We work with fuel and nonfuel suppliers to drive continuous improvement and efficiencies within the supply chain, while improving environmental and safety performance. We ask suppliers about their sustainability strategy and activities through our procurement process, and we advise them of opportunities to help them reduce or mitigate their impacts on natural resources.
AEP buys millions of dollars in goods and services every year, ranging from chemical solvents and office supplies to vehicles and industrial equipment. As a large company, we are able to manage costs by negotiating prices, being strategic about sourcing and managing inventory. By applying an integrated supply program model for our procurement activities, we are able to look at the whole value chain from sourcing through inventory. Our goal is to be an industry leader in procurement performance, cost and value by 2018.
One way we are improving efficiency is through strategic sourcing - optimizing what we buy and how we buy it. Our procurement team is getting involved earlier in the purchasing process and standardizing the process by educating employees on best procurement practices. We are looking at the total cost as well as end-of-life value, financial and environmental impacts. We are also using different forms of technology, such as bar code scanning through mobile devices to capture, store and share instant data. This type of technology allows increased accuracy, and gives us the ability to instantly communicate with others throughout the company.
Cybersecurity poses an increasing risk within our supply chain. As data breaches increase, so does the concern for how to protect our systems, to which many of our suppliers have access. AEP’s Procurement team is working very closely with our Enterprise Security team to address these concerns. We are implementing a screening process and developing criteria to identify the high-risk suppliers to help prioritize our efforts. Learn more about AEP’s approach to cybersecurity.
One way we can be a leader in supply chain and procurement practices is by ensuring we have a diverse supplier base. Increasingly, we are receiving inquiries about our supplier diversity program. This is an area we are working to expand beyond a compliance-based program towards best practice. We believe that having a strong, diverse pool of suppliers is as important to AEP as it is to the business owners in our communities who want to do business with us. We are strengthening this network by identifying and helping to qualify small, diverse and competitive suppliers to be part of AEP’s supplier portfolio to compete for our business.
We are building a business plan to establish a program that will lead us to best practice for supplier diversity. This will add value to AEP and the local communities and economies where we conduct business and where our employees live and work. It will also help us achieve the cost savings and level of service we expect and need from our suppliers.
Since 2009, AEP has worked with its coal suppliers to survey their environmental, safety and health performance. We have conducted five surveys of our coal suppliers, a commitment we made to stakeholders to better understand the life cycle of coal, its impact on the environment, how our suppliers are addressing those impacts and sharing of leading practices.
The 2014 AEP Sustainability Survey of Coal Suppliers repeatedly showed our suppliers outperforming the national average in safety and health performance and an improved environmental performance over the years. We also have seen an increased commitment to sustainability reporting. Due to the rapid changes in the coal and electric industries, AEP suspended the coal supplier survey in 2015.
We respond annually to the Carbon Disclosure Project’s (CDP) Supply Chain Survey. This survey aims to drive action on climate change among both purchasing companies and their suppliers. The survey provides us with a different platform to be transparent about our sustainable supply chain efforts and collects business-related climate change information from our suppliers.