At the recent Shibumi Virtual Summit, Tiffany Doris from Arizona Public Service (APS) presented on their Customers Affordability Program and Procurement Management Programs. Like many customers, APS leverage Shibumi for multiple program types, and Tiffany’s presentation is a great example of how our two organizations work together to support the important work APS is doing.
Thank you very much to the Shibumi Team for inviting me to present on some of the wonderful things that we have found to be useful for us here at Arizona Public Service.
My name is Tiffany Dorris. I’m actually leading a new department at APS called Customer Affordability. Our focus in this department is to not only keep our customers’ rates as low as possible, but we’re also trying to operate as efficiently as possible while improving the experience for our customers and for our employees.
I thought it would be helpful for you to just share a little bit of information about us as a company and what we’re trying to accomplish. We’re, what I would call, a midsize electric utility. We’re the largest utility in Arizona. We’ve been around since 1886. We are regulated by the Arizona Corporation Commission. We have about 6,300 employees. You can see by the map in the middle of the screen that we do cover most of Arizona, all the way from the low desert areas with lots of cactus and dry weather, all the way up to the Grand Canyon area in the middle of the forest with a lot of snow. Operational efficiency and providing reliable service is very important to us as well.
I also thought it might be helpful for you to see how we look at our dollars―every dollar that we make, how we’re actually spending that. I’m not going to go over every little detail on the slide for you but it gives you a pretty big picture right in the middle of a dollar split up and a bunch of little pieces. You can see that the majority of what we spend our money on is purchasing fuel and just our normal operating expenses. We also have taxes that we have to pay just like everybody else. We have depreciating value. At the far right, you see we’ve got 14 cents of net income. Of that, eight cents goes to our shareholders. We’re working with six cents of every dollar of what we can use to improve and do capital projects with and invest with. It’s extremely important that we’re smart with our money and that we’re doing everything we can to be as operationally efficient as possible. That’s why customer affordability was born here at APS.
Now, keep in mind, we started our efforts last year, in 2019. When we were making the case for change, we were really in 2018. When you’re looking at the slide, it’s a little dated but it helps to set the stage a little. Our goal was to become much more Lean principled and to think about continuous improvement, always, because we know things change and we need to change with it. We also had a great year in 2018. We were at the top quartile in our safety and our reliability. Our customers were pretty happy. We had decreasing costs―everything that you would think would make us a successful company, and we are, but we knew now is the time to look at how we’re operating instead of if we’re in a financial bind. That’s the worst time to try and look at reducing costs because the pressure is on. This way, we get to be more creative with what we’re doing and can just kind of go wherever we feel we need to go.
Like I said, our results were very strong but our employees and our customers were very clear that they felt some of our processes were challenged. We needed to make some improvements there. We also know that a lot of utility companies are now taking advantage of all that new tech out there. We really weren’t doing that. That’s a big change that we’re making here at APS as well. Keeping all of this in mind, with what our strategy is, our company decided to look at an enterprise-wide way to be efficient, reduce our cost, and make our workers and our customers happy; pretty big initiative that we’re trying to take care of here but I think we’re doing well.
Once we decided we were going to do customer affordability, it became very important for us to make sure that we were looking at every single opportunity in the same way. We wanted to make sure that we knew exactly what we were doing right now, what’s our current state, and of the products that we’re already using, what can we do differently with those to just improve what we already have, what’s the most we can push out of those products? We also wanted to look at digital lean and agile capabilities with all of these opportunities and what makes most sense. We wanted to align with our roles and with those opportunities and make sure we were prioritizing all of those correctly. “What is going to be most meaningful?” is to say it in another way? That was our first focus for the first year.
We also made some decisions around thinking about what the future is going to look like; what work will we do; how are we going to do it? We know we can’t predict the future but we wanted to create an environment that we were able to shift on a dime if we needed to, and it ended up being perfect timing because of things like COVID and everything else that’s going on in the world right now. This, having already started this really helped us to adjust in this strange time that we’re in right now. So we’ll keep doing that. We also wanted to make sure that we were correctly identifying the value of each one of our opportunities.
