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StrategyDriven
 alignment, accountability, accelerated results




           Enhancing safety, reliability, and efficiency
           in electric power generation and delivery
An Evolving Industry

                                                Safe,         Operating      Workforce       Capital              Retail
                                                reliable      costs per      experience,     investment           market
                                                operations    megawatt       knowledge,      cost                 price
                                                              generated &    skills, and     recovery             uncertainty
                                                              delivered      availability




Complex issues challenge the safe,                                 To meet these challenges, utility leaders must find cost
                                                                   effective ways to replace aging components and
reliable, and efficient generation and                             obsolete equipment, transfer knowledge and a respect
delivery of electric power.                                        for the unique hazards of electric power generation and
                                                                   delivery to a new generation of workers, release
The safe, reliable, and efficient generation and delivery          currently unavailable capital, and optimize operations
of electric power is a responsibility shared by all utility        and maintenance programs.
professionals. Aging infrastructure, retiring workers,
growing regulation, rising capital costs, and increasing           StrategyDriven advisors are seasoned power and
budget pressures combine to challenge utility                      utilities professionals. As such, we have tailored our
executives and managers now more than ever before.                 tools and methods to meet the unique needs of utility
                                                                   operations and are committed to being exceptional
                                                                   teammates in your pursuit of excellence.


Enhancing safety, reliability, and efficiency
in electric power generation and delivery                      2                            StrategyDriven
                                                                                                effective executives, efficient employees
The StrategyDriven Difference

 StrategyDriven advisors possess ‘stood the
 watch’ power and utilities experience:
                                                  StrategyDriven uniquely combines decades of
 §    leading day-to-day nuclear plant
       operations,                                power and utilities operating experience, deep
 §    directing high-voltage switchyard
       operations,
                                                  business acumen, and industry specific methods
 §    supervising online and outage
                                                  and tools to provide solutions that enhance the
       maintenance activities, and                safe, reliable, and efficient generation and
 §    overseeing infrequently performed tests
       and evolutions                             delivery of electric power.
 Our professionals have been awarded top
 industry licenses, certifications, and
 qualifications:
                                                  StrategyDriven focuses on business performance improvement…
 §    U.S. Nuclear Regulatory Commission
       Senior Reactor Operator License
 §    U.S. Navy Chief Nuclear Engineer Officer                                                      Strategy Development
       Qualification
 §    U.S. Navy Engineering Officer of the        StrategyDriven’s methods and                       Strategy Translation
       Watch Qualification                         tools have been specifically




                                                                                                                                            Accountability
                                                                                                     Program Management




                                                                                         Alignment
                                                   tailored to meet the special needs
 §    Institute of Nuclear Power Operations
                                                   of utility operations, aligned with
       Plant Operations Evaluator Qualification                                                        Project          Operations
                                                   regulatory requirements and                       Management        Management
 §    National Academy for Nuclear Training       validated against domestic and
       Event Investigator Certification            international industry performance                  Tactical Execution
                                                   standards and guidelines.
 §    Project Management Institute Project
                                                                                                     Day-to-Day         Operational
       Management Professional Certification                                                         Operations         Outcomes



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                          3                                     StrategyDriven
                                                                                                              effective executives, efficient employees
Achieving Operational Excellence
 Diverse, Global Client Experience
       13 submarines
                                                           StrategyDriven’s power and utilities
       4 aircraft carriers
                                                           professionals advise executives and managers
                                                           at dozens of Fortune 500, government, and
                                                           large regional utilities on how to best
                                                           improve the safety, reliability,
                                                           and efficiency of electric
 United States                                             power generation                       Enhanced
                                                                                                  safety through
       30 nuclear power plants from 18 utilities
                                                           and delivery                           effective risk
       18 U.S. nuclear powered naval vessels

       1 coal-fired fossil power plant from 1 utility
                                                           operations.                            analysis,
                                                                                                               management, and
       1 natural gas delivery system from 1 utility
                                                                                Improved                       ongoing
 Canada
                                                                                operational                    performance
                                                                                                               monitoring and
       4 nuclear power plants from 4 utilities
                                                                                reliability and
                                                                                                               assessment
 Japan
                                                                                lower direct
       1 nuclear power plant from 1 utility
                                                                                costs through
       1 U.S. nuclear powered naval vessel                   Reduced            integrated
 United Kingdom                                              indirect costs     process value
       2 natural gas-fired power plants from 1 utility       through            analysis,
 Central & South America (El Salvador, Peru, and Brazil)
                                                             benchmarking       streamlining, and
                                                             and workforce      standardization
       1 hydro dam from 1 utility
                                                             optimization
       1 diesel generator power station from 1 utility


Enhancing safety, reliability, and efficiency
in electric power generation and delivery                              4                      StrategyDriven
                                                                                                    effective executives, efficient employees
What We Offer

StrategyDriven can help you accelerate the achievement of improved power
generation and delivery safety, reliability, and efficiency through the application
of our deep hands-on management and operations experience and leveraging
our power and utilities specific tools and methods in the areas of:

 Enhanced safety

 §  Corporate Risk Analysis, Management, and Mitigation
 §  Internal Assessment
 §  Decision Making and Management

 Improved operational reliability and lower direct costs

 §    Enterprise Performance Measurement
 §    Program / Project Development, Management, and Improvement
 §    Equipment / System Life Cycle Maintenance Management
 §    Online and Outage Work Management Optimization

 Reduced indirect costs

 §  Domestic and International Benchmarking
 §  Succession and Workforce Planning
Enhancing safety, reliability, and efficiency
in electric power generation and delivery         5                 StrategyDriven
                                                                      effective executives, efficient employees
Corporate Risk Analysis, Management, and
Mitigation
How We Serve                        We help reduce corporate risk exposure through an independent assessment of your enterprise risk programs. We
                                    can help you develop a power generation and delivery specific risk profile, benchmark your risks against industry
                                    peers, identify risk management program gaps, and develop and implement a multiyear oversight program to
                                    manage risks consistent with industry guidelines.


                                                                 A StrategyDriven advisor mapped a large Midwestern utility’s corporate risks to their
                                                                 nuclear business unit risks and then to the processes from which those risks could
                                      Case Study                 be manifest. Oversight mechanisms for these programs were identified including
                                                                 gaps; providing a basis for a multiyear internal audit assessment schedule.


                                                                 Our advisor worked with the utility’s corporate managers and staff to capture the
                                      Engagement                 existing internal audit framework and developed a gap analysis of their risk profile;
                                      Approach                   identifying risks not currently categorized or audited and opportunities for further
                                                                 program enhancement based on industry leading practices.


                                                                 Only seventy-five percent of the utility’s nuclear-related high-risk programs were
                                                                 routinely assessed by either the utility’s nuclear quality assurance or its corporate
                                      Value Delivered            internal audit programs. Addressing the twenty-five percent gap will enable the utility
                                                                 to considerably reduce its safety, reliability, and efficiency risk exposure.




        The StrategyDriven Difference
        Decades of operational ‘stood the watch’ risk management and mitigation experience. Co-authored the nuclear industry’s
        operational risk management guidelines and evaluation methods. Proprietary risk to process to oversight mapping tool.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                     6                                   StrategyDriven
                                                                                                                      effective executives, efficient employees
Internal Assessment

How We Serve                        We perform independent, objective, and detailed reviews of core line and support organization functions; assessing
                                    performance against regulatory requirements and domestic and international performance standards, guidelines,
                                    and industry leading practices. Our resulting recommendations offer a unique actionable value proposition focused
                                    on improving operational safety, reliability, and efficiency.


