Top > Measures towards reform > Actions for Management Streamlining > Actions for Management Streamlining (FY2012) > [Cost Reductions]Procurement expenses of materials and services (FY2012)

[Cost Reductions]Procurement expenses of materials and services (FY2012)

Result (¥ billion) Target (¥ billion)
FY2012 FY2013 Total of 10 years
49.2 664.1

*The amount provided in the parenthesis in FY 2012 results is the target amount.

Specific measures
Items Contents
Reduction of depreciation costs by cutting facility investments
  • Reduction of capital investments for the short and mid term
    - Cancel new showrooms for promotion activities (Switch Station)
    - Reduce construction for expanding trunk transmission systems etc.
Suspension or revision of timing of construction and inspection
  • Emergency reduction of repair costs (revision concerning the construction of power network facilities)
  • Permanent revision of construction timing while ensuring stable supply etc.
    - Revise facility inspection intervals
    - Revise equipment inspection methods
    - Suspend some repair work of communication cables etc.
Transactions with affiliate companies:
expand competitive procurement
  • Negotiate a 10% transaction price discount with current business partners, which is the expected discount rate, if procurements are made via competitive bidding.
    - Cost improvements with affiliate companies and expansion of new suppliers
    - Implement negotiation in consideration of market prices such as setting a benchmark on the prices in the transactions
    - Promote optimal procurement methods such as competitive bidding
  • Increase the cost cut amounts via reforming the cost structures in subsidiaries and affiliate companies
Transactions with group companies: Construction efficiency improvements
  • Cut repair and maintenance costs etc. by increasing the productivity of construction work related to power distribution with group companies or construction companies unaffiliated to TEPCO or via price negotiations and contract reviews based on introductory trials and effective evaluations of new ways of construction or new materials that will lead to enhanced productivity
Reviewing the transaction structures and ways of ordering relating to external business partners
  • Lower maintenance costs and outsourcing expenses by adopting an order method to minimize costs as much as possible for each contract and review present supplier relationships via considering new business partners and thorough progress management of each project (reflecting an approx. 10% costcut from the current prices by negotiating down to a level calculated based on the expected costs realized via bypassing any middlemen or competitive bidding, as is presently being done with TEPCO's group companies)
  • Review the negotiation / business process: from transactions through agents to direct transactions with manufacturers
  • Review order methods: from blanket orders to separate orders made for individual construction assignments
  • Create competition by placing bids for new business partners or loosening transaction restrictions
  • For those transactions not easily implemented through the bidding process, we will try to cut maintenance costs and outsourcing expenses by negotiating thorough cost cuts via proposing spec changes and/or requesting spec changes from our suppliers.
Standardization of equipment specification
(Smart meters)
  • Review smart meter procurement methods in order to cut costs
Standardization of designs / specification among electric power companies <long-term issue>
  • Concrete cost reductions will be realized through such measures as interviewing manufacturers and other electric power companies. Prior to the interviews, we will select items to be standardized with other power companies

*The revise of electricity rate applied on May 11, 2012 was approved on July 25 in the same year after reflecting the instruction based on the assessment policy of the Ministry of Economy, Trade and Industry.
TEPCO considers further cost reduction based on the above instruction as well.

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