A lot of people think of value as money, whether that’s operations and maintenance or capital, but we also look at value as time saved for our employees. If we can save somebody an hour every single week, they can then take that hour and focus on more strategic work for the future. That’s extremely important as well. We knew all of this was extremely important. We wanted to make sure we implemented everything in a very thoughtful way. Once we started looking at all of the different opportunities, really, it came down to three different areas that we were going to focus on. Now, I have a red box around the company-wide opportunities because that is where my department spends the most amount of time. We do track and report out on the zero-based redesign work and the procurement work, but the individual business area opportunities is where my team is solely focused for right now. Within that, we meet with the business areas on a very regular basis. We wanted to make sure we were engaged with them, that we’re providing support for them, that we’re really accurately assessing what they’re doing, and trying to help them improve, not just with costs but with operational efficiency.
This is where we really started introducing our lean capabilities with the entire organization. This is different for us. Continuous improvement is not something that we focused on before. That’s where our main focus is. But I do want to tell you the zero-based redesign is really kind of a great function. It’s really designed more for our corporate business areas where we get key individuals in those business areas together. We just say, “If your department was brand new, what would you do? What would you look like?” They really get to build from the bottom up, and then decide which direction they want to go and make improvements in. That’s been a wonderful development for our corporate business areas. Our procurement department has been around for a very long time but they are now focused in a much more deep-dive look at every single vendor negotiation that they work through and are being more much more thoughtful about how they’re using the vendors, and when they’re using the vendors. We’ll talk about procurement a little bit more further on in the presentation.
We knew what we wanted to do. We started looking around at all of the different products out there and we really zeroed in on Shibumi. Why Shibumi? What’s the big deal about Shibumi? What we found is that it looked like a system that was really going to help us track all of those opportunities, the status, the scope the financial forecasting, capabilities, all of that we needed to track. We also wanted to make sure that we were accurately reflecting the impact to the business. Shibumi looked like it would help us in that area. We wanted a way to hold our business areas accountable for the work that they’re doing. Anybody that works in the utility industry knows that it’s a very reactionary world. So it’s very easy to get distracted with your day-to-day responsibilities. Not that you don’t want to do the improvements. It’s just there are distractions.
Shibumi is very helpful for us to keep them accountable and keep them engaged in the work that they’re doing within these individual improvement processes. We also wanted something that was going to work very well with other planning ventures that we do here at APS. We do our budget planning every single year. We do our strategic business planning every single year. We have a timeline for each one of those. We wanted to make sure this was something that was very complimentary to what we were already doing. We also wanted something that’s a single source of truth because we have 13 different business areas. Historically, they’ve worked in silos. We all know when different areas work in silos, you’re not cross-functionally looking at what can be improved upon but you’re also not reporting the same way across all those different business units. Shibumi is our one source of truth. We use that to provide very regular updates to our executive team. We do that every two weeks.
Shibumi looks like it was really going to work for us. But we also wanted something that was going to be very customized for us. We wanted it to be quick and easy to use. So I sort of relate this to when you buy a new car, you want everything that you want on a new car. You want the color on the outside to match the color on the inside. You want the specific tires and the specific rims or sound systems, whatever it is that you really want to focus on with a car. That’s what we wanted to do with Shibumi. We wanted to change things relevant to the way we talk, the icons that we’re currently using within the company to be able to create the screens that work well with other programs that we use, and basically, customize everything within Shibumi to fit well with us, that makes sense for our business, and that would make it much more intuitive to use Shibumi for our business users.
We found that it actually is working very well. This is one of the fantastic things that I’m going to show you―our financial forecast and redesign efforts. You can see in the upper left-hand corner, this was our original financial forecast chart. We really only focus on operations of maintenance, capital, fuel and purchase power, our revenue growth, and then our cost to achieve. But as we were meeting with the business, really found out that this was too vague for them. When they’re planning work in their area, they’re getting more granular with what kind of financial benefits their department is going to receive from the work that they’re doing. So we split that out for them. We have a hard value, which is the value that can be basically swept from your budget. Then we have soft value, which is efficiency gains to save time, better processes.