                                                                 A StrategyDriven advisor led the evaluation of plant operations, maintenance,
                                                                 engineering, work management, and supply chain functions at a large regional
                                      Case Study                 utility’s coal-fired generating station. Provided an objective assessment of functional
                                                                 and cross-functional program performance against industry best practices.

                                                                 Our advisor worked with senior station managers to identify personnel performance
                                                                 and programmatic gaps and develop near and long term improvement plans. Initial
                                      Engagement                 data analysis was performed followed by direct performance observations conducted
                                      Approach                   onsite. Performance evaluation and improvement briefings were conducted with
                                                                 station managers and senior corporate and business unit executives.

                                                                 Specific, actionable performance improvement opportunities valued at the tens of
                                                                 millions of dollars were identified including online and outage program optimization to
                                      Value Delivered            support improved equipment reliability and potentially yielding a 4 percent increase
                                                                 in equivalent availability factor (EAF) and better supply chain coordination providing
                                                                 an estimated $10 - $27 million reduction in on-hand inventory while maintaining or
                                                                 improving overall parts availability.


        The StrategyDriven Difference
        Decades of hands-on utility operations, maintenance, engineering, supply chain, work management, and regulatory experience.
        Developed the U.S. nuclear industry’s plant operations and operational focus guidelines and evaluation methods.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                     7                                   StrategyDriven
                                                                                                                      effective executives, efficient employees
Decision Making and Management

How We Serve                        We can assist you with the development and implementation of a high risk operational decision management
                                    program. Additionally, we can assess and recommend improvements to your existing program; evaluating it
                                    against industry leading practices and the common programmatic and execution shortfalls StrategyDriven’s
                                    proprietary research has identified. We also support leaders while making their important decisions; asking the
                                    tough questions that prevent group think, introduce new approaches, and help foster success.


                                                                  A StrategyDriven professional advised a Fortune 200 nuclear utility’s management
                                                                  team in the development of their fleet-wide high risk decision-management program;
                                      Case Study                  consistent with the Institute of Nuclear Power Operation’s Principles for Effective
                                                                  Operational Decision-Making guidelines and incorporating industry leading practices.

                                                                  Our advisor worked with senior utility managers to identify and benchmark industry
                                                                  leaders in each phase of the decision-making process. He then supported
                                      Engagement                  consolidating and harmonizing these practices into one cohesive process document.
                                      Approach                    Lastly, a process execution assessment was performed at one of the utility’s several
                                                                  nuclear plants to ensure effective implementation of the program.

                                                                  This client successfully developed and implemented an end-to-end industry leading
                                                                  practice decision-management program; promoting increased levels of operational
                                      Value Delivered             safety and reliability. The program’s development was accelerated by insights into
                                                                  the tested practices from numerous other utilities introduced by our StrategyDriven
                                                                  advisor.


        The StrategyDriven Difference
        Co-authored the nuclear industry’s operational decision-making guidelines and evaluation methods. Extensive experience
        supporting numerous utilities design and implement their high-risk decision management programs.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                      8                                 StrategyDriven
                                                                                                                      effective executives, efficient employees
Enterprise Performance Measurement

How We Serve                        We can work with you to assess and improve your performance measurement system; yielding metrics and reports
                                    that are operationally relevant, organizationally consistent, and economically implemented. The resulting system
                                    helps improve managerial decision-making, organizational alignment, and individual accountability.



                                                                 A StrategyDriven professional advised a Fortune 200 utility management team in
                                                                 assessing their organizational performance measurement system; identifying
                                      Case Study                 monitoring and communication gaps and developing an improvement plan that
                                                                 included supporting system configuration upgrades.

                                                                 Through a series of workshops and interviews, our advisor worked with senior utility
                                                                 managers to catalog existing performance metrics and reports, recognize gaps to
                                      Engagement                 industry leading practices, identify additional measures needed, and develop a
                                      Approach                   phased approach to upgrading the utility’s measurement system. A fleet-wide
                                                                 metrics and reports governance program was also developed.

                                                                 An actionable performance monitoring system upgrade plan was created that, once
                                                                 implemented, will provide executives and managers with the accurate and timely
                                      Value Delivered            information needed to support effective decision-making. This comprehensive
                                                                 roadmap contained a step-by-step plan for establishing a fully integrated
                                                                 performance monitoring system supported by data collection and processing
                                                                 procedures, application configuration, program governance, and management and
                                                                 employee training.

        The StrategyDriven Difference
        Comprehensive, proprietary collection of regulatory and industry guidelines-based performance metrics enhanced by
        broadly benchmarked industry leading practice performance measures. Extensive experience implementing measurement systems.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                    9                                  StrategyDriven
                                                                                                                     effective executives, efficient employees
Program / Project Development and
Management
How We Serve                        We can assist you in the effectiveness assessment and improvement of existing internal program and project
                                    management plans, oversight of contractor projects, and implementation of a program / project management office.
                                    For capital construction and other major projects, we can analyze program / project risk models and evaluate
                                    contracting method and management effectiveness to ensure strategic benefit realization and delivery timelines.


                                                                 A StrategyDriven advisor spearheaded the planning, execution, and on-time
                                                                 delivery of a 12-month, $325 million large-scale, integrated power generation
                                      Case Study                 maintenance and modernization project employing 1800+ personnel across multiple
                                                                 work specialties and organizations. Implemented robust operational risk mitigation,
                                                                 technical management, metrics analysis, and project management tools.

                                                                 Our advisor worked with station managers at all levels to actively manage daily work
                                                                 schedules and resources, improve meeting and operational efficiencies, oversee
                                      Engagement                 contractor commitments and acceptance criteria, and ensure efficient integration of
                                      Approach                   work through the use of Project Management and Lean Six Sigma analysis.
                                                                 Assisted in the definition, interpretation, and analysis of key performance metrics.

                                                                 Achieved a safe, on-time return to service of two power plants and supporting
                                                                 equipment within original cost estimates. Provided for sustainable first-time work
                                      Value Delivered            safety and quality improvements through standardization and documentation of
                                                                 streamlined outage work management processes.



        The StrategyDriven Difference
        Decades of experience in operations and maintenance execution and planning, identification and utilization of the most efficient
        and applicable plant metrics, and analysis and enhancement of existing processes using Lean Six Sigma practices.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                    10                                  StrategyDriven
                                                                                                                     effective executives, efficient employees
Equipment / System Life Cycle Maintenance
Management
How We Serve                        We can assist your organization assess the cost efficiency of your plant equipment life-cycle maintenance
                                    programs. We are particularly effective in identifying cost-saving improvements in maintenance plan scheduling,
                                    resource use and balancing, and consolidation of industrial skill sets to optimize personnel deployment and
                                    physical equipment storage/floor footprints.


                                                                 A StrategyDriven advisor, through the implementation of Lean Manufacturing
                                                                 principles and constraint analysis, identified multiple cost and schedule saving
                                      Case Study                 improvements to a nationwide nuclear submarine rotatable equipment pool storage
                                                                 system.

