Renewable energy has taken the United States by storm, but a tug of war between logistics and economics is generating unnecessary turbulence.
A renewed global focus on the imperative to secure energy independence and establish sustainable, environmentally friendly energy sources has simultaneously been ignited by an influx of millions in U.S. government seed dollars to foster the development and implementation of wind and solar energy projects.
But becoming lost in the heady rush to lead the pack in the burgeoning U.S. renewable energy market are the down-in-the-trenches business fundamentals that determine success, whether the product is widgets or wind turbines.
The Internet bubble of the 1990s heartily disproved the “build-it-and-they-will-come” economic model, yet what has begun to emerge — notably in the wind energy category — is a “build-it-in-the-US-or-else” mentality that defies basic business logic and threatens to stymie category growth, heighten supplier risk and exposure and inhibit market flexibility.
The spike in local-government commitment to fund, and private enterprise desire to build, wind turbine facilities has created a rush to procure materials — from towers and turbines to Nacelle controllers and cable harnesses — to construction sites quickly. But lost in the rush for expediency is cost efficiency.
For while “location” is the mantra of the real estate market, the rise of overseas manufacturing facilities — governed by the economic realities of lower production costs and leaner manufacturing infrastructure — has proven it is not a dictum that dictates the traditional supplier-customer relationship.
Proximity – the temptation to move production closer to the source – no longer delivers an economic or operational edge, and the wind-energy market is no different.
Rather, sustainable growth in the wind-energy industry will hinge on how effectively suppliers build both operational and technological relationships with manufacturers and customers to maximize efficiencies and erect a structure that more effectively matches both short- and long-term demand with supply and minimizes risk and exposure.
The perceived benefits of brick-and-mortar proximity are easily negated when weighed against the efficiencies of technological supplier-manufacturer partnerships — such as enterprise resource planning (ERP) networks to coordinate the resources, information and business functions on a shared database.
Such basic supply-chain integration and communication have proven a more effective tool in laying the foundation for sustained growth and navigating the turbulent environment of nascent industries such as wind energy, and all but eradicate the need for costly factory location and production.
By synching ourselves with our clients’ ERP networks and matching our operations against our clients’ short- and long-term forecasts, my company, Sinbon Technologies, has been able to capitalize on our offshore manufacturing cost advantages, streamline our client service teams and maximize our warehousing capabilities to better manage inventory levels.
We have significantly reduced our overstock levels and can more efficiently respond to demand peaks and valleys.
Through a similar combination of symbiotic technological partnerships and focused warehousing infrastructure, wind energy suppliers can continue to capitalize on the economic benefits of overseas production and keep ahead of the supply curve.
That translates into getting the product to market quickly and efficiently, eliminating unnecessary and costly oversupply, and delivering results for a lower cost than the competition.
Timothy Kehoe is General Manager of Sinbon Technologies, a designer and manufacturer or customized tower, turbine and Nacelle signal, data, and power cable harnesses.