1. Supplier Selection – Nuon Energy
Shilen Patel, Tyler Shrubb, Amitkumar Shah

2. Nuon Energy Dutch-based utility company
One of the top 3 suppliers of energy in the Netherlands with 2 million customers
Approx employees
€3.124bn net sales in 2014

3. SWOT Analysis Growth in renewable energy Association with Vattenfall
Electricity and fuel price risk
Currency fluctuations
Competition with other energy suppliers (E.ON, Centrica)
Geographic concentration of revenues
High lost time injury frequency rate
Robust asset base
Balanced fuel mix
Strengths
Weaknesses
Opportunities
Threats
MarketLine, 2015

4. Nuon’s Responses to SWOT
Customer retention by offering “It Pays to Stay” scheme. 10% off their electricity bill and a further 5% off each year afterwards up to 25% as long as the customer remains with Nuon
Heavily investing in renewable energy sources. Invested EUR 73 million in wind power in 2014

5. Nuon’s Supply Planning
positioning
Supplier
preferences
Risk
management
Current market position
Procurement
marketing
Reverse
marketing
Supplier Development
programme
Optimising
the Supply
Base
Ideal market position
Steele and Court (1996 p. 32)
Kirlkaldy, A., ES4C9 Lecture 7 7

6. Kraljic’s Supply Positioning
Low
High
Supply risk
Leverage items
Alternative sources of supply available
Substitution possible
Bottleneck items
Monopolistic market
Large entry barriers
Routine items
Large product variety
High logistics complexity
Labour intensive
Strategic items
Critical for product’s cost price
Dependence on supplier
Competitive bidding
System contracting +
E-commerce solutions
Performance based partnership
Secure supply +
search for alternatives
Supply’s impact on financial results
Kirlkaldy, A., ES4C9 Lecture 7

7. Nuon’s Supply Planning
positioning
Supplier
preferences
Risk
management
Current market position
Procurement
marketing
Reverse
marketing
Supplier Development
programme
Optimising
the Supply
Base
Ideal market position
Steele and Court (1996 p. 32)
Kirlkaldy, A., ES4C9 Lecture 7 7

8. Optimising the supply base
In 2011, Nuon had 12,000 suppliers with a total spend of €1bn
Firstly Nuon assigned ownership of supplier list to gain more control
Over the following 3 years, reduced supplier list by two thirds
Reduced IT consultant contracts from 200 to 16
Removed suppliers from the list used for general expenses such as books and sundries and moved to credit card purchases

9. Suggested Improvements The outsourcing decision matrix
Potential value to the organisation
Low High
Partnership outsourcing approach
Core activity.
Do not outsource!
10% of suppliers providing 90% of spend
Transactional outsourcing
90% of nuisance suppliers providing 10% of spend (non-core activities)
Decision based on financial considerations
Low High
Organisational Expertise
Vitasek (2010)
Nuon can take an inside-out approach to strategic outsourcing
Kirlkaldy, A., ES4C9 Lecture 6

10. Thank you for listening Any questions?