In aSSocIatIon wItHnuclear Supply chain Gap analysis 2013Report Prepared and compiled by: Dr Malik Khalid Mehmood PhDChief Technical Advisor
| Page 2Supply chain Gap analysis 2013In 2012 the US nuclear supply chain market was estimated at We invited industry experts to comment on the gap in the nuclear$100 billion and recent industry analysis anticipates that nuclear supply chain and asked them - whether they saw it as an issue,new-build investment will reach some $1.5 trillion by 2030. where the main gaps were and how they planned on tackling them.Over the next 15 years $500 billion will be spent globally oninternational procurement to support nuclear new build - this After interviewing 250+ nuclear experts working in the US andanticipated growth calls for the support and development of a the global supply chain industry, nuclear energy Insiderrobust and reliable nuclear supply chain. have collated the results to give you the latest market data.A nuclear plant requires millions of components, and if new The results indicate that there is ample capacity and demand insuppliers of nuclear-grade components are going to support the the supply chain - and a developing international market will liftsupply chain industry and manufacture reliable safety critical investment, add more competition to the market place and henceparts, they need to gain the required certification. encourage improved services, innovation and modernization.
| Page 3Playing to win in the nuclear Industry"A renaissance within a renaissance?" could be the heading that depicts the A Whole new Meaningoutcome of nuclear energy Insiders recent supply chain gap analysis. We view thisconcept with a positive frame of mind. What does that mean? "Existing asset utilization" may be the code words for "renaissance" now.Over the past several years the renaissance banner flew high over the industry;the goal was US domestic new-build. Since nationwide new-build has not fully Without extensive US new-build in the near future, our existing nuclear facilitiesmaterialized, that goal is different. have become ever more valuable. The 20 percent of the electricity we supply to the nation, especially as the economy gains momentum, is needed juice for growth. ourThis survey illuminates those new insights. even without the traditional end-product becomes more valuable. So do our plants.renaissance there is perceived opportunity in the supply chain, according to 80+percent of respondents. they see growth in emerging needs across the board -- In the US vendor base, equipment, engineering skills, and facilities managementthe availability of equipment, engineering skills, and facilities management are are noted as critical needs along with quality assurance, training, safety andidentified as the three major gaps. consulting services as important needs.Almost half the respondents identify existing operations of some sort as the What is the thread? People. Talent, the knowledge and skills that are the foundationgreatest demand for supply chain services. of any industrys integrity. Industry cluster experts talk about the social glue that makes clusters and supply chains work well. The personal touch is the grease in the gears. In Start-up nation, a book that describes the way Israel has been innovative and successful, one official says, "...everybody knows everybody, and there is a very high degree of transparency." Knowing each other and working together are traits of cluster success.
| Page 4People Drive SuccessA critical supply chain gap is in our future workforce. One estimate says that Our cluster just finished an intense two-year effort of supply chain education forwithin the total 59,700 US employees in the industry, there can easily be 23,200+ small firms, bringing networking and industry education to companies that wouldjobs to fill in the next five years. There is that much turnover. "The contraction in not easily find such resources. We put a personal face on a big industry....eye-to-the nuclear workforce in the 1990s and the slow pace of hiring in the last decade eye...building transparency and relationships.has left an incumbent workforce that is aging, with up to 39 percent eligible forretirement in the next five years," says this source. Sound like any industry you know?This Insider survey is one more marker that we need to address the gap sooner "Learn to let go of the past... what is done is done...."rather than later.Addressing workforce issues requires a unified industry approach. What next?In the carolinas nuclear cluster - in fact across the carolinas energy cluster - weprefer to look at teamwork like this: Act decisively to close the gaps, but that means more than traditional training or procurement work. It requires a revitalized state of mind. Our young leadership"coordination means we share data; cooperation means we class reviews a book each year called, Sway - the Irresistible Pull of Irrationalshare resources; collaboration means that we share goals." Behavior by Ori Brafman. That book has a lesson for us, "... learn to let go of the past....what is done is done..." Sway says that people can be fenced-in by the pastWe have the data. That’s easy. and what others say. As a result, people play not to lose, they dont play to win.In some regions there are companies that have come together to support academia, Instead, lets chart our own success. We can look at the developing gap as a realthat is good coordination. That’s a bit more of a challenge. threat or, as Sway describes, treat it as an opportunity.Collaboration is toughest and most productive. Let’s introduce collaboration in a The nuclear industry is in an environment to win: assets growing in value, aprofoundly meaningful way. Unbundle traditional higher education and corporate carbonless product when carbon constraints are desired, a place for steady jobstraining models to meet our talent and skill needs. Add more options. For instance, when regional economies cry for employment, and an energy resource essential tocarolinas nuclear cluster companies band together to develop the highest build local economies.potential young nuclear leaders in our states. Industry competitors work side-by-side to teach about policy, innovation, managing, and other critical thinking skills. There is a renaissance within a renaissance. As long as we collaborate - trulyThis leadership energy carolinas program is in its fifth year, and makes these share goals - how could we not win?valuable human assets more valuable to us.