                                                                 Our advisor worked with in-house delivery management representatives and those of
                                                                 other national coordinating logistical organizations to analyze delivery times,
                                      Engagement                 maintenance repair times, and packaging schedules using Lean Six Sigma Value
                                      Approach                   Stream Analysis. The approach focused directly on the largest cost and schedule
                                                                 constraints and provided immediately actionable process improvements.

                                                                 Improvements included gains in component repair and equipment delivery times.
                                                                 Delivered a 10 percent overall schedule execution time reduction (overall
                                      Value Delivered            maintenance turnaround time) and over 25 percent reduction in logistics material
                                                                 delivery timelines.




        The StrategyDriven Difference
        Executive level experience managing a nationwide maintenance program including life cycle management of major industrial
        plant equipment and identification and implementation of performance metrics driving continual improvement.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                     11                                 StrategyDriven
                                                                                                                     effective executives, efficient employees
Online and Outage Work Management
Optimization
How We Serve                        We can work with you to assess and improve your end-to-end work management program; yielding an
                                    operationally focused process driving improved organizational alignment and supporting high equipment reliability.
                                    The resulting program will directly support increased operational and personnel safety, higher capacity, and
                                    reduced maintenance, inventory, and expediting costs.


                                                                  A StrategyDriven advisor qualitatively and quantitatively assessed a Fortune 200
                                                                  utility’s work management function performance, including the integration between
                                      Case Study                  the work management, operations, engineering, maintenance, and supply chain
                                                                  organizations, relative to industry guidelines and global leading practices.

                                                                  Through direct observation, interviews, and quantitative analysis, our advisor worked
                                                                  with senior station managers to assess the focus and efficiency of the work
                                      Engagement                  management program. This assessment identified people, process, and technology
                                      Approach                    gaps to industry leading practice performance for each process phase as well as a
                                                                  collection of performance improvement recommendations to eliminate shortfalls.

                                                                  Implementation of identified work management program improvements were
                                                                  projected to improve process efficiency and equipment reliability; enabling increased
                                      Value Delivered             plant safety and total generation capacity, reduced total maintenance cost, and lower
                                                                  component inventory and associated carrying costs.




        The StrategyDriven Difference
        Decades of online and outage work management experience. Proprietary, industry guideline compliant process framework
        complimented by hundreds of execution leading practices, metrics and reports, and maturity model assessment tools.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                     12                                 StrategyDriven
                                                                                                                      effective executives, efficient employees
Domestic and International Benchmarking

How We Serve                        We assist clients in the comparative analysis of their operational performance to that of domestic and international
                                    peers. Our assessment approach enhances available industry and government data with StrategyDriven’s
                                    proprietary collection of operational data, metrics, process maps, and organizational charts and further benefits from
                                    our advisors’ decades of direction performance observations at dozens of domestic and international utilities. The
                                    resulting analysis informs integrated future state performance target-setting and outcome achievement monitoring.


                                                                  A StrategyDriven advisor supported a United Kingdom based power generation utility
                                                                  in the comparative operational assessment of its natural gas fired generating stations
                                      Case Study                  operations, maintenance, work management, engineering, and supply chain programs
                                                                  against North American and European industry performance and protocols.

                                                                  Our advisor worked with senior utility leaders, functional area managers, and line
                                                                  organization staff to compare operational program processes and results with those
                                      Engagement                  of leading power generation utilities and European program standards. The resulting
                                      Approach                    analysis identified programmatic and performance shortfalls, specified improvement
                                                                  opportunities, and defined future state operational goals.

                                                                  Client executives and managers gained foundational insights on their generating
                                                                  stations’ operational performance compared with that of industry peers. Additionally,
                                      Value Delivered             they received a three-year resource-loaded performance improvement roadmap
                                                                  specifying the execution, program, and technology enhancements needed to achieve
                                                                  their benchmarking-informed future state goals.


        The StrategyDriven Difference
      Robust, proprietary domestic and international utility performance information enhanced by experienced onsite analysis and evaluation
      at dozens of utilities. Improvement opportunities tied directly to increased employee efficiencies and operational cost savings.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                      13                                  StrategyDriven
                                                                                                                       effective executives, efficient employees
Succession and Workforce Planning

How We Serve                        We help clients enhance their succession and workforce planning programs through pipeline and capability
                                    projection, training and development program assessment, and improvement plan design and implementation
                                    assistance. Our evaluations identify retention, replacement, productivity, and quality risks while providing leading
                                    practice strategies for maintaining full staffing including temporarily filling vacancies with highly qualified personnel.


                                                                    A StrategyDriven advisor supported a Fortune 200 utility’s internal audit team
                                                                    assess the succession and workforce planning of key nuclear plant management
                                      Case Study                    and employee positions.



                                                                    Our advisor worked with senior plant leaders to identify management and workforce
                                                                    staffing and experience shortfalls, including the underlying drivers, for positions
                                      Engagement                    within the online work management and outage planning organizations. Senior utility
                                      Approach                      manager briefings were conducted on the fundamentals of succession and workforce
                                                                    planning programs and potential near-term solutions to fill existing vacancies.

                                                                    Our client received foundational insights on how to establish a robust management
                                                                    succession and workforce planning program, including key program elements and
                                      Value Delivered               execution effectiveness measurement. Recommendations to close positional and
                                                                    programmatic gaps were provided to temporarily alleviate the plant’s near-term
                                                                    staffing shortfalls.



        The StrategyDriven Difference
        Responsible for a management rotational program. Ground-up experience building a nuclear organization’s workforce
        planning program. Proprietary collection of succession and workforce planning program implementation and evaluation tools.



Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                        14                                   StrategyDriven
                                                                                                                           effective executives, efficient employees
StrategyDriven’s Nuclear Professionals

                         Nathan Ives                                                    Greg Gaskey

                         Principal                                                      Principal
                         Advisory Services                                              Advisory Services
                         +1 678 313 0150                                                +1 360 340 6540
                         NathanIves@StrategyDriven.com                                  GregGaskey@StrategyDriven.com



Nathan Ives is a StrategyDriven Advisory Services Principal         Greg Gaskey is a StrategyDriven Advisory Services Principal
with over 20 years of Energy industry and consulting                with over 20 years of nuclear plant operations, maintenance,
experience. His experience includes 12 years of external            and large-scale program and project management
and internal advisory work within the Energy industry               experience. An experienced Operations Manager, he has
specializing in strategic planning, resource management,            managed critical Department of Defense programs, projects,
project management, managerial decision-making,                     and business lines; spanning multiple engineering
operational risk management, organizational alignment, and          maintenance disciplines including mechanical, electrical,
operator performance. Nathan has advised executives and             hydraulic, and instrumentation and controls systems. He has
senior managers at numerous utilities on improving                  extensive knowledge of initial system design development,
generation fleet and individual plant operating performance.        lifecycle maintenance planning and optimization, existing
He authored the nuclear industry’s risk management, high-           system modification and modernization, and end-of-life
risk decision management, and operations performance                disposal.
guidelines and evaluation methods.
                                                                    Greg has over 10 years experience in nuclear and
Nathan also has 8 years of experience managing and                  environmental Emergency Management Operations,
supervising (military and commercial) nuclear plant                 including environmental and terrorism incident response
operations, online and outage work management, and                  coordination and Emergency Operation Center (EOC)
maintenance and held the U.S. Nuclear Regulatory                    oversight for the U.S. Navy’s largest regional maintenance
Commission’s Senior Reactor Operator license and                    facility. He previously served as Combat Systems Officer
U.S. Navy’s Chief Nuclear Engineer Officer qualification.           onboard a NIMITZ Class Aircraft Carrier and as a nuclear
                                                                    weapons courier and maintenance supervisor for TRIDENT
                                                                    Class ballistic missile submarines.


