Sustainability is rapidly becoming one of the top priorities for supply chain executives globally. Glenn Hoskin, a leader at Maine Pointe, shares four ways how executives can achieve their renewable energy supply chain goals in a cost-effective and competitive manner.
1. Understand and digitize the end-to-end supply chain
The challenge traditional energy companies face is to quickly get up to speed with the legal, technical, manufacturing and supply chain deployment dynamics associated with the renewables ecosystem. With the clock ticking, some organizations are rushing into ad-hoc acquisitions without a clear understanding of the end-to-end supply chain and operation as whole.
The key is to understand the dynamics associated with renewable energy – including planning, due diligence, implementation, sustainable cost dynamics, and innovation. Digitizing and visualizing the whole is critical to knowing how to extract the maximum measurable value from the renewable energy ecosystem, given your investors are most probably demanding it.
2. A step-by-step pathway to success
This is critical given the complexities and geopolitical dynamics impacting the supply chain. For example, reliance on China is diminishing, with alternative sourcing from Malaysia, Vietnam, Thailand, and South Korea becoming more prevalent. As a result, companies need to gain insight to leverage and expand sourcing relationships with manufacturers in multiple geographical locations.
In addition, in North America growth rates vary considerably by state so having a clear understanding of installation partners with national or mega-regional presence and capability is critical to your path forward. Given the impact on the supply chain from recent global risk events, companies should also consider risk assessment initiatives such as the EPIC framework (economy, politics, infrastructure and competency) as part of the go-forward plan.
This can be used for regional and country level risk assessments in supply chain. However, companies cannot rely solely on EPIC; they need a comprehensive supplier-based supply chain risk management (SCRM) solution.
3. Avoid overpaying for assets
Having a clear understanding of the end-to-end renewables supply chain is the first step to avoiding overpaying for assets in a world where everybody is competing for the same limited interests. Without the appropriate planning and due diligence, companies risk rushing in and buying from the wrong firm with the wrong sustainable products from the wrong suppliers.
The key to avoiding this lies in effective operational due diligence alongside the timely use of data analytics and artificial intelligence in assessing target companies. Deploying a comprehensive set of pre- and post-acquisition due diligence and implementation approaches with renewables experts helps reduce risk while improving confidence, competitiveness, and time-to-value creation.
4. Ongoing cost and innovation sustainability
With the race on, it’s critical you keep your eye on the future from a cost, innovation, and sustainability perspective. For example, in the next five years nearly 100% of solar energy cells will be high efficiency (today that figure is only 50% PERC / PERL / PERT). This means R&D spend and funding, technology roadmaps, and investments are critical factors in supplier selection.
From a technology perspective the gap in manufacturing costs between countries has fallen considerably, and automation has reduced labor costs. This means you need to think of key aspects of the supply chain with the future in mind. For example, installed costs are expected to drop by another 25% to 30% over the next decade. The response? Ensure your new EPC supplier contracts are indexed and contain appropriate improvement metrics and goals.