Strategic and Operations Management Analysis: Ergon Energy Case Study

This report provides a comprehensive analysis of Ergon Energy, a subsidiary of Energy Queensland Limited, focusing on its strategic and operations management within the Queensland energy sector. It explores Ergon Energy's role in electricity distribution, retail operations, and its alignment with the course's theoretical frameworks of Supply Chain Management, Value Chain Management, and Operations Management. The report examines Ergon Energy's core values, its network operations, and retail functions, highlighting its linkages to course concepts. It delves into the company's business model, sustainability practices, and strategic objectives, including its engagement with the Australian Energy Regulator (AER) and customer/community arrangement programs. Furthermore, the report discusses Ergon Energy's strategic objectives, key strategic enablers, and outcomes, providing insights into its efforts to provide customer choice, increase productivity, and strengthen the Queensland economy.

Running head: SUPPLY CHAIN OPERATIONS 1
Strategic and Operations Management in Ergon Energy
[Author name]
James Cook University - Australia

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Overview of Ergon Energy – Australia
Ergon Energy is a subsidiary of the Energy Queensland Limited (EQL), a corporation owned by
Government of Queensland. Ergon Energy provides energy to all of Queensland, except south-
east Queensland via the Australian Energy Regulator (AER) network which sets the prices that
Ergon Energy can charge from customers. The company was founded on July 1, 1999 and has its
headquarters in Townsville (Corporate profile, 2017).
Ergon Energy is an active player in unconventional energy generation mechanisms and is one of
the chief buyers of renewable power resources in Australia. The company is a major contributor
to the skill-development process across the Queensland region. The company also pays attention
to its social responsibility through partnerships with certain client communities. Ergon Energy’s
distribution network including poling and wiring is mainly managed by the Australian Energy
Regulator (AER). This authority also sets the revenues that can be collected by Ergon Energy for
its services (Service regions and depot map, 2017).
One of the other subsidiaries of the company is Ergon Energy Telecommunications pvt ltd, with
Nexium Telecommunications as its trade name. This organization mainly serves Ergon Energy’s
communication needs and is an authorized telecommunications transporter that also provides
Queensland with high-speed broadband. The company has a joint undertaking with Energex Ltd,
Sparq Solutions pvt ltd that offers Communications Technology and Information solutions to
them (Executive management team, 2017).

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Ergon Energy‘s core values are based on an abbreviated term known as ‘SPIRIT’. It stands for
Safety, Professionalism, Integrity, Respect, Innovation and Team Work. The company’s goal is
to implant these values into the conscious minds of all of its employees so that they can always
remember these and implement in daily professional routine (Environmental management
practices, 2017).
Day-today-Operation of Ergon Energy
The electricity network of Ergon Energy consists of a hundred-and-sixty-thousand km of
powerlines and approx. 1 million electricity poles. It also consists of related infrastructure like
the main substations and electricity transformers. Ergon Energy has since Aug 2007 possessed
and made to function the Barcaldine gas-fired power station and associated set-up that is
responsible for supplying power to main grid (Ergon Energy Corporation Limited, 2010).
There are two main functional areas in which Ergon Energy generally operates into. One of them
is the department which manufactures and manages electricity allocation network and the other
is the retail department whose task is to sell that electricity to common people and businesses
(Corporate profile, 2017).
The network functional area of Ergon Energy is responsible for manufacturing and distributing
the electricity in the entire region of Queensland, basically building poles and wires. Under this
operational function, Ergon Energy also has certain roles to play which includes informing their
customers of planned and unplanned outages and restoration processes, to restore power quickly
after a natural disaster such as cyclone or floods, to add and establish new connections to homes
and businesses, to accommodate connections for solar and new technologies, to ensure their

