Saturday, March 2, 2013

IUKAN Session 3 Proceedings: Strategizing Vendor Management – Collaboration, Innovation, and Integration

Utilities are heavily driven by outsourcing of products and services, but most times, their integration is limited by lack of strong SLAs and vendor management practices. The new private operators usually start dealing with several products and contractors, and already scarce Management bandwidth gets occupied in monitoring and renegotiating contracts and performance. Strong vendor management should be a key point for private players taking over power distribution.

The key question here was
  1. Can organized vendors be developed with more end-to-end managed services for these new PPPs?
  2. What new business models need to emerge for such managed services that have performance-linked contracts?
The session moderator Mr. Ajai Nirula, COO of Tata Power DDL (earlier NDPL) shared his experience of vendor engagements in different processes of operations. Starting with Vendor Management, he said graduating (shifting) from Manual to SAP Modules in Material Planning & Control has led to overall improvements in right sizing of quantity, Staggered delivery time, improved planning, reduction in inventory, hence cost optimization. Further, stressing on proper and continuous engagement with the vendor employees, timely payment, etc. are integral part of vendor engagement. An important point, he mentioned is clear cut delineation of work responsibilities for own and vendor employees, which otherwise creates work allocation issues. On vendor identification, he said to evaluate organizational set up, technical capability, quality standards, manufacturing facility visit, testing, past experience, etc before opening price bid. After evaluation vendor options, one should try to enter into long term or turnkey contracts for cost optimization, escalations built-in, etc. Lastly, ensuring safety and timely payment by vendors to labours to avoid unrest, delays, etc. is important. A legal cell and central bill desk could be established to track the full mechanism. 

Coming in next, Mr. Pratap Dhumale, AVP, ADCC Infocad Pvt Ltd, shared his views on Managed Data Services. Data for any utilities is of key aspect. Each process in utility is driven by Data and hence its integration is very crucial and important for new technologies implementation. To overcome the challenges in data management across various processes like Regulatory Compliance, Database Management, Data Security, customer centre, billing centre, etc. there is need of central agency to ensure availability, consistency and correct data for utility processes. He further adds that long term engagements with the experience entity well versed with Technical, techno - commercial activities is the preferred business model.

Mr. Ashish Sahay, Senior VP, A2Z Group, shared a case study on Feeder Level Loss reduction & O&M project executed in Jabalpur DISCOM for 20 feeders, 1 lac+ customer base. A unique PPP model wherein the AT&C losses were brought down from EPC basis and O&M is funded on incremental Realization per Unit (RPU) basis. The objective was to bring down the losses through Effective Metering. To start with the project, network survey, consumer indexing was done. The execution part consists of strengthening of networks, replacement of bare conductor by AB cable, replacement of burnt meters, damaged service lines, etc. The company also shifted the meter location near Call bell. Key achievements during the projects were AT&C loss came down from 37% to around 9%, no. of units sold (MUs) increased, increase in no. of consumers, billed amount, etc. 

Mr. Anand Sancheti, MD, SMSIL, shared his thoughts as an EPC player for Power Distribution Franchisee. In the complete value chain of Distribution sector, there is missing fine-tuning from Top level to bottom level in the Hierarchy. At top level, we are aligned and as we come down, the alignment magnifies. So, what has been agreed at the Chairman level is not happening at ground level. Further, he stresses on needs of stronger pre-qualification criteria for contractors in electrical projects to strengthen the service delivery. Moving on, he says since the country is vast, it’s very important to understand the geography, nature of population, etc. of the local city to be more effective in operational side. All these things add up and magnifies during the local operational plan. He suggested an important point of providing Viability Gap Funding (VGF) in electrical project, which is the case in other infrastructure projects and it is not applicable only in electrical projects. 

Mr. Madhav Vemuri, Country Service Manager, ABB India Ltd., says that considering the current losses in the country, addition/rolling out of new power plants in the value chain (Generation, Transmission and Distribution) will magnify the problems further. He was of the opinion that it’s not just important to focus on building infrastructure and capacity addition, but focus should be more on existing assets and how their performance can be improved. That is may be one of the reasons why we never focused on service side of the value chain. It’s important for us shift focus from infrastructure creation to leverage and ensuring existing assets and extending useful life of it using protection systems, audits, etc. One of the key challenges for Distribution sector is definitely O&M budget, hence maintaining efficiency of the equipment systems, it can be brought down. To add to that, he suggested we should move more towards automation and control systems, scientific approach of maintaining the assets.   

Mr. Ananth Chandramouli, Head of Client Services – Energy & Utilities, Infosys, presented his company’s innovative cloud base platform for Distribution Franchisee operators. To achieve the ultimate goal of business, DFs should focus on Network Operations, which is the core of business. He was of the opinion that Overall business value to DFs does not come by provisioning IT systems, but through additional business insights. Utility in a Box (UIB) is a comprehensive solution for utilities providing reports and insights on franchisee’s business objectives like meter calibration report, revenue collected/revenue billed, arrears report, vigilance reports and analytics, audits, infrastructure maintenance reports, etc. To conclude, he said a dedicated  solutions of IT should be ultimate business goals to bring the effect of transformation in Indian Utilities.

For more details of the service providers in the DF value chain, visit our website and download the presentations. Feel free to provide your feedback, suggestions, if any.

Posted by: Kunjan Bagdia @ pManifold

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