With the traditional S&OP, the five-step process, depending on what you read, it’s either step one is all data gathering and all that, or there’s a version that’s
step one is product management or life cycle. And a lot of what we do in step one, we really focus on that product life cycle. And where are we at? What are we introducing? Because there’s a lot of engineering going on and new products. Are coming out maybe this year or something, we’re working on this deck going to come out for four more years, but we better keep an eye on it. And then of course, as you do that, you get the natural obsolescence. Okay, we’re replacing this. What do we do about inventory and all that? So, our first process is really to make sure everybody puts all their cards on the table and everybody knows what all the different organizations are doing and where we think our products are going to go lifecycle wise in the future and make sure everybody’s playing to the right page.
Then we get to the second meeting, which is the demand review. And again, being a global organization, I have to interface with our Sweden operations. We have three business units, EMEA, which is Europe, Asia. And then of course the Americas and we tie all of that, not only on the fuel end, which is our primary business, but then there are things called core components that reactors use that aren’t actually fuel itself. And then we get into sub products which may be fuel components or tubing or zirconium that we sell. And so, we really work on getting that whole big picture, but our industry is a slow industry because we’re dealing with utilities and because we’re dealing with regulators, it takes a very long time to make a change in our industry.
So, for instance, we won the contract to take over Sequoia Nuclear. It takes two and a half years to transition from the previous vendor to us in the US market. And there’s all sorts of regulatory stuff that has to happen, but you see it coming and you got to be looking that far out to go, okay, this is going to be an increase to the business. Or if you lose something in two years, this is the last time we’re going to do any of that. And try to keep that big picture in alignment. So that when we moved to the third business meeting, the supply review, we’ve got three major plants in the U S over in Sweden and in the UK. And then you start deciding how that’s getting parsed out and we’re vertically integrated.
So that with fuel operations will now reach back into component operations, which will reach back into tubing operations, which will reach back into zirconia material operations and keeping that entire vertical supply chain. And again, our business plan reaches out five years, which is longer than the traditional, but I look out actually 20 years because capital projects could take eight years from the time somebody says, yep, we’re building one to when it actually gets constructed.
So, I’m taking these 10-year views out as part of that process. And then the supply folks are looking at that, doing the whole resource planning. Do we have the footprint that supports this and all of that, you get into the financial reconciliation, what do the changes mean? And then finally the management of business review, these are hard points. These is the approach we want to take, this as the effect on inventory, or this is the risk we want to take in the supply area. And then, roll it right over the next month. We kind of have a running joke that we know what we’re going to do, we’re just not dead sure when we’re going to do it. And so there’s an internal volatility that really causes us to constantly
make sure that everybody’s in alignment. So, the fuel contract isn’t going to change, but when the customer wants it delivered to their power plant is a very critical thing in our industry. Some people want it right at the last moment because they want to just literally get it in and shove it right in the reactor. Others want to get it two months in advance because they want it off their checklist of things to do during an outage. And so you literally have to negotiate with every customer. And that puts volatility into the total demand, the timing and customers don’t want to talk about the timing until it gets within six months of them actually doing the reload. So, you’re always guessing out in the future. So, there’s a lot of internal volatility that you wouldn’t see on the external aspect of the business. You’d go, this is a pretty steady state business. There are companies that would kill to know what they’re going to do nine years from now, right? So those demand signals can get a bit tricky. A good chunk of my job is to make sure that I catch those movements and get them communicated well so that if there needs to be a change in supply, et cetera, they aren’t caught flat footed going, when did that contract move up three months. My first job, which was in the machine tool business was probably a two year window. From the time somebody would sign to the point where we would actually install it on their shop floor. But this is significantly a longer window than that.