We also added one other thing here, which is direct savings. The direct savings is something that our customers still benefit from. We still consider it customer affordability, but it isn’t something that directly impacts our budget. What we’re talking about here is the customer is going to make a payment with a credit card or use one of our kiosk systems. We’ve been able to reduce the cost for our customer to use those. That is a direct saving to our customer. We still wanted to track that. That is customer affordability, so we added that here.
The other thing that you can see on the right-hand side, down towards the bottom is– it looks like the orange chart below the green chart, and that’s exactly what it is. This orange chart is an identical version of what you see underneath the green titles except that it’s for our participant shares. We, here at APS, have several sites. Probably, one example that some of you might be familiar with is Palo Verde, our nuclear generation power plant. Now, we operate and run it but it’s actually seven different utilities that own Palo Verde. We, as we’re going through making improvements out there, wanted to be able to track what is going to be the value savings for APS, and then what is also going to be the value savings for our other participants at that site. It’s an identical chart and it really just helps break things down.
Now, when we originally did this, I thought it was going to be too complex, but our users actually have said that it’s very natural; it makes sense to them; they found it to be very intuitive; and so, they were able to make their updates very easily here. One thing that we have stressed is that the business owns this financial forecast. My team does not. The reason for that is we wanted it to make sense to them. In doing that, they know that they’re only doing a forecast so it’s a best-guess estimate. We also have stage gates that every opportunity moves through. As they move through those stage gates, the financial forecast becomes more and more fine-tuned until it eventually gets to plus or minus 10%. At that point, our financial department really feels much more comfortable with taking a hard value, O&M savings, a plus or minus 10%, and saying, “We feel comfortable that you, the business could probably take this out of your budget for next year and be fine. That’s how we’re helping the business reduce a lot of their O&M cost as well.
Now, I mentioned our procurement group before and how they were doing this deep dive. It was very interesting the way this all happened. My team was working. We were doing everything we needed to do. The procurement team came to us and said, “We love Shibumi. We love what you’re seeing that your team is doing. Can you help us?” They had very manual work. They had very duplicative work. They were managing and doing their work management system through multiple spreadsheets, pivot tables all over the place. It was just a mess. There was a lot of copy-paste in that department. When they went to go create reports to provide to their management team, it was all manual. It took them hours and hours, sometimes, days depending on what kind of reports they were trying to give to their management team to just do a simple task like that. We looked at the challenge and we said, “Yes, we want to help you.” We sat down with them, had several meetings with them. Here are some of what came out of those discussions.
You can see in the upper right-hand box, we have our value descriptions. One thing that they really wanted to be able to determine for their work is what business unit is going to see the impact of the vendor negotiations that they’re working on. They are very much a department that they don’t reap any of the reward for the work they do. It’s always the other business areas that get the benefit. They wanted to be able to show: Is it customer service: Is it fossil? Is it a transmission and distribution? We’ve provided that for them. In the upper right-hand screen, you can see there’s a little gray area that says, “Fossil.” But what’s also nice about this is we made it available that they can pick more than one business area, so they could say this particular negotiation actually benefited fossil, and generation, and T&D, or maybe just fossil and T&D. They have that choice or they can even select company-wide. It’s very well-rounded for everything that they might be able to provide for the company.
The other thing they wanted to know is if it was a participant plant or a project impact, what kind of participant value was there? For this particular opportunity that we chose for our copy and paste here, it benefited every single fossil plant that we had. They could select that. Same thing, they could select multiple areas here. They could pick Palo Verde and the fossil plants, or maybe just two of our fossil plants. It really just depends on what they want to do, but this helps them identify the work they’re doing a little easier. Now, they also do work differently. They do work within waves: Wave 1, 2, 3. They’re actually on Wave 5 right now. They’re doing a lot of work. When we took this screenprint, they were still on Wave 3. But this is how they identify what area of work this particular opportunity was coming from for them. They, in addition, have something called closed loop. For any opportunity that is going to bring in more than a million dollars of value to the company, they wanted to close those processes, which basically creates an effectiveness review that’s either 6 months out or 12 months out from when a contract starts. We added that for them.
