suppliers, cost modeling, procurement market intelligence, pricing insights, and procurement insights in SpendEdge’s upcoming report on the global iron ore market.

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Procurement Research Report on the Global Energy Consulting Market Now Available from SpendEdge

The global energy consulting market has high growth potential due to the growth of technological innovations, the rise in utilities sectors, an increase in government regulations to implement energy-efficient buildings.

LONDON: The procurement research report on the energy consulting market is an indispensable part of SpendEdge’s professional services category portfolio and offers an in-depth assessment of the major factors influencing the supply market, strategic procurement and sourcing decisions, pricing models, and procurement best practices. Furthermore, it also offers detailed insights into the supply chain management, key market developments, and demand-supply shifts to help sourcing and procurement experts make smart procurement decisions.

With the continuously increasing demand for energy savings, purchasing managers are engaging with energy consulting firms for developing capital investment strategies and energy-efficient programs to obtain cost savings through optimizing operations by using sustainable energy resources. In addition, these energy consulting firms provide consultation for implementing technologies such as smart meters and compressed air technology.

“Purchasing managers must collaborate with energy consulting firms that offer smart operational practices for managing energy-efficient buildings and facilities,” says A Kowshik, a professional services industry procurement research specialist at SpendEdge.

The instability in energy prices and growing stringency of regulatory policies make it difficult for purchasing managers to select and optimize appropriate environmental strategies. Therefore, energy consulting firms face challenges in estimating accurate budget for a long-term energy-efficient project due to volatile energy resource prices.

Need more insights on this report?

This procurement report on the energy consulting market offers insights on:

Supply markets, growth drivers, trends, and imminent restraints
Key suppliers and assessment of their capabilities
Procurement best practices
Negotiation strategies and cost-saving opportunities
Pricing models and category innovations
For a comprehensive, detailed list, view our full report

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12 Next →

Set the goal

Market comparison

Flexible contracts

Analyze data

To know more about the strategies for better energy procurement

Related Posts

Top Transformer Manufacturers

Siemens

Overview of the Hydro Energy Industry

The Business Challenge and Journey

Key questions answered in this supply chain analysis engagement

The Results

To know more about our supply chain analysis solutions

Overview of the Renewable Energy Industry

The Business Challenge and Journey

Fundamental questions answered in this spend management study include

The Results

To know more about our spend management solutions

Butane gas market

Propane gas market

Category Overview

The Procurement Pain Point and Insights Offered

Fundamental questions answered in this supply chain assessment engagement include

Business Outcome

To know more about our supply chain assessment solutions

Stockpile Management Software

Bulk-Terminal Management Systems

Advance Planning and Scheduling Systems

Shortage of Essential Chemicals

Effects Across the Supply Chain

Falling Demand for Natural Gas

Challenges in the Iron Ore Industry

Increasing Use of Recycled Steel

Antidumping of Steel

Huge Capital Requirements

Land Dispute in Developing Countries

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