Gordon Smouther

1
Introduction of Internet B2B at PSEG
Gordon Smouther Manager Strategic
Commodities PSEG Services Corp. (973)
430-7689 Gordon.smouther_at_pseg.com
DOE Contractors Purchasing Managers Symposium
Workshop October 26, 2000
2
AGENDA
E-market Basics PSEG Experience Concluding
Remarks
3
Corporate Structure - 2000

• Revenues 6.5B
• Assets 19.0B
• Employees 12,000

• Net income 12 mos. ended 6/30/00 766M

Power
Energy Holdings
International Generation/ Distribution

• Delivery
• Customers
• 1.9M electric
• 1.5M gas
• Revenues 3.6B
• Assets 11.6B
• Employees 5,700

• Domestic Generation
• Capacity
• 11,000MW
• Revenues 2.1B
• Assets 3.1B
• Employees 3,200

Global
Energy Investments
Resources

• Revenues 800M
• Assets 4.4B
• Employees 2,000

Energy Services
Energy Technologies
4
E-market Basics
5
E-commerce Growth its BIG
Business-to-Consumer
2003 1.3 Trillion
2002 843B
2001 499B
2000 251B
1999 109B
Source Forrester Research, Inc.
6
The Internet is not just another channel.
Instantaneous Any - Always
Standards to any on
based
Internet In Person Phone Mail EDI
X
X
X
X
X
X
X
X
X
X
X
Forresster Research
7
Concentrated Buyers Market
Buyers dominate with B2B in lesser roles
Big 3 Auto Exchange
Sellers
B2B Company
Buyers
8
Concentrated Sellers Market
Sellers dominate with B2B in lesser roles.

Chemdex
B2B
Sellers
Buyers
9
Neutral Market
Many buyers and sellers B2B dominate.

EXCHANGE

Suppliers
Buyers
B2B Company
10
PSEG EXPERIENCE
PANTELLOS.COM
11
Pantellos Vision
Become the leading e-supply chain solutions
provider to the energy industry.
Ontario Power
UNICOM
Carolina PowerLight
12
Pantellos eMarketplace
Engages both buyers and suppliers as
customers to create value across supply chains

Buyers Generation Elec. / Gas Deliv. Gas
Transmission Munis Distributors Other
Verticals Horizontals Others TBD

GTW
Other Global Trading Webs
13
Value levers provide benefits to both buyers and
suppliers
Value Lever
Buyers
Suppliers
Lower price negotiation costs Expanded supplier
access
Lower negotiation costs Extended customer base
Purchase Power
Lower search costs Lower processing costs
Lower cust. acquisition cost Lower processing
costs
Process Efficiency
Reduce inventory costs Reduce time to market
Supply Chain Integration
Improved inventory management Improved demand
forecasting
Cost-effective research Faster competitive
response
Cost-effective research Faster competitive
response
Aggregated Content Community
Price inventory transparency Reduced cost of
spot buying Reduced excess inventory costs
Greater customer reach Reduced cost of
sales Reduced excess inventory costs
Market Efficiency
14
The value proposition is built around core and
value-added services
Materials and Services
Core Services Basic e-enabled supply chain
optimization
Logistics
Inventory
Industry Specific
Customized User Interface
Content, News, Trends
Buying Community
Disposal
MRO

• Value-Added Services
• market analysis
• hosted forums
• eSettlement
• eScorecard

Corporate Expenditures
Supplier Community
HR
Transaction Management
Enabling Technology
Illustrative
15
Emarket Service Offerings
New Services and Solutions for Supply Chain
New Services
Hosted Contracts
Industry Forums
Auction/ReverseAuction
Catalog Aggregation
Strategic Sourcing
eCompliance
RFQ/RFI
Source Pantellos
16
Service offerings and adoption will drive
operating value
Negotiable Spend
Adoption Rate
Throughput
Value Levers Purchase Power Supply Chain
Integration Market Efficiency Aggregated Content
Value Rate
Acquisition costs - Commissions - Fees
Net Total Cost of Ownership Reduction
17
Total Purchase Costs Will Be Reduced
Component Sources of Cost Reductions
Purchase Price
Total Cost of Purchases Price to
Price Logistics Receiving Settlement Inventory
Cost Reductions
Activity Cost
Assets

Before
After
Benefit Source
18
Purchasing Transactions
Transactions per Buy
2) Check Availability
Buyer
Supplier
Purchase Order
Exchange
1) Purchase Order
3) Order Acknowledgement
4) Receipt Acknowledgement
PO through Receipt
Invoice through Settlement
5) Invoice
Buyer
Supplier
6) Invoice Approval
Exchange
7) Settlement
Note that of transactions per buy will vary
with purchase channel used
19
Concluding Remarks
20
Challenges to Developing eMarkets
Industry

• Identify pain points and issues
• Facilitate industry discussions
• Leverage best practices and benchmarks

Supply Management
Technology

• Build and acquire tools to enable supply chain
  services
• Build and provide rich content
• Provide a secure and reliable environment in
  which to transact business
• Create and manage a virtual network of technology
  partners
• Push the boundaries for matching supply and demand

• Develop category specific supply chain solutions
• Establish and maintain channels for buyers and
  sellers to reach desired outcomes
• Develop and acquire new content and value added
  services

E-Market
Buyers/Sellers

• Build relationships that enable supply chain
  improvements
• Create liquidity in the marketplace through
  increased adoption
• Identify areas of interest and opportunity to
  supply chain participants

Source Pantellos
21

• 5 Risk factors are shared by e-market initiatives
• Antitrust
• Lack of buyer Scale
• Competitor tensions
• Lack of supplier scale
• Wrong technology
• Lack of effective leadership

Source GIGA Information Group, August 28, 2000