Powering up: What ‘Disruptive’ Innovations Mean For Utilities Sector Supply Chains

The pressure is on for electricity, gas and water suppliers to improve the way they serve their customers. How can the industry’s supply chains move with the times?

For an industry charged with maintaining the infrastructure behind public services, utilities supply chains could use a power up.

The utilities industry has typically been slow to adapt, restrained by regulation, criticised for restricting competition and dependent on increasingly undesirable fossil fuels.

Now the industry has hit fast forward. Small start-ups and agile contenders are shaking up the domains of the long-established players. In the UK, the ‘Big Six’ energy suppliers have lost ground, dropping to only around 77% of the market. With this change comes increasing pressure to reevaluate business practices in order to stay on top. What will that mean for the sector’s supply chain partners?

The Amazon Effect — choice, cheapness and convenience

The well-documented ‘Amazon effect’ has changed the landscape for both online and offline businesses, including utilities. Increased choice, reduced prices and convenient delivery have elevated consumers’ expectations. Add to this the impact of social media, which has given customers a public channel through which they can demand higher standards, airing their dissatisfaction and preventing potential sales.

For utilities, this has made customer service a new battleground. Industry newcomers are offering choice, from green energy plans to more flexible contracts. It’s easy to see how this would appeal to consumers in an industry that has been criticised for rigidity and high prices.

There are other supply chain-related issues that keep utilities in the public eye. For the water industry, leakage is one such example. As much as 20% of water leaks out of pipes before it reaches homes, creating PR problems as well as being a contributor to raised operating costs. It’s suggested that taking water from the natural environment is cheaper than fixing leaks – until you take into account fierce criticism of environmental damage and of passing water-saving responsibility on to customers.

The inability to find a lasting solution to leakage contributes to the industry’s slow-moving and unresponsive image. This sits at odds with today’s empowered and more environmentally conscious consumers.

The future for utilities supply chains

For utilities companies considering supply chain partners, PR problems and emerging contenders mean a potential change in terms of whom you choose to work with. In particular, the industry’s changing landscape is driving the need for a faster-moving, more agile approach.

In previous years, there has been a lot of nervousness about disruption and talk of the ‘death spiral’ brought about by new market challenges. There are signs, though, that the industry is starting to see this as an opportunity. If a small start-up can gain a mass following by offering consumer choice, then why shouldn’t a large company?

For utilities supply chains, this shift in perception represents a chance to engage with the industry-wide discussion on how to modernise, especially in regard to new technology.

Technology is key to customer service

The industry is increasingly looking to technology to solve its supply chain challenges. To make bold promises and earn a reputation for keeping them, today’s providers have to be able to fulfil demand in a way that meets, if not exceeds, consumer expectations.

HomeServe is a great example of a company that has looked to integrate via technology, installing a one-stop contact solution with customer, service schedule and parts information together in one place to improve service.

As we’ve discussed in previous articles, there are also other ways to increase the efficiency of the chain by embracing technology, for example, smart vans stocked with the right tools for particular call-out jobs.

Disruptive behaviour

What unites Amazon, Uber and other ‘disruptors’ is the way in which they have shaken up existing marketplaces to give their customers something better. They’re also defined by their use of technology, especially internet and mobile connectivity. (Remember when managers were trying to decide if it was really worth investing in a website? That was when Amazon was starting to build its empire…)

To compete, the utilities industry needs to prioritise consumer desires and embrace the technology already reshaping other industries. Smaller, younger players are racing to the forefront because of their willingness to offer a utility cheaper, faster, easier or even ‘greener’. Supply chain directors need to be equally prepared for change, looking at technologies and processes that will make them more agile, efficient and customer-friendly.