A Critical Analysis of Centrica Companys Supply Chain Strategy

Introduction

In contemporary years, an understanding of the role of supply chain as a source of competitive advantage has inspired organisations to pursue goals of attaining both operational excellence and value advantage. Customer responsiveness has ascended as a major differentiator in markets. Besides, globalisation has resulted into many organisations experiencing market pressure demanding major rethinking on the manner in which business is done concerning supply chains. Beske and Seuring (2014) present supply chain as a system whose element parts encompasses material suppliers, distribution services, production services, and customers integrated through a continuous flow of material and feedback flow of information, essential for business dissertation help. A presentation by Beske and Seuring (2014) focuses on the link between corporations and the flow of information and material between them. Supply chains are characterised by complex interactions between product manufacturers and end-consumers who are the market representatives. The emphasis of supply chain strategic management is on the consumers of the product, integration of systems, inventory and policies within the supply chain domain and therefore invoking a synergy where all companies attain prosperity and competitive advantage (Mackelprang et al., 2018). Whereas this task intends to inculcate the prospects of supply chain strategy, it seeks to refer to the Centrica Company, which is an energy-sectored company in the UK. In this regard, a critical examination of Centrica’s supply chain strategy over the past five years is sought from existing literature, plus the major environmental challenges the company has faced within the supply chain spectrum in the last five years and how the company has gone about these challenges. Consequently the work will examine whether the applied strategies for combating environmental impacts are viable sustainably.

Introduction to Centrica Company

Centrica is an international energy services and solution company headquartered in Windsor, Berkshire in the UK (Paroutis, 2016). The company mainly deals with the supply or gas and electricity to consumers and business at home, in North America and Ireland. It is one of the largest suppliers of gas to local customers, and one of the biggest suppliers of electricity operating under the trading names British Gas in the UK and Scottish Gas in Scotland. Centrica also provides services such as plumping.

In the year 2015, Centrica Company reviewed her strategy following in-depth analyses of market sources, new sources of growth, and abilities and efficiency crucial for increased profits. The company then resolved to deliver in accordance to the dynamic need of her customers, deliver a long-term shareholder value via growth and returns, to be a trustworthy business partner, to be an employer of choice and to be the 21st century energy and service corporation (Paroutis, 2016). Most importantly, Centrica identified five key areas to focus in the following five years namely; customer-related growth, organisational effectiveness, operational costs efficiency, maintaining capital discipline and balance sheet strength and securing an excellent base for 2020 and beyond. The following table compares the long-term strategies (2016 to 2020) and long-term strategies (beyond 2020);

The energy sector under which Centrica Company falls under is central in contemporary society and economy. Since gas is a product of crude oil, a non-renewable source, and a potential environmental pollutant. Brindley (2017) suggests this domain is highly interwoven with sustainability. In this view, the company has striven to remain within the bounds of sustainability in the last five years following the review of her business strategy. Sustainable supply chain management articulates the systematic incorporation of key business practices enabling Centrica and her supply chain to meet environmental, economic and social objectives. As a result, Centrica as a sensitive entity in implementing a sustainable supply chain strategy to keep on controlling large market share (Paroutis, 2016).

A Supply Chain Strategy for Centrica Company of the last Five Years

Centrica Company conceives supply chain strategy as a platform for selling its high standards in the market. As a global energy and service firm, Centrica spend billions of pounds with thousands of suppliers annually (Ralston et al., 2015). This expenditure seek to procure necessary goods, keep customers satisfied by availing them required energy goods and services, and procure equipment for sourcing energy abroad. The company harnesses her purchasing power to integrate high ethical, social and environmental standards across her supply chain. To actualise this, the company applies responsible business clauses in supplier contracts, carry out site inspections, conduct online supplier assessments and induce forums for best practice.

Centrica Company works in conjunction with independent sustainability professionals (EcoVadis) to evaluate strategic and risky suppliers to establish sustainability risks in the company’s supplier chain such as corruption, human rights abuses and bribery. In the year 2016, Centrica assessed seventy three suppliers leading to the realisation of a sustainability risk score of 57 which is a low risk. This implies that majority of Centrica’s suppliers are extracted from lower risk regions such as the Europe, UK and North America. The 57 score was an improvement from the previous year (2015) in which the company scored 54.

Upon a conceptualisation that suppliers are perceived having medium or high risk, the company seek to work with the suppliers to lay corrective action plan and strategy. In 2016, 12% of the company suppliers were identified as medium risk, and the company ventured into working with them to elevate standards. When the situation deteriorate further even with these close collaborations, Centrica Company terminates the relationship with them. Where necessary, high risk suppliers deemed may undergo a site inspection to determine how they conduct business. In 2016, the company carried out two pilot site analyses which encompass a uniform manufacturer in Vietnam. In 2017, the company inspected 15 suppliers (Hamouz et al., 2018).