Enhancing safety, reliability, and efficiency
in electric power generation and delivery                      15                         StrategyDriven
                                                                                              effective executives, efficient employees
Utility Industry Thought Leadership

StrategyDriven’s professionals have long supported the utility industry through co-authorship of performance
improvement articles and industry standards and guidelines documents.


5                 Insights for executives
                                                                                                                                                                                  Improving safety and reducing costs in the power                                                                        INPO 03-004, Performance Objectives and Criteria
The answers in this
issue are supplied by:
                                                         Improving safety and reducing costs
                                                         in the power and utilities sector
                                                                                                                                                                                  and utilities sector, Ernst & Young LLP, April 2012                                                                     Publication documenting the standards for corporate
                                                                                                                                                                                  Five steps to a more effective relationship between                                                                     and station performance in the operation and
                                                         Five steps to a more effective relationship
                                                         between work management and supply chain
                                                         The work management organization at an electric generating station appeared to be understaffed
                                                         and was performing many of its duties behind schedule. An investigation revealed that resource
Dana Hanson                                              constraints within the supply chain organization compelled work management personnel to
+1 704 491 0894                                          perform several component procurement and issuance functions. Subsequently, work planning
dana.hanson@ey.com                                       suffered and delays in component requisitions resulted in higher-than-needed inventories in
                                                         an effort to avoid expediting costs.




                                                                                                                                                                                  work management and supply chain.                                                                                       maintenance of nuclear electric generating plants.
                                                         Process misalignments made the situation worse. Because the work management and supply
                                                         chain departments reported to different executives with separate business objectives, the two
                                                         functions did not collaborate when developing processes that impacted the other group. For
                                                         example, work management’s executing timing did not account for average component lead
                                                         times. Work management personnel typically ordered needed parts two or three weeks in
                                                         advance of work execution. However, the average lead time for many of these components
                                                         was four to six weeks. To avoid high expediting costs, supply chain personnel raised the safety
Nathan Ives
                                                         stock levels of frequently used components. This significantly increased inventory levels and
+1 404 817 5122
nathan.ives@ey.com                                       associated carrying costs.
                                                         Without losing sight of the operational benefits to be gained in a more effective work management
                                                         and supply chain partnership, such as increased parts availability and improved productivity, the
                                                         focus of this paper is the sizable cost savings opportunity when the two functions operate in sync.
                                                         “By examining the interactions between the supply chain and work management functions,”
                                                         says Nathan Ives, a senior manager in Ernst & Young LLP’s Power & Utilities and Global
                                                         Nuclear practices, “the utility in the example above identified an opportunity to reduce
                                                         inventory by 20% to 45%, resulting in millions of dollars in savings for the organization.”
                                                         While the circumstances at each utility can vary widely, eliminating obstacles between the
                                                         supply chain and work management functions often yields significant cost savings by reducing
                                                         inventories, minimizing expediting costs and lowering spare parts obsolescence.




                                                                                                                                                                                  Nuclear Renaissance and the Global Supply Chain,                                                                        Principles for Effective Operational Decision-
                                                                                                                                                                                                                                                  Building on the Principles
                                                                                                                                                                                                                                                  for Enhancing Professionalism

                  Nuclear and the
                          Renaissance
                  Global Supply
                                                                                                                                                                                                                                                                                       Principles
                                                                                                                                                                                                                                                                                       for Effective

                      Chain                                                                                                                                                       Public Utilities Fortnightly, December 2010                                                          Operational
                                                                                                                                                                                                                                                                                       Decision-Making    Making, INPO 2001
                                                                                                                                                                                  Avoiding the pitfalls and realizing the benefits arising                                              December 2001
                                                                                                                                                                                                                                                                                                          Principles-based document on risk informed
                                                             Avoiding pitfalls,
                                                                                                                                                                                  from an increasingly global nuclear supply chain.                                                                       managerial decision-making; published in six
                                                                                                                                                                                                                                                                                                          languages and serving as the performance model at
                                                             realizing benefits.


                                       BY NATHAN IVES, STEVE MCCABE AND GARY GILMARTIN




                                                                                                                                                                                                                                                                                                          nuclear plants worldwide.
                                                                                                                                  www.fortnightly.com
                                                                                                                                                        À




                                                                                                                                                                                  Reducing Lifecycle Expenditures, Public Utilities                                                                       INPO 01-002, Guidelines for the Conduct of
       Business & Money                                                                                    In fact, acquisition costs (specifically
                                                                                                           purchase price) are frequently the sole
                                                                                                           basis for making purchasing decisions,

     Reducing Lifecycle                                                                                    while often accounting for less than half
                                                                                                           of total asset costs.2 Employing TCO


     Expenditures
                                                                                                           to identify less obvious lifecycle costs
                                                                                                           aids in early identification of best-fit
                                                                                                           purchasing decisions and long-term cost
     Total cost of ownership accounting                                                                    savings across the project and ultimately
                                                                                                           the asset lifecycle.3




                                                                                                                                                                                  Fortnightly, May 2009                                                                                                   Operations at Nuclear Power Stations
     optimizes long-term costs.                                                                                A cross-functional team of supply
     BY STEVEN MCCABE ET AL.                                                                               chain, operations, maintenance, engi-



     A
                                                                                                           neering, finance, and project-manage-
            large regional utility forfeited significant operating revenues after it replaced
                                                                                                                                                                                                                                                                                  Guidelines for the
                                                                                                           ment personnel should conduct the
            pulverizers at several of its coal-fired power plants. Because the replacement                 TCO analysis. The team works collabo-
            pulverizers were sized to operate at 100-percent capacity during operations                    ratively to develop a comprehensive cost

                                                                                                                                                                                                                                                                                  Conduct of Operations
     using the coal typically procured by the utility, upgraded plants had to be derated                   model for the asset to be installed during
     following a change to lower BTU-rated fuel.                                                           the project and provides estimates for
         If utility decision makers had used a total cost of ownership (TCO) framework,                    each relevant cost category (see Figure 3).
     they could have avoided this situation. An operations and maintenance cost assess-
                                                                                                                                                                                                                                                                                  at Nuclear Power

                                                                                                                                                                                  Total cost of ownership accounting optimizes long-term                                                                  Document establishing the operational performance
                                                                                                           A distinct cost model is developed for
     ment would have revealed the operational effect of the fuel change, allowing the                      each supplier and scenario under con-
     company to consider oversized pulverizers to accommodate lower-grade fuels and                        sideration while estimates are based
     thereby maintain the power plant’s capacity.
        A confluence of market, regulatory,               aligned with corporate goals, regulatory
                                                                                                           upon historical data and detailed market
                                                                                                           analysis. After completing this detailed
                                                                                                                                                                                                                                                                                  Stations
     and technical factors will drive sustained           requirements and investor demands.               analysis, the team is capable of making
     levels of capital investment across each                 The implementation of the TCO                well-informed purchasing recommenda-
     segment in the utility value chain for the           method during a long-term capital pro-           tions, identifying areas for potential cost
     next 10 years. The ongoing credit crisis             ject’s planning phase (see Figure 1)             reductions, and quantifying the long-
     significantly increases both the cost of,            ensures asset-expenditure decisions are          term value associated with their recom-




