To be a successful company, we have to work as a team; stay focused on doing the right things; be thoughtful about how we manage human, financial and natural capital; and constantly communicate. 2013 was an excellent year for AEP in many ways — we delivered on our growth strategy, our safety and environmental performance was among the best in our history, and we delivered value to our customers and shareholders. This didn’t just happen; our employees made it happen.
In 2013, we asked our employees to help us identify sustainable savings and new revenues. They came up with hundreds of ideas to be more efficient, operate more cost-effectively and identify process improvements. Continuous improvement requires taking a close look at the work, the resources that are needed, and the process to get that work done. We celebrated many successes because our employees got involved.
Examples of continuous improvement efforts
Employees are focusing on more effective and efficient ways to perform their jobs.
Technical malfunctions can unexpectedly take a generating unit off line. One example is the failure of a boiler tube. When that happens, the entire unit must be taken off line for repairs, which can be lengthy. Mechanics making the repairs don’t always know what types of tools they need to bring with them for the job, requiring several trips to get the equipment they need. Employees at two of our power plants analyzed the repair process and found that they were making 24 trips to get all the equipment they needed. In response, they created a new Point of Use kit that is organized, well-stocked and mobile — allowing them to bring it with them wherever they need it. With this new kit, they have reduced the number of trips to eight, allowing them to spend more time on actual repairs.
As our Transmission business grows at a fast pace, we want to be more agile in our ability to manage the work in the field as well as maintain the reliability of the grid. In 2013, that meant reorganizing how we do our work and putting employees closer to our facilities and our customers. With 90 offices across our 11-state region, AEP Transmission provides services to our operating companies, Transcos and joint ventures. We operate central service functions in regional offices in Ohio, Oklahoma and Virginia. We reorganized our Transmission Field Services (TFS) organization and hired more than 100 new field services employees to handle construction work that was previously done by contractors. This initiative will allow for faster response when damage occurs to the system, and is more efficient because these employees are based at locations throughout our service territory where we need them. The TFS organization has increased the number of projects built by AEP crews. By doing more of this construction work in-house, our crews also gain knowledge and the core experience that is needed to grow the business.
In transmission, we also reduced costs by increasing our complement of engineering and project management resources and added about 200 new positions. These decisions have led to new career opportunities for employees while addressing a business need.
We made several changes in our procurement organization to be more efficient, reduce costs and improve processes, focusing on reducing cost to our customers. In 2013, for example, we centralized procurement functions for Distribution and Transmission. This move resulted in cost savings and opportunities to standardize operations across AEP. The advantages of this move include:
- Standardizing procurement procedures, terms and conditions, systems, contracts, processes and paperwork;
- Standardizing contractor safety requirements and benchmarks;
- Leveraging purchases; and
- Improved pairing of contractors with projects.
Many of these initiatives come down to common sense, but it is this type of engagement and empowerment that promotes entrepreneurial thinking and leads to cost and work efficiencies that really add up.