TVA's new deal: public/private B2B

Unified supply chain key to staying competitive

CHATTANOOGA, TENN. -- By law, the Tennessee Valley Authority can't sell the 165 billion kilowatt-hours of electricity it generates each year beyond a designated seven-state area. But competitors can come into those states and take business away from the government-owned company.

To fight back, the nation's largest wholesale producer of electricity is launching a bold new e-commerce strategy that combines private and public business-to-business marketplaces with a unified supply chain asset-management system that was installed in a multiyear project.

The Knoxville, Tenn.-based TVA plans to use a private marketplace that went live in June to service the 158 local power companies that distribute its electricity, while pushing internal procurement activities and purchases made on behalf of the distributors through a public exchange that it joined late last month.

The backbone of the plan is the reworked supply chain system, and the stakes are high. "We have to find every efficiency in our business in order to stay alive," said Diane Bunch, senior vice president of information services. "We can't [just] try e-commerce. We have to make it work."

According to Gary Ownsby, the TVA's e-commerce procurement project manager, the installation of Atlanta-based Indus International Inc.'s PassPort software has given the authority a common set of supply chain processes. The installation was completed last month, giving every TVA facility a view of product inventories throughout the company.

PassPort also lets the TVA "punch out" information from its back-office system to a business-to-business marketplace using XML protocols and a real-time Web interface, said Ownsby. Once a purchase order is executed in the marketplace, the data is routed back to the TVA system.

About the TVA
Established by Congress in 1933 to provide flood control, safe navigation and electric power along the Tennessee River.
Operates 11 fossil-fuel plants, five nuclear reactors, 29 hydroelectric plants and combustion turbine plants.
Provides electricity to 158 local power companies and 62 large industrial customers in an 80,000-square-mile area
When Pantellos Group Ltd., the TVA's chosen public exchange, upgrades its MarketSite software from Pleasanton, Calif.-based Commerce One Inc. next month, Ownsby added, the electricity generator will be able to directly send data between that marketplace and its private one. That could be used for things such as comparing buy and sell prices on the two exchanges, he said.

Ultimately, the TVA plans to receive orders for poles, transformers and wiring from power distributors through its private marketplace and then fulfill the orders using the accrued buying power that The Woodlands, Texas-based Pantellos is expected to provide.

In a project related to the PassPort one, the Unix-based supply chain system has been tied to a work management system based on Oracle Corp.'s applications using MQSeries messaging middleware from IBM.

"When we get a work order at one of our plants, [the Indus software] will check our inventory companywide to see if we have the right materials," Bunch said. "And if we don't, it will then punch out [a purchase order] to the marketplace."

Thus far, very few companies have managed to figure out a role for both public and private online exchanges, let alone make them work in harmony, said Dean Nelson, a consultant at Deloitte & Touche LLP in Wilton, Conn. The TVA "is definitely one of the first to put that kind of architecture together," Nelson said. And like the TVA officials, he noted that supply chain improvements are key to such projects.

Elcom Inc. in Norwood, Mass., designed the TVA's private marketplace using its Pecos software and is hosting the exchange. The only applications distributors need to use the marketplace are an Excel spreadsheet and a Web browser, Ownsby said.

The TVA didn't customize PassPort or Pecos in any way, he added. "That runs the cost of the software up, as well as the cost of revisions. When we went shopping, we decided it had to work out of the box."

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