                                                                                                                                                                                  costs                                                                                                                   standards, based on industry leading practices, for
     and competition for, capital that will               well informed and balanced with corpo-           mendations. Furthermore, cost model
     force numerous utilities to reevaluate               rate, regulatory and investor demands.           completion enables the team clearly
     near-term capital expenditures.1 During              This method is a supply-chain manage-            to communicate the rationale behind
     these unprecedented times, it’s increas-             ment leading practice; providing a wide-         specific purchasing decisions to key
     ingly important that utilities focus on              ranging view of the costs associated with        stakeholders so they understand the key
     reducing lifecycle expenditures, while               asset ownership. TCO classifies costs,
     executing capital projects and not nar-              direct or indirect, incurred throughout
     rowly focusing on short-term procure-                the acquisition, operation and mainte-           Steven McCabe (stmccabe@deloitte.com)
     ment gains. A near-term focus on                     nance, or retirement of an asset (see Fig-       is senior manager with Deloitte. Kwasi
     acquisition costs can result in unin-                ure 2). Traditionally, there has been little     Mitchell and Nathan Ives are managers




                                                                                                                                                                                                                                                                                                          nuclear electric generating stations.
     formed decision making that is mis-                  difficulty in identifying acquisition costs.     with the firm.


        FIG. 1                                                        CAPITAL PROJECT LIFECYCLE
                                                                                                                                                               Source: Deloitte




                                                                                                                                                                                                                                                                                  GENERAL DISTRIBUTION
                                                Planning &
                  Feasibility                                                Procure                     Construct                Close Out                                                                                                                                       May 2001
                                                  Design
         Definition of project need,     Preliminary design and     Material, equipment and    Management of asset /       Asset / facility testing                                                                                                                               Guideline
             benefits and risks         resource need definition      labor procurement          facility assembly          and commissioning                                                                                                                                     01-002
                                       Ability to Influence Project Cost Decreases with Time / Project Phase



     22 PUBLIC UTILITIES FORTNIGHTLY MAY 2009                                                                                            www.fortnightly.com




Enhancing safety, reliability, and efficiency
in electric power generation and delivery                                                                                                                                                                                                    16                                                                            StrategyDriven
                                                                                                                                                                                                                                                                                                                               effective executives, efficient employees
StrategyDriven

StrategyDriven
StrategyDriven.com | StrategyDriven Professional | StrategyDriven Advisory Services

StrategyDriven refers to the family of organizations comprising StrategyDriven Enterprises, LLC.
For more information about our company, please visit www.StrategyDriven.com.

Copyright © 2013 by StrategyDriven Enterprises, LLC. All rights reserved.

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StrategyDriven Advisory Services for Utility Executives and Managers