In 2016, Centrica partnered with the Supply Chain Sustainability School, which offered splendid opportunity for the company’s supplier’s access diverse knowledge on online resources and workshops which can enhance suppliers’ skills and action on sound business processes. Over the last five years, Centrica has partnered with more than fifty companies, creating new resources and implanting best processes which can tap and manage emerging issues for instance modern slavery.

Copacino (2019) writes the supply chain for petroleum industry is complex relative to other industries. Further, the scholar suggests the supply chain of a petroleum industry can be subdivided into two major segments namely the downstream and upstream supply chains. Whereas the upstream chain revolves around acquiring crude oil a speciality of the oil corporation; the downstream supply chain revolves around exploring, forecasting, and processing and logistics management in transporting crude oil derivatives to consumers. Both upstream and downstream supply chains are characterised by opportunities and challenges. Such challenges include logistical challenges such as long durations in transporting crude oil, production capabilities of crude oil suppliers, and limitations in transportation channels. To address transportation challenges, Centrica has invested in the application of modern technologies. To counter unforeseen delays caused by transport logistics, Centrica has resolved this through buffer stocks. Effective warehouse management has enabled Centrica to have raw materials delivered and create a time buffer concerning delivery to make sure everything runs well. This has triggered continuous production which consequently triggers trust with employees through constant suppliers, and customer retention.

Christopher (2016) argues corporations have come to the realisation that logistics services and expertise are fundamental components in granting sustainable solutions. The developments towards logistics as a precursor of sustainability for Centrica arise from the suppliers rethinking offers, and from the company’s ability to readjust her logistics practices. A craving towards sustainability brings forth increased cooperation amongst the company’s supply chain proponents, as they have to conform and comply with rigorous standards.

Fredendall and Hill (2016) maintain that consumers constitute great power in enforcing change through their purchasing decisions. However, the consumers will equally demand for transparency, more so when paying a premium for sustainable development solutions, leading them to ask for a concrete carbon accounting, management and control systems, and standardised carbon IV oxide labelling. This transparency is offered for green products, and has triggered Centrica to extend her inclination to green energy solution. As a result of this, Centrica has championed for international standards offering transparency concerning carbon IV oxide release. Over the last five years, Centrica Company has been inspired to implement viable standards for carbon IV oxide accounting and reporting in the entire supply chain.

To contribute into the basketry of resource conservation, Pigott (2014) writes Centrica ventured into the product stewardship strategy, which by extension has created a differentiation advantage for the company. Product stewardship entails an environmental management strategy implying that whoever designs, sells, produces o uses a product remains responsible in minimizing the product’s environmental effect entirely in all phases of the product lifecycle. Over the last five years, product stewardship is becoming pervasive in Centrica as a conservation strategy yet within the supply chain.

A Critical Evaluation of Key Environmental Challenges Affecting Centrica and Resolutions over the Last Three Years

The prospects of climate change and its multiplier effects have posed a major crisis in the world today (Giannakis and Papadopoulos, 2016). Centrica is one of the biggest energy companies in Europe. This implies that the company controls a lot of energy reserves which are non-renewable (crude) in nature. The excavation and refinery of crude oil into gas and other derivatives is subject to posing environmental impacts potentially contributing to climate change. Besides, the aspect of transporting crude oil by typical means contributes into carbon emissions. Centrica Company is therefore plunged into a series of environmental sustainability issues, despite the relentless efforts to mitigate such impacts.

In addition, energy has continued to play a crucial role in the lives of millions of people, businesses and families, from keeping our homes warm to lighting. Even as these needs keep on increasing, the environmental impacts also these demands come along with increase on equal measures. Such impacts include energy reserves depletion, increased global warming, and degeneration of environmental quality as a result of waste generation and emission from refineries.

Centrica is committed to fostering competitive and reliable energy supplies to her customers’ needs in an environmentally conscious way. This is demonstrated by the company’s new vision that was promulgated in 2015, which conceived Centrica as a leading integrated energy company with customers at its epicentre. To achieve this vision, the company has employed more than 37, 500 employees working hard within its supply chain value from sourcing, generating, servicing to supplying energy to the end consumers. The company’s downstream supply chain provides customers with great choice and control over their energy through creative innovations that results into low carbon products and services offered by British Gas in the UK, Bord Gas Energy in Ireland ,and Direct Energy in North America (Wieland and Wallenburg, 2017). Based on the company’s international upstream supply chain, Centrica reacts to market needs circumstances by offering a balanced mix of oil and gas production, power generation and energy trading. The company has globalised her operations to countries such as Trinidad, Canada and Tobago amongst other European and North America countries. Even as the concept of globalising is at the heart if Centrica, it is doing so with a commitment to minimise carbon emission along the supply chain. The company’s direct emission under scope one encompasses emissions resulting from sources they have ownership such as gas production, power generation, gas storage; as well as emissions coming as a result of the company’s property, travel and fleet.