They also want to know if it’s a buy better or spend better. Buy better to them means it’s just the contract. They get whatever value out of the contract they’re going to get. But if it’s a buy better and spend better, that means they’re going to get a great new contract they’ve done the buy better there; but then, the business area that it’s impacting also needs to know how to work as efficiently as possible to get the most amount of value out of that contract as possible. That’s a spend better. This helps them to work with the businesses and identify when they need to engage more or not with the businesses. Then over to the right, you’ll see per procurement phase gates, this doesn’t match up to what we do. We have five stage gates. They have six phase gates. We had to align those with the work we were doing. Essentially, the way we look at it is their phase gate 2 and 3 is the same thing as our stage-gate two. This was a way that we could align across and reporting out the correct numbers at the correct phase of work that everyone is doing.
We didn’t stop there. Procurement had a lot of work they needed to do. I think I mentioned that they needed a better way to report. We did that for them. You could see on the upper right-hand screen, we have reduced all of these different reports for them based on what they were telling us they needed. What they love about this is they can open the report. They get live data that is current and up to date to the minute. They can then drill down so if they want to see more information about every opportunity that has an impact to the report, they can click on that opportunity and go down to that opportunity level itself and get more details about the work that was done there. Now, I wanted to also create a wow factor. I wanted to blow their minds because they were already so happy with what they were doing. I wanted to take it one step further. We made some presentations for them.
This was not an ask from this. They didn’t think they needed it but once we produced these four presentations for them, they were completely floored by what Shibumi could do and how versatile it was. It made their life so much easier. They didn’t have to create reports that had old data in them. Everything was live. When they went to go present to their management team, everything was live, everything was up to date. They could drill down if the executives asked any questions. They’ve just loved it. The work continues in that area. They’ve been thrilled and we’re thrilled for them. Now, there are some other things that we have done for our users. My department is very small. We are 24/7 operating electric utility. We never shut down. A lot of the owners for the different opportunities could be doing work on their customer affordability projects at 11 o’clock at night. We make ourselves as available as possible but we’re not always available at 11 o’clock at night when they’re at work. We went through and we created these Roles & Responsibilities tab for them. What this does is it provides very detailed definitions of what each person that’s in here, what their responsibilities and roles are. We’ve got the owners defined. We’ve got our financial team defined. We’ve got our results delivery office defined. We’ve got a procurement office defined.
This is really kind of our gospel if you will. It’s available to them anytime they want in Shibumi. They just go here, look at it if we aren’t available. A lot of times, they can find answers to some of their questions right here. It’s proved to be very valuable to our internal customers. Something else that we have found is that we meet with our business areas every two weeks. We also include our finance group to join those meetings. Over time, it seems like we kept getting the same questions over, and over, and over again. Very common questions. But it seems like there was a better way to communicate this, maybe a better way to provide a different resource for them. In addition to this User Resources’ Roles and Responsibilities’ page, we also created a financial value tips. I know you can’t see the details on the screen, so just to kind of tell you a little bit more, we have information here that answers questions on every tab. Then we have a screenshot for every single individual tab. It could be their charter tab or the summary tab or their financial tab. It just has all of the questions that we seem to get on a regular basis, and answers, and examples, so they have a better understanding of what they need to do within the system if they have some questions. The resources have been great.