  • 1. StrategyDriven alignment, accountability, accelerated results Enhancing safety, reliability, and efficiency in electric power generation and delivery
  • 2. An Evolving Industry Safe, Operating Workforce Capital Retail reliable costs per experience, investment market operations megawatt knowledge, cost price generated & skills, and recovery uncertainty delivered availability Complex issues challenge the safe, To meet these challenges, utility leaders must find cost effective ways to replace aging components and reliable, and efficient generation and obsolete equipment, transfer knowledge and a respect delivery of electric power. for the unique hazards of electric power generation and delivery to a new generation of workers, release The safe, reliable, and efficient generation and delivery currently unavailable capital, and optimize operations of electric power is a responsibility shared by all utility and maintenance programs. professionals. Aging infrastructure, retiring workers, growing regulation, rising capital costs, and increasing StrategyDriven advisors are seasoned power and budget pressures combine to challenge utility utilities professionals. As such, we have tailored our executives and managers now more than ever before. tools and methods to meet the unique needs of utility operations and are committed to being exceptional teammates in your pursuit of excellence. Enhancing safety, reliability, and efficiency in electric power generation and delivery 2 StrategyDriven effective executives, efficient employees
  • 3. The StrategyDriven Difference StrategyDriven advisors possess ‘stood the watch’ power and utilities experience: StrategyDriven uniquely combines decades of §  leading day-to-day nuclear plant operations, power and utilities operating experience, deep §  directing high-voltage switchyard operations, business acumen, and industry specific methods §  supervising online and outage and tools to provide solutions that enhance the maintenance activities, and safe, reliable, and efficient generation and §  overseeing infrequently performed tests and evolutions delivery of electric power. Our professionals have been awarded top industry licenses, certifications, and qualifications: StrategyDriven focuses on business performance improvement… §  U.S. Nuclear Regulatory Commission Senior Reactor Operator License §  U.S. Navy Chief Nuclear Engineer Officer Strategy Development Qualification §  U.S. Navy Engineering Officer of the StrategyDriven’s methods and Strategy Translation Watch Qualification tools have been specifically Accountability Program Management Alignment tailored to meet the special needs §  Institute of Nuclear Power Operations of utility operations, aligned with Plant Operations Evaluator Qualification Project Operations regulatory requirements and Management Management §  National Academy for Nuclear Training validated against domestic and Event Investigator Certification international industry performance Tactical Execution standards and guidelines. §  Project Management Institute Project Day-to-Day Operational Management Professional Certification Operations Outcomes Enhancing safety, reliability, and efficiency in electric power generation and delivery 3 StrategyDriven effective executives, efficient employees
  • 4. Achieving Operational Excellence Diverse, Global Client Experience 13 submarines StrategyDriven’s power and utilities 4 aircraft carriers professionals advise executives and managers at dozens of Fortune 500, government, and large regional utilities on how to best improve the safety, reliability, and efficiency of electric United States power generation Enhanced safety through 30 nuclear power plants from 18 utilities and delivery effective risk 18 U.S. nuclear powered naval vessels 1 coal-fired fossil power plant from 1 utility operations. analysis, management, and 1 natural gas delivery system from 1 utility Improved ongoing Canada operational performance monitoring and 4 nuclear power plants from 4 utilities reliability and assessment Japan lower direct 1 nuclear power plant from 1 utility costs through 1 U.S. nuclear powered naval vessel Reduced integrated United Kingdom indirect costs process value 2 natural gas-fired power plants from 1 utility through analysis, Central & South America (El Salvador, Peru, and Brazil) benchmarking streamlining, and and workforce standardization 1 hydro dam from 1 utility optimization 1 diesel generator power station from 1 utility Enhancing safety, reliability, and efficiency in electric power generation and delivery 4 StrategyDriven effective executives, efficient employees
  • 5. What We Offer StrategyDriven can help you accelerate the achievement of improved power generation and delivery safety, reliability, and efficiency through the application of our deep hands-on management and operations experience and leveraging our power and utilities specific tools and methods in the areas of: Enhanced safety §  Corporate Risk Analysis, Management, and Mitigation §  Internal Assessment §  Decision Making and Management Improved operational reliability and lower direct costs §  Enterprise Performance Measurement §  Program / Project Development, Management, and Improvement §  Equipment / System Life Cycle Maintenance Management §  Online and Outage Work Management Optimization Reduced indirect costs §  Domestic and International Benchmarking §  Succession and Workforce Planning Enhancing safety, reliability, and efficiency in electric power generation and delivery 5 StrategyDriven effective executives, efficient employees
  • 6. Corporate Risk Analysis, Management, and Mitigation How We Serve We help reduce corporate risk exposure through an independent assessment of your enterprise risk programs. We can help you develop a power generation and delivery specific risk profile, benchmark your risks against industry peers, identify risk management program gaps, and develop and implement a multiyear oversight program to manage risks consistent with industry guidelines. A StrategyDriven advisor mapped a large Midwestern utility’s corporate risks to their nuclear business unit risks and then to the processes from which those risks could Case Study be manifest. Oversight mechanisms for these programs were identified including gaps; providing a basis for a multiyear internal audit assessment schedule. Our advisor worked with the utility’s corporate managers and staff to capture the Engagement existing internal audit framework and developed a gap analysis of their risk profile; Approach identifying risks not currently categorized or audited and opportunities for further program enhancement based on industry leading practices. Only seventy-five percent of the utility’s nuclear-related high-risk programs were routinely assessed by either the utility’s nuclear quality assurance or its corporate Value Delivered internal audit programs. Addressing the twenty-five percent gap will enable the utility to considerably reduce its safety, reliability, and efficiency risk exposure. The StrategyDriven Difference Decades of operational ‘stood the watch’ risk management and mitigation experience. Co-authored the nuclear industry’s operational risk management guidelines and evaluation methods. Proprietary risk to process to oversight mapping tool. Enhancing safety, reliability, and efficiency in electric power generation and delivery 6 StrategyDriven effective executives, efficient employees
  • 7. Internal Assessment How We Serve We perform independent, objective, and detailed reviews of core line and support organization functions; assessing performance against regulatory requirements and domestic and international performance standards, guidelines, and industry leading practices. Our resulting recommendations offer a unique actionable value proposition focused on improving operational safety, reliability, and efficiency. A StrategyDriven advisor led the evaluation of plant operations, maintenance, engineering, work management, and supply chain functions at a large regional Case Study utility’s coal-fired generating station. Provided an objective assessment of functional and cross-functional program performance against industry best practices. Our advisor worked with senior station managers to identify personnel performance and programmatic gaps and develop near and long term improvement plans. Initial Engagement data analysis was performed followed by direct performance observations conducted Approach onsite. Performance evaluation and improvement briefings were conducted with station managers and senior corporate and business unit executives. Specific, actionable performance improvement opportunities valued at the tens of millions of dollars were identified including online and outage program optimization to Value Delivered support improved equipment reliability and potentially yielding a 4 percent increase in equivalent availability factor (EAF) and better supply chain coordination providing an estimated $10 - $27 million reduction in on-hand inventory while maintaining or improving overall parts availability. The StrategyDriven Difference Decades of hands-on utility operations, maintenance, engineering, supply chain, work management, and regulatory experience. Developed the U.S. nuclear industry’s plant operations and operational focus guidelines and evaluation methods. Enhancing safety, reliability, and efficiency in electric power generation and delivery 7 StrategyDriven effective executives, efficient employees
  • 8. Decision Making and Management How We Serve We can assist you with the development and implementation of a high risk operational decision management program. Additionally, we can assess and recommend improvements to your existing program; evaluating it against industry leading practices and the common programmatic and execution shortfalls StrategyDriven’s proprietary research has identified. We also support leaders while making their important decisions; asking the tough questions that prevent group think, introduce new approaches, and help foster success. A StrategyDriven professional advised a Fortune 200 nuclear utility’s management team in the development of their fleet-wide high risk decision-management program; Case Study consistent with the Institute of Nuclear Power Operation’s Principles for Effective Operational Decision-Making guidelines and incorporating industry leading practices. Our advisor worked with senior utility managers to identify and benchmark industry leaders in each phase of the decision-making process. He then supported Engagement consolidating and harmonizing these practices into one cohesive process document. Approach Lastly, a process execution assessment was performed at one of the utility’s several nuclear plants to ensure effective implementation of the program. This client successfully developed and implemented an end-to-end industry leading practice decision-management program; promoting increased levels of operational Value Delivered safety and reliability. The program’s development was accelerated by insights into the tested practices from numerous other utilities introduced by our StrategyDriven advisor. The StrategyDriven Difference Co-authored the nuclear industry’s operational decision-making guidelines and evaluation methods. Extensive experience supporting numerous utilities design and implement their high-risk decision management programs. Enhancing safety, reliability, and efficiency in electric power generation and delivery 8 StrategyDriven effective executives, efficient employees
