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Case Study - Redesigning a Utility's Distribution Network
Forward-thinking utilities began early to prepare for the industry upheaval brought about by deregulation. The introduction of competition would bring market pressures on revenues and drive a widespread effort to streamline operations and cut costs. The client had to rethink its approach to inventorying and distributing parts and supplies used in both new construction and system maintenance.

Approach
We used phone interviews to benchmark the logistics strategies of utilities in other areas of the country. Our discussions focused on network structure, number of distribution centers (DCs), frequency of deliveries to the field, use of field-direct vendor shipping and vendor-managed inventories, warehouse and materials management information systems, bar-coding and material handling equipment, inventory levels, and staffing. We found that compared to its peers, our client had lower inventory turns, and a larger number of facilities to customers served. Our recommendation was a sweeping change in approach, hinged on the implementation of a central DC, but enabled by the creation of a new planning function.

Value Added
About a year and a half following the completion of our study, we attended the grand opening of the new central DC, a slick operation incorporating a sophisticated warehouse management system, bar coding, and man-aboard order pickers. One of the best moments a consultant can have came when the project sponsor listed us first in his list of people to thank for helping to create the new organization and its forward vision. Inventories are now down more than 15 percent, and further detailed peer-to-peer benchmarking and development of the strategy by the client has continued to support the direction set more than two years ago.
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