Indirect emission under scope two emanates from electricity purchased and utilised in the company’s premises. The third scope of emissions constitutes those the company does not produce but yet is associated with the company’s products and services such as gas and electricity sold to customers from wholesale market and products and services procured to run the company’s processes. It is the third scope emissions arising from consumers’ gas and electricity consumption which form the largest source of emissions linked with the company, which form a major reason why Centrica is concentrating on assisting customers lower their use through the company’s creatively-innovated products and services (Wieland and Wallenburg, 2017).

To reduce the environmental impacts posed by supply chain processes, the company is transforming the manner in which energy is generated and used. The focus is on suppressing climate change which according to the company must be at articulated from energy consumption patterns, to ensure the concept of intra-generational and extra-generational equities are actualised for the good of present and future generations (Sweeney, 2016). As a response to climate change, Centrica’s downstream business strategic supply chain is enabling homes and business have access to technologies and tools essential in cutting short energy consumption patterns. The company is continuously developing her abilities to deliver energy-effective measures, while empowering customers to mitigate carbon footprints through micro-generation products (Benjamin, 2016). Besides, Centrica is investing in energy-saving technologies for their customers to help them acquire useful insights on how to consume energy on a smart fashion through remote control devices such as Hive Active Heating and smart-activated offerings such as time-of-use tariffs all which potentially provide important know-how in energy management. These products not only equip consumers’ ability to suppress carbon footprint effect but also enable them save on costs incurred on energy bills. As the UK’s biggest energy, installation and services provide, the British Gas is working tirelessly to lead the UK and the world in sustainable energy future through the development of engineering skills necessary in installation and servicing new innovations (Lummus, Vokurka, and Alber, 2015).

Over the last five years, gas has remains at the core of Centrica’s energy strategy. The company is supported by the on-going quests for renewable and renewable generation. Since gas is one of the lowest carbon fossil fuel, it offers a fundamental back-up to renewable sources. Besides, Centrica is working towards making gas more affordable day by day. The company is also working towards lowering emissions linked with her fleet, offices, and business travel.

The company equally takes cognizance the pivotal role it can play in the realm of climate change mitigation in the realm of supply chains. To actualise the mitigation quest, Centrica works collaboratively with partners in raising and instilling high environmental standards in its supply chain through her responsible procurement programme (Monczka et al., 2015). The company also resolved in 2015 to engage communities through sound educational programmes which will contribute greatly to sensitising the public about the major environmental crises on the world, and ways of mitigating, preventing or stopping them. This will equally foster sustainable development principles, requiring the present generation to inherit a safe planet to future generations.

Is Centrica’s Supply Chain Strategy Sustainable?

The supply chain strategies employed by Centrica are not only effective towards the attainment of competitive advantage but also towards ensuring environmental constraints are granted attention for the sake of sustainable development and sustainability (Qrunfleh and Tarafdar, 2014). The three Ts (time, transparency and trust) model of efficient supply chains grants a simple but yet comprehensive framework which Centrica has harnesses in the construction of her supply chains (Gattorna and Jones, 2018). The three Ts are interwoven and interdependent. In-depth understanding of time dimension has enabled the Centrica to attain transparency of that which is happening around the supply chain, and when everyone develops this awareness, trust is conceived between all players (internal and external stakeholders). Consequently, a greater understanding to the time parameter gives birth to higher levels of transparency which in turn brings forth elevated levels of trust.

Centrica Company works in conjunction with independent sustainability professionals such as EcoVadis to evaluate strategic and risky suppliers to establish sustainability risks in the company’s supplier chain such as corruption, human rights abuses and bribery. This is one of the most responsive strategies for ensuring sensitive aspects related to environmental compliance is granted prevalence in supply chain policies. Such partnerships also contribute to a holistic approach to elevating confidence and trust upon the market customers, forming a basis retaining them.

The prospect of product stewardship strategy which Centrica has embraced in the last five years has inspired accountability on the part of product users to take part in safeguarding the prospects of quality and conservation. As opposed to medieval days where quality and conservation were isolated to be pursued by a few entities, product stewardship strategy reverses this trend. The aspect of environmental conservation is a matter of the general public, right from the outsourcing stakeholders to the final consumers, and therefore everyone involved should take part in ensuring the personal and environmental safeties are actualised accordingly (Hult, Ketchen and Slater, 2014).

