A concept known as the Group Purchasing Organization (GPO) has been around for quite some time, assisting companies control costs by collectively bargaining with suppliers. The Utilities Service Alliance (USA) is a type of non-profit cooperative acting like a GPO for 15 member utility companies that operate 17 nuclear power plants.
Economies of Volume in Procurement Reduce Operating Costs
By pooling the purchasing of these 17 nuclear power plants the utilities that own them can enjoy reduced costs from suppliers by purchasing in greater volumes. As with almost all things in business to business procurement, the greater the quantity of purchases the lower the price of each individual item. In this way, utilities operating nuclear power plants are able to achieve better pricing on commodities and repair parts than if they were procuring the materials on their own. Lower pricing translates into reduced operating costs, further increasing the financial viability for nuclear power production.
Performance Improvement and Supply Chain Efficiencies Lower Costs
The USA also assists member utilities in supply chain management and efficiency. They have best practices and experts who will help their members be more efficient at procuring supplies in addition to the lower pricing. The members also enjoy the benefits of the Operations Performance Improvement Program. This is a unique assessment program to help members improve the efficiency of their operations.
Utilities Service Alliance Return on Investment
The members of the USA have averaged about a 9% Return on Investment (ROI) driven mostly by cost savings. The USA members also leverage resources such as personnel and equipment to lower costs of repair and maintenance as well as refueling. A member typically experiences a higher ROI in a year when they refuel because of the sharing of equipment and resources during the outage compounds on top of the normal cost savings realized from suppliers.
Small to mid-size utilities operating nuclear power plants should consider membership with the USA. The benefits range from hard dollar cost savings to enhanced operations performance. In an industry that is already highly cooperative, it is important for the smaller companies to share resources and pool their spending in order to achieve economies of volume in procurement and leverage resources during refueling outages. These strategies help keep costs low and allow the utilities to remain competitive in tight markets where people are watching every penny.
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Cofrentes courtesy of Flickr user Toni Rodrigo under the CC license.