  • 9. Enterprise Performance Measurement How We Serve We can work with you to assess and improve your performance measurement system; yielding metrics and reports that are operationally relevant, organizationally consistent, and economically implemented. The resulting system helps improve managerial decision-making, organizational alignment, and individual accountability. A StrategyDriven professional advised a Fortune 200 utility management team in assessing their organizational performance measurement system; identifying Case Study monitoring and communication gaps and developing an improvement plan that included supporting system configuration upgrades. Through a series of workshops and interviews, our advisor worked with senior utility managers to catalog existing performance metrics and reports, recognize gaps to Engagement industry leading practices, identify additional measures needed, and develop a Approach phased approach to upgrading the utility’s measurement system. A fleet-wide metrics and reports governance program was also developed. An actionable performance monitoring system upgrade plan was created that, once implemented, will provide executives and managers with the accurate and timely Value Delivered information needed to support effective decision-making. This comprehensive roadmap contained a step-by-step plan for establishing a fully integrated performance monitoring system supported by data collection and processing procedures, application configuration, program governance, and management and employee training. The StrategyDriven Difference Comprehensive, proprietary collection of regulatory and industry guidelines-based performance metrics enhanced by broadly benchmarked industry leading practice performance measures. Extensive experience implementing measurement systems. Enhancing safety, reliability, and efficiency in electric power generation and delivery 9 StrategyDriven effective executives, efficient employees
  • 10. Program / Project Development and Management How We Serve We can assist you in the effectiveness assessment and improvement of existing internal program and project management plans, oversight of contractor projects, and implementation of a program / project management office. For capital construction and other major projects, we can analyze program / project risk models and evaluate contracting method and management effectiveness to ensure strategic benefit realization and delivery timelines. A StrategyDriven advisor spearheaded the planning, execution, and on-time delivery of a 12-month, $325 million large-scale, integrated power generation Case Study maintenance and modernization project employing 1800+ personnel across multiple work specialties and organizations. Implemented robust operational risk mitigation, technical management, metrics analysis, and project management tools. Our advisor worked with station managers at all levels to actively manage daily work schedules and resources, improve meeting and operational efficiencies, oversee Engagement contractor commitments and acceptance criteria, and ensure efficient integration of Approach work through the use of Project Management and Lean Six Sigma analysis. Assisted in the definition, interpretation, and analysis of key performance metrics. Achieved a safe, on-time return to service of two power plants and supporting equipment within original cost estimates. Provided for sustainable first-time work Value Delivered safety and quality improvements through standardization and documentation of streamlined outage work management processes. The StrategyDriven Difference Decades of experience in operations and maintenance execution and planning, identification and utilization of the most efficient and applicable plant metrics, and analysis and enhancement of existing processes using Lean Six Sigma practices. Enhancing safety, reliability, and efficiency in electric power generation and delivery 10 StrategyDriven effective executives, efficient employees
  • 11. Equipment / System Life Cycle Maintenance Management How We Serve We can assist your organization assess the cost efficiency of your plant equipment life-cycle maintenance programs. We are particularly effective in identifying cost-saving improvements in maintenance plan scheduling, resource use and balancing, and consolidation of industrial skill sets to optimize personnel deployment and physical equipment storage/floor footprints. A StrategyDriven advisor, through the implementation of Lean Manufacturing principles and constraint analysis, identified multiple cost and schedule saving Case Study improvements to a nationwide nuclear submarine rotatable equipment pool storage system. Our advisor worked with in-house delivery management representatives and those of other national coordinating logistical organizations to analyze delivery times, Engagement maintenance repair times, and packaging schedules using Lean Six Sigma Value Approach Stream Analysis. The approach focused directly on the largest cost and schedule constraints and provided immediately actionable process improvements. Improvements included gains in component repair and equipment delivery times. Delivered a 10 percent overall schedule execution time reduction (overall Value Delivered maintenance turnaround time) and over 25 percent reduction in logistics material delivery timelines. The StrategyDriven Difference Executive level experience managing a nationwide maintenance program including life cycle management of major industrial plant equipment and identification and implementation of performance metrics driving continual improvement. Enhancing safety, reliability, and efficiency in electric power generation and delivery 11 StrategyDriven effective executives, efficient employees
  • 12. Online and Outage Work Management Optimization How We Serve We can work with you to assess and improve your end-to-end work management program; yielding an operationally focused process driving improved organizational alignment and supporting high equipment reliability. The resulting program will directly support increased operational and personnel safety, higher capacity, and reduced maintenance, inventory, and expediting costs. A StrategyDriven advisor qualitatively and quantitatively assessed a Fortune 200 utility’s work management function performance, including the integration between Case Study the work management, operations, engineering, maintenance, and supply chain organizations, relative to industry guidelines and global leading practices. Through direct observation, interviews, and quantitative analysis, our advisor worked with senior station managers to assess the focus and efficiency of the work Engagement management program. This assessment identified people, process, and technology Approach gaps to industry leading practice performance for each process phase as well as a collection of performance improvement recommendations to eliminate shortfalls. Implementation of identified work management program improvements were projected to improve process efficiency and equipment reliability; enabling increased Value Delivered plant safety and total generation capacity, reduced total maintenance cost, and lower component inventory and associated carrying costs. The StrategyDriven Difference Decades of online and outage work management experience. Proprietary, industry guideline compliant process framework complimented by hundreds of execution leading practices, metrics and reports, and maturity model assessment tools. Enhancing safety, reliability, and efficiency in electric power generation and delivery 12 StrategyDriven effective executives, efficient employees
  • 13. Domestic and International Benchmarking How We Serve We assist clients in the comparative analysis of their operational performance to that of domestic and international peers. Our assessment approach enhances available industry and government data with StrategyDriven’s proprietary collection of operational data, metrics, process maps, and organizational charts and further benefits from our advisors’ decades of direction performance observations at dozens of domestic and international utilities. The resulting analysis informs integrated future state performance target-setting and outcome achievement monitoring. A StrategyDriven advisor supported a United Kingdom based power generation utility in the comparative operational assessment of its natural gas fired generating stations Case Study operations, maintenance, work management, engineering, and supply chain programs against North American and European industry performance and protocols. Our advisor worked with senior utility leaders, functional area managers, and line organization staff to compare operational program processes and results with those Engagement of leading power generation utilities and European program standards. The resulting Approach analysis identified programmatic and performance shortfalls, specified improvement opportunities, and defined future state operational goals. Client executives and managers gained foundational insights on their generating stations’ operational performance compared with that of industry peers. Additionally, Value Delivered they received a three-year resource-loaded performance improvement roadmap specifying the execution, program, and technology enhancements needed to achieve their benchmarking-informed future state goals. The StrategyDriven Difference Robust, proprietary domestic and international utility performance information enhanced by experienced onsite analysis and evaluation at dozens of utilities. Improvement opportunities tied directly to increased employee efficiencies and operational cost savings. Enhancing safety, reliability, and efficiency in electric power generation and delivery 13 StrategyDriven effective executives, efficient employees
  • 14. Succession and Workforce Planning How We Serve We help clients enhance their succession and workforce planning programs through pipeline and capability projection, training and development program assessment, and improvement plan design and implementation assistance. Our evaluations identify retention, replacement, productivity, and quality risks while providing leading practice strategies for maintaining full staffing including temporarily filling vacancies with highly qualified personnel. A StrategyDriven advisor supported a Fortune 200 utility’s internal audit team assess the succession and workforce planning of key nuclear plant management Case Study and employee positions. Our advisor worked with senior plant leaders to identify management and workforce staffing and experience shortfalls, including the underlying drivers, for positions Engagement within the online work management and outage planning organizations. Senior utility Approach manager briefings were conducted on the fundamentals of succession and workforce planning programs and potential near-term solutions to fill existing vacancies. Our client received foundational insights on how to establish a robust management succession and workforce planning program, including key program elements and Value Delivered execution effectiveness measurement. Recommendations to close positional and programmatic gaps were provided to temporarily alleviate the plant’s near-term staffing shortfalls. The StrategyDriven Difference Responsible for a management rotational program. Ground-up experience building a nuclear organization’s workforce planning program. Proprietary collection of succession and workforce planning program implementation and evaluation tools. Enhancing safety, reliability, and efficiency in electric power generation and delivery 14 StrategyDriven effective executives, efficient employees