Now, the work we’re doing now is being sustainable for our future. I don’t know about you, guys, but we have a lot of movement in our company. That’s people that get to retire. They may move to a different department. A lot of times, when they’ve worked on projects in the past, they’ll save things like their financial pages, or presentations, or reports to their personal drive. If you reach out to them, if they happen to be still with the company in three, four years, when you’re re-looking at the same opportunity, they may or may not still have that information available. We wanted to make sure that we were capturing that and it was available for the next time we come back and look. Our thought was that it was something that probably nobody would look at for a couple of years until we started doing more of the continuous efforts. What we actually found is that as people move off of one of the projects and somebody else comes in, this is actually proven to be a fantastic resource for them. They may not know anything about the work that was done previously. They now have financial information. They’ve got the PowerPoints. They’ve got the reports. They can come to this attachment page and see basically everything that has been done up to this point in that opportunity. They get caught up very quickly.
The benefits to providing this kind of information is it really gives more insight as to what the workgroup was thinking when they did the opportunity; why they made the financial decisions that they made; and why they went in the direction they went. It’s been a fantastic resource so far. We’re thrilled that we were able to do it in Shibumi. This is also another new view. This is a view that I use for our executive reporting. I mentioned that I provide very regular updates to our executive team. This probably looks a little familiar to you. It’s very similar to the financial chart that we have but with this, it groups all of the opportunities that we’re working on into this one page so they can see overarching for the entire enterprise what we are actually seeing the value coming out of the work that we’re doing. Again, this is a live view. It’s up to the minute from when we go to this page. If you look to the left of all of the little titles, the names here, you’ll see a little arrow. If we click on those arrows, it will expand out and show us every opportunity that is contributing to the dollars that you’d see in the yearly financial columns over to the right-hand side. What they can then do if they have questions about any individual opportunity is click on that opportunity, and it goes right to it, and they can get the details of everything that they’re seeing.
This was pretty mind-blowing for our executives. Normally, when they received the reports, it was two weeks’ old data. This was really new for them. They found this so exciting that when we looked at some of the other benefits that Shibumi is providing, turns out our executives are now coming to us and saying, “I need this kind of information. Can you get that for me in Shibumi?” and usually, the answer is yes. Not only is the answer usually yes but it’s, “When do you need it? I can have it ready for you in about an hour?” which is much faster than they’ve ever seen before because the data in Shibumi is so easy to get to, it’s so easy to filter through that it’s something we can customize whatever it is that our executives are asking for.
Another unknown benefit to Shibumi was how easy it is to do the administration. I mentioned I have a very small team and it’s so incredibly easy for us to add new users, remove users, change their roles within Shibumi that it’s not any type of strain on my team to manage that on a regular basis. I think I mentioned a couple of times that a lot of these pages are very intuitive to the users that are in here, and they are. But when we have a new user to Shibumi, we typically spend anywhere from half an hour to an hour with them on very focused training on how they’re going to use the system. What we’ve actually found is that most of them don’t even need that entire hour. I, myself, when I first got into Shibumi, I got access before I got any training. By the time my training rolled around in it, I felt very comfortable with what I was seeing and what I was doing. Everybody always says, “This platform is going to be easy,” and then it never is. Shibumi, I can categorically say, is the easiest platform that I have ever worked on within the entire 20 years that I have been with APS. It’s phenomenal.
The scoping abilities within Shibumi is also an unknown benefit that we found. When we originally started our efforts, our thought was we were going to have about 40 opportunities per year, we have now just crossed 300 opportunities that we’re tracking. They’re all active in Shibumi and we’re very easily able to keep track, keep the businesses accountable to the work they’re doing, and organize the work they’re doing. It’s very easy for them to see. These are just some of the benefits that we have seen so far at APS. I’m sure as Shibumi develops, as we develop, we’re going to find more wonderful benefits with using this particular product, but so far, we’ve been extremely thrilled with what we’ve seen. I would personally like to thank our team that backs us up. We have Sean, we have Whitney, we have Jennifer, and everybody behind them at Shibumi that makes everything within our partnership so valuable and so wonderful. I hope you enjoyed it. I hope you gleaned a little information that maybe you can use in your future Shibumi efforts. With that, thank you very much. Have a wonderful day.