According to the American Gas Association, natural gas supplies nearly one-quarter of all of the energy used in the United States. And with the growth of natural gas shale plays in areas such as Pennsylvania, that number is expected to rise. According to the U.S. Department of Energy, natural gas use will increase 20 percent overall by 2030.
“We continue to grow and benefit from strong consumer demand for natural gas,” explains John Sutphin, Piedmont Natural Gas director of finance. “We are fortunate to operate in a very strong service territory and have seen continued growth in our residential and commercial markets. Over the last several years we’ve also seen more activity and growth in the industrial markets we serve and significant growth in our power generation markets – and by that I mean the delivery of natural gas to power plants for their use in generating electricity. This growth is an indication of the value that our customers and our markets continue to place on the benefits of clean burning natural gas and its ability to meet their needs.”
Piedmont Natural Gas is a natural gas provider for residential and business customers in North Carolina, South Carolina and Tennessee. It owns and maintains more than 22,000 miles of distribution pipeline and approximately 2,800 miles of transmission pipelines. The company, headquartered in Charlotte, also operates 21 resource centers over those three states and serves more than 1 million customers, with the residential sector comprising its largest customer base. However, with growing natural gas supplies as a result of increased production from shale gas resources, natural gas prices have fallen sharply in recent years, causing more commercial and industrial customers to now consider and choose natural gas. Overall, the company grew 1.3 percent last year, adding slightly more than 13,000 new customers.
The growth in customers has spurred a number of upfront capital investments that equate to long-term savings in costs and labor for the company. Many of those investments have affected Piedmont’s supply chain.
Demanding More from Supply
“About three years ago, we did business very differently,” Sutphin says. “We did a lot more bidding, and procurement was distributed between many vendors. Today, we have consolidated more of our relationships with key partners and that, along with a focus on technology has been core to our strategy.”
Piedmont Natural Gas formed an agreement with MRC, the largest distributor of pipes, valves and fittings – integral supplies to Piedmont’s core business. The exclusive contract to use MRC as its integrated pipe, valve and fittings supplier resulted in a value-added relationship that Piedmont has been able to leverage for better pricing and efficiency.
Manager of Supply Chain Anthony Capece explains, “It gives us more leverage in the market because as a local distributor, we would be a small player going to manufacturers directly. But MRC, as a distributor, is a large customer to many of these manufacturers. So by buying through them, we are able to leverage our spend and get better pricing.”
As a distributor, MRC’s business is in building relationships with manufacturers around the world to offer a wide depth and breadth of quality products. “They have a robust quality department,” Capece says. “They have a team of inspectors that travel around the world and inspect plants and perform audits. They also do some in-bound inspection of products they purchase and it’s very beneficial to us and gives us a level of confidence.”
The relationship with MRC has also led to a number of value-added services. Previously, Piedmont Natural Gas handled the distribution of these supplies in-house. Sending out its fleet of trucks each day to pick up and deliver supplies and employing a large staff to handle inventory was very laborious and not directly focused on the company’s core competency, Sutphin says. Today, the company operates unmanned depots where employees get the supplies they need and an MRC employee refills the depot and bills Piedmont Natural Gas for purchased items.
“We want to use all of our resources more efficiently and maintain our focus as an organization on our core business – the safe and reliable delivery of natural gas to our customers,” Sutphin says. “Our core business is not counting and distributing supplies and parts. Those are activities that we could very easily have someone else do that knows that area better than us.”
The significant changes made to its supply chain division aren’t exclusive to process. It’s affected technology, as well. Piedmont Natural Gas replaced its 1980s, paper-heavy procurement technology with an e-procurement system by Verian Technologies.
Sutphin says going electronic and having data readily available has created greater speed and accountability in Piedmont’s supply chain, allowing the company to make better and faster decisions to improve its operations and meet regulatory standards. “We are a publicly traded utility so audit transparency is important, which it should be,” Sutphin says. “So the improvements we’ve made help us in that area. A big focus is making sure that our procedures are well-established and in-place and out there for everyone to see.”