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customers and staff around electricity are safe, to read over 5 million meters each year and plan
for the future of electricity network (O’Sullivan, Oo & Harvey, 2010).
Ergon Energy also has another major functional area – Retail. The main objective of this
functional area is to sell electricity connections and opening of new accounts and arranging
location shifts, calculation of correct tariff plans for every customer, managing electricity usage,
giving customers various options to pay for accounts, subscribing for clean energy and donating
for Royal Flying Doctor Service (Service regions and depot map, 2017).
Linkages between Ergon Energy operations and course’s theory
The LB5230 theory as supplied in our courseware that deals with the concepts of the Supply
Chain Management, Value Chain Management and Operations Management has a significant
impact on the business operations of Ergon Energy (Coelli & Lawerence, 2006).
Operations Management is the art and science of making sure that goods and services of the firm
are made and delivered in an effective manner to the end customers. OM includes the know-how
of designing of goods, services, the processes that manufacture them, the everyday upkeep of
those processes and the continuous improvement of such processes (Roy, 2005).
The Value Chain background is formed when a tactical process at the strategic level, a plan
procedure on the planning level and operations procedures on the operating level exists in the
organization. A value chain is the process that “disaggregates a firm into its strategically relevant
activities to understand the behavior of costs and the existing and potential sources of
differentiation” (Roy, 2005, p.120). The typical value chain as made known by Porter includes of
a set of actions which are done to produce, design, advertise, supply and support their product.
Michael E. Porter has classified these actions into two broad headings viz:

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 Primary Activities – These are activities which include outbound logistics,
inbound logistics, operations, sales and marketing, services in the basic value
chain building value directly
 Support Activities – Support activities include collection, human resource
management, management of technology, organizational infrastructure backing
the value creation in the basic value chain
Supply Chain Management – “A supply chain management encompasses all the integrated
activities that actually bring the end product to market and make customers satisfied. The Supply
Chain Management program integrates topics from manufacturing operations, purchasing,
transportation and physical distribution” (Coelli & Lawerence, 2006, p. 236).
Ergon Energy is one of leading and highly diverse electricity supply companies of Australia and
it does understand its responsibility to coordinate its operations in a manner that minimizes
ecological impact. Ergon Energy is a socially responsible and conscious electricity supply
organization of Australia that has been in the industry since more than a decade. The
organization employs over 4000 people and has been rated as a top company to work for in
Australia because of its decent corporate culture and high employee satisfaction ratings
(Sioshansi, 2016).
Ergon Energy is under the regulation of National Electricity Rules (NER) that is a part of the
Australian Energy Regulator (AER). AER is responsible to set the amount of revenues that
Ergon Energy is permitted to collect (O’Sullivan, Oo & Harvey, 2010). Such revenue figures
construct approx. fifty percent electricity retail price in Queensland. The company has
extensively engaged with its customers to make them informed of their proposal and with

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constant support from the Australian Energy Regulator the company would be able to deliver
premium quality results for regional Queensland (Demand and energy management plan, 2017).
The company has a vital role in all the four elements of the power supply chain. Ergon Energy is
both a supplier and a buyer, and plays less significant roles in creation and transmission of
electricity. These revenues as estimated by the AER are primarily aimed at recovering the costs
incurred in distributing electricity to customers (Response to ACCC discussion paper: National
broadband network points of interconnect, 2017).
The company has employed a coordinated, varied customer/community arrangement program in
order to align its long-term interests of customers. One of the main aims of the organization has
been to provide customers and other shareholders with a prospect to let know of their views and
give input on expenditure schemes and important investments. Such inputs and suggestions are
also processed to critically analyze the customers’ paying patterns for company’s various
services and standards (Corporate profile, 2017). These efforts of Ergon Energy have helped the
organization to better understand the upcoming challenges that may be faced in the community
and industry in general (Evans & Hunt, 2009). The company’s customer arrangement program
for supervisory scheme since the last eighteen months has involved uninterrupted customer
engagement that is supported by online information sharing and also important customer
research package. The company’s significant Board, CEO and top organization commitment to
local stakeholder and main body involvement (Executive management team, 2017).
Sustainability within the Business model of Ergon Energy
As per the business model of the company, the network of Ergon Energy would be such that
provides an easily accessible platform and an equitable access to distributed energy resources

