wind energy
Partnering for Accelerated Growth Developing a strong supply chain By Juan Marin & Matthew Turnbull
We are experiencing a difficult eco-
nomic environment, and many manufacturers in the wind sector are evaluating long-term partnerships to position their businesses for short-term profitability and longer-term share growth. The ability to properly assess strategic partnerships and, ultimately, select preferred suppliers is critical for ongoing competitiveness and profitable growth. Strategic sourcing teams for turbine, tower, blade, and nacelle manufacturers are being challenged to contribute to the global growth of their companies. A need to develop a strong supply chain among diverse operations is becoming an important consideration in terms of market entry acceleration, competitive positioning, and long-term viability. Highlighted are a few key elements strategic suppliers should embrace when considering a partner for a supply chain. Every single component or service is reflected in the end product, the brand, the market position and, ultimately, in a customer’s perception. When evaluating
strategic partnerships, it is important to evaluate all of the company’s requirements, so as to establish a lasting relationship, to achieve competitiveness, and profitable growth. Global. With an interest in pursuing new markets and accelerating the efficiency of new operations, a global scale is increasingly important. Today’s requirement for the expansion of renewable energy, and the rapid expansion of new markets, demands a truly global partner that can help accelerate entry into these markets, while seamlessly integrating existing operations and associated business practices. Wind industry expertise. Partnering with a supplier that has industry expertise is of great importance. Considerations for existing suppliers, as well as for pending supplier qualifications, include: benefitting from those suppliers that can offer the best practices to accelerate localization, optimize
transportation and logistics costs, and reduce supplier and component qualification cycles. A good supplier proposes key benefits for an operation—this is a live process, one that continually seeks better ways and alternatives to improve operations. In short, identify and partner with suppliers that understand the wind sector, can aid with localization efforts, and transfer practices that positively impact operations. Healthy balance sheet. It is important to consider the financial condition of all critical or “tier 1” supplier relationships. Far too often, manufacturers are forced to terminate supply agreements due to under-capitalized manufacturers supplying critical path components, lacking the resource or capacity to scale, or meet the dynamic needs of turbine, tower, and blade manufacturers. Establishing long-term relationships, while ensuring key suppliers are well managed, have proven track records, and can support a company’s goals are important considerations. There are many operating risks in managing today’s global supply chain, and companies would be wise to eliminate or reduce as much credit and capitalization risk, particularly in the volatile financial markets we have now. Stable material supply. Original Equipment Manufacturers (OEMs) should focus on securing critical path components. Whether pursu-
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ing a vertically integrated strategy or securing critical components via an out-source model, resources should be focused on critical component supply. Supplier rationalization, which is common in many other industries, is becoming more important in the wind sector. Global sourcing and localization is essential to assure competitive pricing and the right mix in a product portfolio. Finding the balance to ensure resources are allocated strategically, while maintaining consistent quality and proper inventory positions of critical and noncritical parts that support manufacturing and project implementation, is becoming increasingly significant. Robust quality system. One of the most important decisions is material quality. Ensuring quality control and consistency in manufacturing routines is critical to ensure delivery of quality components. Eliminating any variation in results is key, so components or materials will perform as designed for the expected life of the turbine, significantly reducing field failure, and downstream costs associated with remediation. Increasing the importance of quality evaluation in the supplier selection criteria involves a delicate balance between localization requirements, resource constraints, and logistics constraints as OEMs expand into new markets. A prospective supplier’s quality infrastructure is an important consideration, one that with due diligence should evoke confidence that the product or service is meeting overall quality requirements. Working capital. Cash flow is a hot topic, particularly given the global financial crisis, and the impact on project and delivery delays. The ability to rapidly adjust to production and project schedule changes is vital. Equally important as the ability to react to demand changes is a capacity for global inventory re-balancing. Partners should improve working capital and accommodate changing global business conditions, while providing a significant operating and financial impact. Business practices. Integrity and ethical business practices are the foundation for sustainable business relationships. The aforementioned elements are all significant; however, ensuring your supplier selection closely evaluates general business practices and fosters a culture of openness will cement a lasting and mutually beneficial business relationship. Gexpro | www.gexpro.com
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