Cost Insights
by PowerAdvocate

Intelligence for energy companies seeking a data-driven approach to cost management

Impact of Potential Labor Shortages on Costs for North American Utilities

June 17, 2021 at 12:27 PM / by PowerAdvocate posted in Industry Insights, Power & Utilities

President Biden’s proposed $2T investment plan could strain an already tight labor market servicing utilities. As demand for various construction services increase, North American utilities will need to accomplish the same or greater levels of work compared to the past, but with a more constrained supply base. As a result, utilities must think about the potential higher costs that result from labor shortages.

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Strategies for Offsetting Inflation in the Utility Industry

June 9, 2021 at 12:02 PM / by PowerAdvocate posted in Industry Insights, Power & Utilities

Across the top areas of spend in the North American utility industry, our models reveal that costs for utilities have increased dramatically in the last year, upwards of 16%, and are forecasted to climb around 3% in a single quarter by the end of Q2 2021.

In our most recent whitepaper, we examine how supply chain professionals can confidently rise to the challenge by demonstrating they can offset the impact of inflation on an ongoing basis. 

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North Sea Spend Market Report

June 9, 2021 at 11:54 AM / by PowerAdvocate posted in Industry Insights, Power & Utilities

Volatile markets can have an adverse effect on operators, especially when having to purchase products and services off contract. For example, with Equipment Maintenance Services 8% off contract on average and costs expected to rebound c.3% by April 2022, operators must be prepared to manage their spend effectively to mitigate market changes.

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The Impact of Biden's Infrastructure Bill on a Constrained Labor Market

May 27, 2021 at 4:14 PM / by PowerAdvocate posted in Industry Insights, Power & Utilities

The US construction sector is facing a confluence of supply chain disruptionscost increases, and worker shortages as the economic recovery from the pandemic acceleratesNow, President Biden’s proposed plan to invest $2T over 8 years in infrastructure could further boost demand for construction services, putting even more pressure on the limited labor supplies providing services to energy firms. 

PowerAdvocate’s analysis of the proposed investments in roads, bridges, power transmission networks, and other physical infrastructure shows that higher demand will impact some craft labor types more than others. As the chart shows, demand is expected to exceed supply for several key crafts in the first year of the plan, with heavy equipment operators and electrical power line installers seeing the severest shortagesBoth crafts saw minimal job losses in 2020 amid pandemic-related work stoppages and are currently near full capacity with few qualified workers remaining joblessMeanwhile, both will see significantly higher demand if the infrastructure bill passes CongressAt a national level, PowerAdvocate forecasts that construction sector employers could face a shortage of 27,000 heavy equipment operators, or nearly 7% of the currently employed labor force of 405,000. For electrical power line installers, we forecast a shortage of 21,000 workers, or 18% of the current labor force of 114,000.  

Labor shortages are a major risk for energy firms, impacting everything from costs, to safety, to project continuity. PowerAdvocate works with firms to quantify their exposure to these shortages and execute key supply chain strategies to mitigate the risk, including managing demand, improving supplier productivity, and enhancing volume commitments. 

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Accelerating Supplier Diversity Programs

October 20, 2020 at 4:23 PM / by PowerAdvocate posted in Power & Utilities

This year's economic, cultural, and health environment has elevated the industry's focus on supplier diversity initiatives. As an example, over 50% of the top 25 investor-owned utilities in the US referenced the topic in their Q2 earnings call, vs. just 20% in Q2 of last year. However, data and resource challenges can often hinder progress to stated diversity program goals.

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Soft Oilfield Service Prices: Implications for Supply Chains

December 24, 2019 at 5:42 PM / by Elcin Aktasosburg and Jordan Monahan posted in Industry Insights, Oil & Gas, Power & Utilities

Summary

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New Section 301 Tariffs: What Supply Chain Teams Should Know

August 28, 2019 at 1:18 PM / by Steven Eisen posted in Industry Insights, Oil & Gas, Power & Utilities

Summary

  • The US administration recently announced two new rounds of tariffs on $300 billion of imports from China at a rate of 10%, effective September 1 and December 15.
  • This is the fourth round of US tariffs on imports from China, which now covers over $500 billion of Chinese imports, covering nearly all remaining trade with China.
  • China has responded by cutting US imports and by threatening additional tariffs on US goods.
  • The new tariffs largely focus upon consumer products; however, the tariffs also cover numerous steel & aluminum products in both finished and intermediate states that may impact energy supply chain teams. However, the lists will not include products for which China maintains monopolistic market share, such as rare earth minerals and barite.
  • While trade negotiations between China and the US are expected to continue, should the talks fail to result in an agreement, the list 4 tariff rate is anticipated to increase to 25%, in line with lists 1 – 3.
  • Supply Chain teams should evaluate how exposed they are to key commodities such as steel and aluminum and be able to evaluate potential risks to cost structure.

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Section 301 Tariffs: US-China Trade War Worsens

June 6, 2019 at 9:51 AM / by Amrit Naresh posted in Industry Insights, Oil & Gas, Power & Utilities

Summary

  • The US raised tariffs on $200 billion of imports from China from 10% to 25% in early May. China responded with retaliatory tariffs on $60 billion of imports from the US, effective June 1.
  • This is the third round of US tariffs on imports from China, which now affect $250 billion of imports. The US has threatened a fourth round of tariffs on $300 billion of imports, or nearly all remaining trade with China.
  • The new tariffs cover 1,200 chemical and 500 metal products. They are also the first to include consumer products, which raises the prospect of accelerating price increases for US consumers. Neither List 3 nor List 4 includes rare earth minerals.
  • Trade negotiations between Beijing and Washington remain underway. Slowing economic growth in either country would add pressure to advance the negotiations, but supply chain teams must prepare for potential price risks.
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Utility Update: 5 Things to Watch in 2019

January 10, 2019 at 3:45 PM / by PowerAdvocate posted in Cost Reduction, Industry Insights, Power & Utilities

Utilities are in the thick of an industry transformation driven by technological and competitive forces. 2019 shows no signs of slowing down. We have highlighted 5 key trends to stay ahead of in the coming year, so utilities can continue to position themselves for success.

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[Whitepaper] How Segmenting Suppliers Can Help Predict Bidding Behavior

November 26, 2018 at 5:08 PM / by PowerAdvocate posted in Project Estimation, Power & Utilities

The variability of supplier responses to bid events can pose significant financial and operational risks to energy companies, especially as this behavior is prone to change when market and economic conditions shift. Variances in bid responses during the recent economic recession and recovery motivated PowerAdvocate to analyze the impact of macroeconomic factors on supplier bidding behavior. The aim of this analysis was to uncover trends that, when coupled with project and company-specific data, will enable industry leaders to better anticipate and mitigate project and supplier risk. If you missed our introduction of this analysis, you can read our previous blog about it here.

Our team hypothesized that suppliers who offer a diverse range of services, work across multiple industries, and service a wide geographic area respond to macroeconomic circumstances differently than smaller or more specialized suppliers. To measure these differences, and to better understand how a supplier’s profile influences their behavior, the team categorized bid data into two groups: bids from major suppliers and bids from specialized suppliers.

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