Moreover, Centrica’s investment on renewables and gas as smart energy sources will contribute towards reduced emissions which will in turn suppress climate change and breathe a life t environmental quality. Innovating smart meters will also contribute to lower energy consumptions. Centrica Company is one of the companies who have owned a duty to compress the impact their business ventures bring forth along the supply chain pathways. A critical evaluation of the company’s activities will conclude the company’s commitment to provide impeccable energy efficient services, but also suppressing emissions and environmental degradation along the supply chain path. It is out of this conception the company has attracted the attention of her consumers through transparency of the company’s operations which in turn has implanted a robust source of competitive advantage against the more than seventy competitors in the market (Meindl, 2016).

With climate change as a major threat to the planet today, Centrica’s strategic plan is to help customers reduce emissions by over 25% through direct and indirect action. The company is also committed to multi-environmental agreement agencies such as the Paris Agreement, in her vision to zero emission by 2050.

Conclusion

In conclusion, a comprehensive supply chain strategy tends to integrate strategy, implementation and management to facilitate harmony between demand and supply by addressing weaknesses inhibiting business developing and by laying initiatives addressing consumers’ needs in various levels of supply chain efficiency, responsiveness, complexity and flexibility. As discussed above, Centrica Company, a leading energy and services company in UK’s strategic supply chain is also a source of its competitive advantage. This comes from the company’s transparent supply chain processes which invokes trust with the market consumers. Despite operating in a docket with potential environmental impact, Centrica has continually embraced efforts to foster sustainability within and without her supply chain. These efforts have attracted attention of her consumers, which increases likelihood of customers’ retention, consequently triggering larger market control.

References

Benjamin, L., 2016. The Responsibilities of Carbon Major Companies: Are They (and Is the Law) Doing Enough? Transnational Environmental Law, 5(2), pp.353-378.

Beske, P. and Seuring, S., 2014. Putting sustainability into supply chain management. Supply Chain Management: an international journal, 19(3), pp.322-331.

Brindley, C., 2017. Supply chain risk. Routledge.

Christopher, M., 2016. Logistics & supply chain management. Pearson UK.

Copacino, W.C., 2019. Supply chain management: The basics and beyond. Routledge.

Fredendall, L.D. and Hill, E., 2016. Basics of supply chain management. CRC Press.

Gattorna, J. and Jones, T. eds., 2018. Strategic supply chain alignment: best practice in supply chain management. Gower Publishing, Ltd.

Giannakis, M. and Papadopoulos, T., 2016. Supply chain sustainability: A risk management approach. International Journal of Production Economics, 171, pp.455-470.

Hamouz, M., Coppin, B.K., Barr, G., Chapman, C., Hargreaves, J.E. and Palmer, D.J., Centrica Hive Ltd, 2018. Method and system to provide feedback for energy saving to a user of a property comprising a plurality of appliances. U.S. Patent 10,083,491.

Hult, G.T.M., Ketchen Jr, D.J. and Slater, S.F., 2014. Information processing, knowledge development, and strategic supply chain performance. Academy of management journal, 47(2), pp.241-253.

Lummus, R.R., Vokurka, R.J. and Alber, K.L., 2015. Strategic supply chain planning. Production and inventory management Journal, 39(3), p.49.

Mackelprang, A.W., Robinson, J.L., Bernardes, E. and Webb, G.S., 2018. The relationship between strategic supply chain integration and performance: a meta‐analytic evaluation and implications for supply chain management research. Journal of Business Logistics, 35(1), pp.71-96.

Meindl, S.C.P., 2016. Supply Chain Management--Strategy, Planning and Operation. Tsinghua University Press. Wheat soybean others land for no use.

Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.

Paroutis, S., 2016. Centrica: Strategizing in a multi-utility. SAGE Publications Ltd.

Pigott, M., 2014. Keeping Britain's lights on. Construction Journal, p.13.

Qrunfleh, S. and Tarafdar, M., 2014. Supply chain information systems strategy: Impacts on supply chain performance and firm performance. International Journal of Production Economics, 147, pp.340-350.

Ralston, P.M., Blackhurst, J., Cantor, D.E. and Crum, M.R., 2015. A structure–conduct–performance perspective of how strategic supply chain integration affects firm performance. Journal of Supply Chain Management, 51(2), pp.47-64.

Sweeney, S., 2016, January. Corbyn’s Class Act Is a Climate Game Changer. In New Labor Forum (Vol. 25, No. 1, pp. 95-99). Sage CA: Los Angeles, CA: SAGE Publications.

Wieland, A. and Wallenburg, C., 2017. Dealing with supply chain risks: Linking risk management practices and strategies to performance. International Journal of Physical Distribution & Logistics Management, 42(10), pp.887-905.

Take a deeper dive into A Comprehensive Study on Group and Team Differences with our additional resources.