Employment Strategy
Progress Energy uses a chase strategy for tasks such as line
repair and emergency service,
which fluctuate greatly based on seasons and
weather. They outsource most of their
work to contractors who already have the necessary training and
experience. This avoids the costs of
hiring and firing and it also avoids the kind of morale problems associated
with high employee turnover.
For more stable jobs that require a high degree of training,
such as management and plant operations, the company has employs a more level
strategy with no backorders allowed.
This is fairly easy to do, since the power plants are highly mechanized
and automated. It takes roughly the
same amount of workers to operate a plant at full
capacity as it does to
operate the same plant at half capacity.
Generation Mix
The two major utilities owned by PE serve 2.9 million
customers (that’s 9 million people, because families and businesses are counted
as single customers) in the areas of Florida and the Carolinas shown on the map
in Appendix A. The map also illustrates
how PE plants generate electricity using a variety of resources. In recent years, a higher proportion of the
oil and gas plants’ production capacities has been left idle because of high
fuel prices.
The government regulates end-use electricity prices, so PE’s
cost structure is quite sensitive to fuel input prices. The effect of input prices and holding costs
can be seen in the inventory management for different types of plants. Consider coal, hydro, and nuclear
plants. Coal is relatively cheap to
store in inventory, and its ordering costs drop significantly when it is
shipped in by train as opposed to truck.
Therefore, it is purchased in large quantities whose batch order sizes
are determined by freight train capacity.
Hydroelectric plants have the cheapest holding costs of all, since their
inventory is the reservoir lake. The only
major costs of storage are the huge capital investment to build the dam, and
then small maintenance expenditures thereafter. Nuclear plants have the most
hazardous and expensive inventory, and there is very little economy of scale
involved in the purchasing of uranium.
Thus they use small order sizes and keep a small inventory level in
order to hold down holding costs.