| Page 5Who was surveyed?Nuclear energy Insider took a cross section of the industry to ensure a fair forecast of industry movementsand developments in the supply chain.What is your primary job role within your company? in which region are you based? 30.7%15.8% 14.0% 14.9% 93% . 56% . 28% . 33% . 14% . 14% . 09% . 00% . Procurement Developmen Developmen Managemen consultancy engineering Inspection / research & operations workforce Financial technical licensing planning Busines Service Project Sales legal s s t / t tWhich of the following best describes your organization?? tier 2 contractor 25% uSa 68.1% asia Pacific 1.4% ePc contractor 22% uK 8.0% canada 6.6% asia 4.2% Middle east 2.3% tier 3 contractor 19% europe 8.0% other 1.4% oeM 19% utility 12% regulator 3%
| Page 6Is there a gap in the U.S. supply chain?How much of your time is dedicated to supply chain related activities? Do you agree there are current gaps in the U.S. supply chain vendor base? all 10.2% Strongly agree 29.8% Majority 21.4% agree 59.5% Moderate 44.2% Disagree 9.8% little 21.9% Strongly Disagree 0.9% none 2.3% Nearly 90% of respondents recognize that there is a gap in the U.S. supply chain vendor base and nearly 60% of the respondents Strongly agree there is a gap.
| Page 7What is causing the gap in the U.S. supply chain?What do you identify as the main driver(s) for the gap in the u.S vendor base? "Ultimate impact is at the utility level, however the industrial and ePc element suffers from years of marginal investment inThere is a clear lack of experienced young personnel coming into the industry capital equipment and professional talent."to replace the ageing workforce. There is a need to focus on integrating moreexperienced personnel into the processes supporting manufacture, maintenanceand operation, and management."In the absence of in-house personnel, hire Who does the gap in the U.S. vendor base affect the most?experienced consultants." 53.1% utilities 42.5% oeMs 11.9% 36.3% ePcs 24.4% tier 2 contractors 10.6% regulators 5.0% 21.3% rate payers 5.6% 21.3% 18.1% 14.4% 13.1% Suppliers feel that nQa1 is open to so many interpretations there is a lack of understanding, direction and that the "attitude in supply chain management is lacking lack of lack of lack of lack of lack of lack of lack of collaboration". This absence of "clear & concise specifications along with appropriate nQa1 specific efficient competitive Quality training experience oversight of the supply chain" is hurting the industry and preventing an efficient timelysuppliers equipment delivery / pricing / assurance / ageing strategy being implemented. availability long lead high cost workforce times The utilities take a similar stance citing the "lack of coordination and political vested interest" as a key problem area. But predominantly, there is a lack of engineeringResearch demonstrates there are significant impacts to Doe/nnSa nuclear skills, trained personnel for project oversight and not enough competition amongstconstruction projects and that it is always the customer / tax payer that is most nQa1 suppliers that "provide a quality product beyond good paper". Specific parts areaffected. never the stock holder or Board members. expensive with long lead times and there is not enough focus on the success of the outcome.
| Page 8the biggest challenges in the nuclear supply chainWhich do you think are the 3 biggest gaps in the U.S. vendor base?There is demand for increased training efforts to better manufacturing capabilities and skills, as well as stronger "A supply chain gap doesbusiness infrastructure to support nuclear manufacturing. not necessarily mean no 75.0% availability. We are in a global 60.6% 64.4% marketplace. It means supply chain efficiency - which can 41.3% always be improved." 24.4% 10.6% 94% . 10.6%63% . Additional points that were highlighted:equipmentavailability engineering skills Facilities management Safety services Quality assurance training programs It systems consulting services legal services • Forgings and raw materials compliant with (nQa1 nuclear codes compliance) • ObsolescenceOne of the main issues stressed by the utilities was the need for better education, transparency and • Lack of understanding of fraud/ counterfeiting preventionknowledge. there is a lack of supply chain vendors with current modern technology and experience inengineering, construction and decommissioning services. • Ability for nuclear fleet across companies to share critical spares and consistentThe lack of modernized manufacturing equipment and skills means that there are very few success stories processes.of new nuclear projects that have been completed within budget, scope and schedule. • Heavy / ultra heavy forging • Nuclear qualified foundriesThe industry is lacking in specific skills sets such as efficient welding services, • Training simulatorsprocurement services and qualified craftsmen for example electricians, healthPhysics, technicians, etc.