  • 15. StrategyDriven’s Nuclear Professionals Nathan Ives Greg Gaskey Principal Principal Advisory Services Advisory Services +1 678 313 0150 +1 360 340 6540 NathanIves@StrategyDriven.com GregGaskey@StrategyDriven.com Nathan Ives is a StrategyDriven Advisory Services Principal Greg Gaskey is a StrategyDriven Advisory Services Principal with over 20 years of Energy industry and consulting with over 20 years of nuclear plant operations, maintenance, experience. His experience includes 12 years of external and large-scale program and project management and internal advisory work within the Energy industry experience. An experienced Operations Manager, he has specializing in strategic planning, resource management, managed critical Department of Defense programs, projects, project management, managerial decision-making, and business lines; spanning multiple engineering operational risk management, organizational alignment, and maintenance disciplines including mechanical, electrical, operator performance. Nathan has advised executives and hydraulic, and instrumentation and controls systems. He has senior managers at numerous utilities on improving extensive knowledge of initial system design development, generation fleet and individual plant operating performance. lifecycle maintenance planning and optimization, existing He authored the nuclear industry’s risk management, high- system modification and modernization, and end-of-life risk decision management, and operations performance disposal. guidelines and evaluation methods. Greg has over 10 years experience in nuclear and Nathan also has 8 years of experience managing and environmental Emergency Management Operations, supervising (military and commercial) nuclear plant including environmental and terrorism incident response operations, online and outage work management, and coordination and Emergency Operation Center (EOC) maintenance and held the U.S. Nuclear Regulatory oversight for the U.S. Navy’s largest regional maintenance Commission’s Senior Reactor Operator license and facility. He previously served as Combat Systems Officer U.S. Navy’s Chief Nuclear Engineer Officer qualification. onboard a NIMITZ Class Aircraft Carrier and as a nuclear weapons courier and maintenance supervisor for TRIDENT Class ballistic missile submarines. Enhancing safety, reliability, and efficiency in electric power generation and delivery 15 StrategyDriven effective executives, efficient employees
  • 16. Utility Industry Thought Leadership StrategyDriven’s professionals have long supported the utility industry through co-authorship of performance improvement articles and industry standards and guidelines documents. 5 Insights for executives Improving safety and reducing costs in the power INPO 03-004, Performance Objectives and Criteria The answers in this issue are supplied by: Improving safety and reducing costs in the power and utilities sector and utilities sector, Ernst & Young LLP, April 2012 Publication documenting the standards for corporate Five steps to a more effective relationship between and station performance in the operation and Five steps to a more effective relationship between work management and supply chain The work management organization at an electric generating station appeared to be understaffed and was performing many of its duties behind schedule. An investigation revealed that resource Dana Hanson constraints within the supply chain organization compelled work management personnel to +1 704 491 0894 perform several component procurement and issuance functions. Subsequently, work planning dana.hanson@ey.com suffered and delays in component requisitions resulted in higher-than-needed inventories in an effort to avoid expediting costs. work management and supply chain. maintenance of nuclear electric generating plants. Process misalignments made the situation worse. Because the work management and supply chain departments reported to different executives with separate business objectives, the two functions did not collaborate when developing processes that impacted the other group. For example, work management’s executing timing did not account for average component lead times. Work management personnel typically ordered needed parts two or three weeks in advance of work execution. However, the average lead time for many of these components was four to six weeks. To avoid high expediting costs, supply chain personnel raised the safety Nathan Ives stock levels of frequently used components. This significantly increased inventory levels and +1 404 817 5122 nathan.ives@ey.com associated carrying costs. Without losing sight of the operational benefits to be gained in a more effective work management and supply chain partnership, such as increased parts availability and improved productivity, the focus of this paper is the sizable cost savings opportunity when the two functions operate in sync. “By examining the interactions between the supply chain and work management functions,” says Nathan Ives, a senior manager in Ernst & Young LLP’s Power & Utilities and Global Nuclear practices, “the utility in the example above identified an opportunity to reduce inventory by 20% to 45%, resulting in millions of dollars in savings for the organization.” While the circumstances at each utility can vary widely, eliminating obstacles between the supply chain and work management functions often yields significant cost savings by reducing inventories, minimizing expediting costs and lowering spare parts obsolescence. Nuclear Renaissance and the Global Supply Chain, Principles for Effective Operational Decision- Building on the Principles for Enhancing Professionalism Nuclear and the Renaissance Global Supply Principles for Effective Chain Public Utilities Fortnightly, December 2010 Operational Decision-Making Making, INPO 2001 Avoiding the pitfalls and realizing the benefits arising December 2001 Principles-based document on risk informed Avoiding pitfalls, from an increasingly global nuclear supply chain. managerial decision-making; published in six languages and serving as the performance model at realizing benefits. BY NATHAN IVES, STEVE MCCABE AND GARY GILMARTIN nuclear plants worldwide. www.fortnightly.com À Reducing Lifecycle Expenditures, Public Utilities INPO 01-002, Guidelines for the Conduct of Business & Money In fact, acquisition costs (specifically purchase price) are frequently the sole basis for making purchasing decisions, Reducing Lifecycle while often accounting for less than half of total asset costs.2 Employing TCO Expenditures to identify less obvious lifecycle costs aids in early identification of best-fit purchasing decisions and long-term cost Total cost of ownership accounting savings across the project and ultimately the asset lifecycle.3 Fortnightly, May 2009 Operations at Nuclear Power Stations optimizes long-term costs. A cross-functional team of supply BY STEVEN MCCABE ET AL. chain, operations, maintenance, engi- A neering, finance, and project-manage- large regional utility forfeited significant operating revenues after it replaced Guidelines for the ment personnel should conduct the pulverizers at several of its coal-fired power plants. Because the replacement TCO analysis. The team works collabo- pulverizers were sized to operate at 100-percent capacity during operations ratively to develop a comprehensive cost Conduct of Operations using the coal typically procured by the utility, upgraded plants had to be derated model for the asset to be installed during following a change to lower BTU-rated fuel. the project and provides estimates for If utility decision makers had used a total cost of ownership (TCO) framework, each relevant cost category (see Figure 3). they could have avoided this situation. An operations and maintenance cost assess- at Nuclear Power Total cost of ownership accounting optimizes long-term Document establishing the operational performance A distinct cost model is developed for ment would have revealed the operational effect of the fuel change, allowing the each supplier and scenario under con- company to consider oversized pulverizers to accommodate lower-grade fuels and sideration while estimates are based thereby maintain the power plant’s capacity. A confluence of market, regulatory, aligned with corporate goals, regulatory upon historical data and detailed market analysis. After completing this detailed Stations and technical factors will drive sustained requirements and investor demands. analysis, the team is capable of making levels of capital investment across each The implementation of the TCO well-informed purchasing recommenda- segment in the utility value chain for the method during a long-term capital pro- tions, identifying areas for potential cost next 10 years. The ongoing credit crisis ject’s planning phase (see Figure 1) reductions, and quantifying the long- significantly increases both the cost of, ensures asset-expenditure decisions are term value associated with their recom- costs standards, based on industry leading practices, for and competition for, capital that will well informed and balanced with corpo- mendations. Furthermore, cost model force numerous utilities to reevaluate rate, regulatory and investor demands. completion enables the team clearly near-term capital expenditures.1 During This method is a supply-chain manage- to communicate the rationale behind these unprecedented times, it’s increas- ment leading practice; providing a wide- specific purchasing decisions to key ingly important that utilities focus on ranging view of the costs associated with stakeholders so they understand the key reducing lifecycle expenditures, while asset ownership. TCO classifies costs, executing capital projects and not nar- direct or indirect, incurred throughout rowly focusing on short-term procure- the acquisition, operation and mainte- Steven McCabe (stmccabe@deloitte.com) ment gains. A near-term focus on nance, or retirement of an asset (see Fig- is senior manager with Deloitte. Kwasi acquisition costs can result in unin- ure 2). Traditionally, there has been little Mitchell and Nathan Ives are managers nuclear electric generating stations. formed decision making that is mis- difficulty in identifying acquisition costs. with the firm. FIG. 1 CAPITAL PROJECT LIFECYCLE Source: Deloitte GENERAL DISTRIBUTION Planning & Feasibility Procure Construct Close Out May 2001 Design Definition of project need, Preliminary design and Material, equipment and Management of asset / Asset / facility testing Guideline benefits and risks resource need definition labor procurement facility assembly and commissioning 01-002 Ability to Influence Project Cost Decreases with Time / Project Phase 22 PUBLIC UTILITIES FORTNIGHTLY MAY 2009 www.fortnightly.com Enhancing safety, reliability, and efficiency in electric power generation and delivery 16 StrategyDriven effective executives, efficient employees
  • 17. StrategyDriven StrategyDriven StrategyDriven.com | StrategyDriven Professional | StrategyDriven Advisory Services StrategyDriven refers to the family of organizations comprising StrategyDriven Enterprises, LLC. For more information about our company, please visit www.StrategyDriven.com. Copyright © 2013 by StrategyDriven Enterprises, LLC. All rights reserved.