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and applications paving the path for an effective market that enables desired outcomes in a cost-
efficient way. Ergon Energy has collaborated with the Government of Queensland to perform the
outlined initiatives with the assistance of “The Queensland Plan: a 30-year vision for
Queensland; and PowerQ: a long-term strategy for Queensland’s electricity sector” (Liu, Rasul,
Oo, & Khan, 2010, p. 4). To align the strategic plans with these key planning documents Ergon
Energy has made vital strategic plans.
As part of this empowerment process, it is one of the objectives of the company to deliver the
Queensland economy through certain techniques and methods. These methods include some key
strategic objectives, strategic enablers and the outcomes derived from applying such techniques
(Ergon Energy Corporation Limited, 2010).
Strategic Objectives- the Company aims to achieve certain key strategic objectives through
customer choice and control. The company aims to increase in average network price below
inflation. Ergon Energy also aims to increase the productivity of energy resources.
Key Strategic Enablers – Some of the key strategic enablers of the company are effective
market and prudent investment. Ergon Energy also strives to offer efficient service to its
customers.
Outcomes – By carefully implementing the strategic objectives and key strategic enablers,
Ergon Energy achieves customer value. The company also allows for better flexible work
practices. Another major outcome is that the Queensland economy becomes stronger through
the utilization of the Developer Charter.

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Ergon Energy has undergone fair restructuring to achieve new strategic direction, and updated its
accountabilities to emphasize more on efficiency and enable for an effective market in the
Queensland economy (Liu, Rasul, Oo, & Khan, 2010).

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References
Coelli, T. & Lawerence, D., A. (2006). Performance measurement and regulation of network
utilities. Cheltenham, UK: Edward Elgar.
Ergon Energy Corporation Limited. (2010). Response to ACCC discussion paper: National
broadband network points of interconnect. Retrieved from
https://www.accc.gov.au/system/files/Ergon%20Energy%20-%20Public%20submission
%20on%20NBN%20POIs.pdf.
Ergon Energy. (2017). Corporate profile. Retrieved from
https://www.ergon.com.au/about-us/who-we-are/our-company/corporate-profile.
Ergon Energy. (2017). Demand and energy management plan. Retrieved from
https://www.ergon.com.au/__data/assets/pdf_file/0005/241394/Demand-and-Energy-
Management-Plan-2017-18.pdf.
Ergon Energy. (2017). Environmental management practices. Retrieved from
https://www.ergon.com.au/network/network-management/environmental-management.
Ergon Energy. (2017). Executive management team. Retrieved from
https://www.ergon.com.au/about-us/who-we-are/our-company/leadership-team/
executive-team.
Ergon Energy. (2017). Service regions and depot map. Retrieved from
https://www.ergon.com.au/about-us/who-we-are/our-company/service-regions-and-
depot-map.

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Evans, J. & Hunt, L., C. (2009). International handbook on the economics of energy.
Cheltenham, UK: Edward Elgar.
Liu, G., Rasul, M., Oo, A., & Khan, M. (2010). Emissions calculation for a grid-assisted hybrid
renewable energy system in central Queensland region. Fusion Solutions: Challenges and
Innovations: Proceedings of the 2010 IV Network conference (pp. 1-1).
O’Sullivan, B., Oo, A., & Harvey, B. (2010). Fusion Solutions: Challenges and Innovations :
Proceedings of the 2010 IV Network conference. Ergon energy alternative augmentation
evaluation tool for distribution planning, pp. 1-1.
Roy, Dr., R., M. (2005). A modern approach to operations management. New Delhi, India: New
Age International Publishers.
Sioshansi, F., P. (2016). Future of utilities - utilities of the future: How technological innovations
in distributed energy resources will reshape the electric power sector. London, UK:
Academic Press.