| Page 9Key problem areasSome of the key problem areas identified were equipment availability in the U.S., engineering skills and effective site The ageing workforce is not all bad news -management. We asked what the key causes were - these were the most commonly sited: companies should embrace it as an opportunity to take advantage of the more tech savvy generation and implement on-going training equipment availability engineering Skills facilities management programs and platforms to mentor young lack of experience in young career individuals. "You can mould young Heavy equipment / major parts Procurement skills recruits as they are not stuck in old ways" workforce - training programs Pumps, valves ageing workforce Bad communication "Gap in retiring engineers and incoming, new graduates" Software, It welding engineers Plants operations and maintenance reverse engineering for obsolete Better leadership - poor senior Again much of the feedback from ePcs was obsolete parts parts management skills based on the fact that far too many sites are managed with displaced workers who dont control and Instrumentation design no flexibility in production nuclear grade capabilities skills have the skill base to efficiently manage the facilities. utilities sited equipment availability Seismic testing equipment, Managing new equipment / new lack of training programs as an issue due to the lack of qualified U.S. emergency and safety related plant activities manufacturers. In addition, there is the need ageing workforce / retiring for more competition for quality hardware with Specialist equipment Site construction personnel engineers fewer paper requirements as numerous parts are currently sourced oversees instead. understanding digital control long lead times I.t. / Digital skills systems The suppliers stated that the number of Succession planning - start to "legal and financial liabilities mean that many loss of manufacturing capabilities Program implementation vendors prefer to sell commercially and make finish skill sets the purchaser bear the cost of dedication", as lack of Qa program opposed to the expense of becoming a qualified Parts with pedigrees and certs Procurement understanding implementation / clear guidelines supplier.
| Page 10 Global supply chain Over 80% of the companies surveyed see opportunities in the U.S. supply chain market, 45% citing North America as the second biggest opportunity for growth behind china. Do you see opportunities within the U.S. supply chain for your company? Where do you think the biggest supply chain opportunities are for growth? 49.0% 45.7% Yes 81.5% no 5.3% n/a 13.2% 27.8% 20.5% 12.6% 14.6% 11.3% Does your company have plans to explore the global supply chain market to fill the gap in the u.S. market? North Canad Europe U.K. India China Middle East America a 37.1% An internationally diverse supply chain is evolving to support the nuclear plant 29.8% construction and there is plenty of scope for competition, a large global market will boost investment, and a diverse range of players in the market will encourage innovation. 12.6% 10.6% 99% . "With regards to new construction, suppliers could fill the gaps if it was obvious that there would be a steady stream of need. Yes, already Yes, in the on going Increasingly no, we the unsure future of new plants will restrict uS suppliers fromhave a global next 12 debate likely use local doing what is needed and many of the items will need to besupplier base months suppliers sourced internationally"
| Page 11We asked 250+ specialists to identify the area with the greatest demand fornuclear supply chain servicesWhere is the greatest demand for supply chain services in the nuclear industry? "Suppliers need to take an interest in developing QA programs that can confirm acceptability of their product. There seems to be a significant lack of interest in satisfying nuclear QA requirements - a major education program should be 39.7% undertaken by an industry/regulatory consortium to train suppliers." aside from a lack of clear regulations there seems to be a huge gap in communication, especially for the smaller vendors. There is the need for "better communication between small mills, the middle men such as the distributors who deal with the 23.8% utilities directly, and better understanding of what is required, both commercially 19.9% and technically." The U.S. needs to recover the leadership in the civil nuclear plant 73% . business, 66% . successfully introducing new NPPs and understand what will trigger new projects 26% . abroad, in order to develop the supply chain market to support the industry enhancement.construction Plant Plant Decommissioning emergency constructing projects maintenance enhancement projects preparedness on site waste "while the US nuclear industry has not been building new projects projects upgrades storage facilities reactors over the last 30 years, other countries (e.g. Korea, China, canada, etc.) have been. These countries have amassed a wealth of knowledge, people and supply chain equipment thatThe principal comment was with regard to increasing engineering skills, can be used to fill the gaps in the US vendor base."improving supplier quality and encouraging a more competitive market. otherresponses included: M&A on plants and Fukushima regulatory responseInitiatives. the US has the potential to take advantage of a cash rich growing nuclear industry and provide quality services where the industry is lacking. But at present it seems that a lack of understanding, clear cut regulations, efficient training programs, vendor quality and long lead times is hindering the U.S. nuclear supply chain industry from reaching its full potential. It is time to address these long standing issues, and as carolina nuclear cluster suggests, look at the developing gap as an opportunity for growth, and a chance to do things better.
| Page 12Nuclear energy InsiderThank you for your interest in the Supply chain Gap analysis study. Nuclear energy Insider hopes you found theinformation collected interesting.Dr Malik Khalid Mehmood PhDChief Technical Advisor