Our Supply Chain organization is responsible for the sourcing and procurement of normal goods and services, materials management, fleet management and accounts payable for all of Xcel Energy’s utility operating companies. Suppliers play an important role in our ability to grow and operate effectively, and the money we spend through our supply chain adds to the overall prosperity of our communities and beyond. In 2013, we spent nearly $4 billion with suppliers on normal goods and services, and 53 percent of that spend went to local suppliers. Seventy-one percent of our approximately 6,600 suppliers are locally based.
2013 Supply Chain Spending
We do not set specific targets for local spending; however, much of our spending occurs naturally on the local level as we build relationships within our communities. In some circumstances, necessary materials and services cannot be obtained locally or it is not feasible to do. The table below depicts the local spend for the states we operate in:
|Total Local Spending||$2,088,914,779|
Among many other things, the Supply Chain organization is involved in negotiating contracts for everything from day-to-day business necessities (e.g., office supplies and furniture) to capital items used to construct, operate and maintain our generation and transmission assets (e.g., transmission poles and transformers); implementing vendor, supplier and contractor management strategies and policies; handling accounts payable; and implementing company-wide sourcing and procurement strategies to achieve cost savings.
We sort our annual supply chain spending into 30 categories with more than 800 sub-categories. This data is used to determine risk, opportunity and negotiation leverage with suppliers. (A list of the 30 categories is available in the GRI index.) We employ a systematic sourcing method to get needed materials and services to the right place at the right time for the right price. The five-step sourcing process used to select suppliers includes: preparation; request for information; request for proposal; contract evaluation and negotiation; and implementation. Four key business objectives--each associated with specific initiatives--drive our supply chain strategy:
- maximize investment yield
- achieve operational excellence
- manage risk and opportunities
- support community and environmental leadership
We have developed guidelines for bid analysis for all categories of spend. Within these guidelines, up to 20 percent of the bid analysis weight can be allocated to social and environmental factors such as safety performance, diversity and green performance.
Monitoring Suppliers and Managing Risk
We have a Supplier Qualification program that uses services from Dunn & Bradstreet to monitor all active suppliers for Office of Foreign Assets Control (OFAC), Excluded Parties List System (EPLS), OSHA and EPA violations, as well as criminal proceedings and disaster events. We assess suppliers’ financial health, safety and use of diverse subcontractors before contracting with them, and suppliers who will have access to confidential data from Xcel Energy must undergo a data security review. We also periodically conduct key risk assessments, looking at categories such as commodity price risk, contract quality and governance processes.
All contractors who provide services or materials at company sites are required to complete a contractor health and safety questionnaire and submit five years of safety-related performance data. Our contractor safety department reviews this data and may reject a contractor or require a safety improvement plan. We continue to monitor safety performance once a contract is implemented.
All contracts include a clause requiring suppliers to abide by equal employment opportunity and affirmative action mandates prohibiting discrimination on the basis of race, color, religion, sex, national origin, actual or perceived sexual orientation or gender identity of an individual, or physical or mental disability. Additionally, all suppliers are expected to comply with our Code of Conduct.
We classify our suppliers in four tiers based on a combination of overall supplier spend and criticality or risk to operations. Critical suppliers provide key materials and services required to support daily operations. We have identified 46 critical suppliers who are considered tier 1, independent of how much we spend annually with them. Tier 1 suppliers, including those who are critical to our operations, are part of our Supplier Relationship Management program. The program enables us to build longer-term contracts with these strategic suppliers and implement continuous improvement initiatives to benefit both the supplier and Xcel Energy in terms of costs and operations.
Suppliers are also tiered based on their total spend. See below:
|Tier||Annual Spending||No. of Suppliers||% of Annual Spend|
|Tier 1||More than $10 million||39||53%|
|Tier 2||Between $4-10 million||19||14%|
|Tier 3||Between $1-4 million||152||17%|
|Tier 4||Less than $1 million||6,771||16%|
We support suppliers in non-tier 1 spend classifications through collaborative initiatives and programs. For example, Xcel Energy is a founding member of the ITASCA-Project in the Twin Cities, which is dedicated to helping smaller local suppliers grow through procurement opportunities. The ITASCA-Project group is made up of chief supply chain personnel from large corporations, such as Xcel Energy, U.S. Bank, Target, United Health and General Mills, who meet monthly to discuss ideas for supporting the local economy by growing the capacity of small- and medium-sized businesses.
Supplier Diversity Program
Our corporate policies underscore our commitment to supplier diversity by recognizing that it is in our best interest to encourage a broad base of supplier relationships. Using diverse suppliers contributes to the economic growth and expansion of the communities we serve. Our policy is to offer these businesses the opportunity to compete in our procurement for products and services. We develop and strengthen business relationships with diverse suppliers by:
- Conducting outreach efforts to seek, identify and encourage supplier diversity in our procurement processes
- Facilitating alliances and partnering
- Educating businesses about our procurement and business processes
- Identifying and encouraging subcontracting (tier two) opportunities with major suppliers when direct participation is not possible
We are an active member of the Edison Electric Institute’s Supplier Diversity Best Practices Group, as well as the National Minority Supplier Development Council, the Women’s Business Enterprise National Council and most local chambers of commerce in our operating territories. In 2013, we spent $365 million with diverse suppliers, directly and indirectly.
|Dollars spent||% of total purchases|
Learn more about our supplier diversity program.