Bond University DOCTORAL THESIS the Impact of Supply Chains On
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Bond University DOCTORAL THESIS The Impact of Supply Chains on Productivity and Financial Performance of Power Producers in Australia. Aburadi, Nedal Award date: 2017 Link to publication General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal. The Impact of Supply Chains on Productivity and Financial Performance of Power Producers in Australia. Nedal Aburadi The thesis submitted in fulfilment for the requirements of the degree of Doctor of Philosophy Bond University Faculty of Society & Design November 2016 Abstract Over the past 10-20 years, Australian federal and state governments have introduced dramatic changes to the Australian power generation market to boost competitiveness and aid with the rapid development of the Australian power generation industry and businesses. These changes included the deregulation, disaggregation and privatisation of the power generation companies and supply chains, resulting in the formation of a new regulatory and management framework called the National Electricity Market. As a result, a variety of different strongly heterogeneous power providers and market operators have emerged in Australia, drastically changing the business environment and causing significant gaps in our understanding of how to manage and regulate this environment in an efficient way. In addition, there are also significant consumer trends to embrace a variety of off-grid renewable power sources in combination with rapidly improving storage technologies. This may certainly have a significant impact on any centralised power generation/distribution companies. There is currently a need to evaluate the impacts of these revolutionary processes on the performance of power generation industry in Australia to boost its competitiveness and consumer orientation. Therefore, this research uses cluster analysis, mixed effect regressions and generalised structural equation modelling to develop and apply comprehensive statistical approaches in order to reasonably categorise highly diverse electricity i generating/supplying companies and study any existing average productivity trends and dependences on other performance variables characterising the production process and size of the involved companies. It is demonstrated that there are two major clusters and four distinct groups (smaller clusters) of companies and supply chains on the Australian power generation market with different performance and productivity trends. One of the significant findings is that there was a significant general trend of declining productivity by around 15% – 20% over the observation period between 2007 and 2012 for all company categories. At the same time, the considered case studies involving several successful companies also showed that this general negative productivity trend could be overcome through proper managerial decisions and approaches. Another determined general trend (with the exception of a few successful companies) was that smaller supply chains and companies appear to be more efficient in terms of their labour and capital productivities. This trend defied some of the previous (though quite limited) findings that optimal productivity might be achieved with larger companies. Simple approximate criteria were derived in this study, based on the determination of the critical values of Property Plant and Equipment (PP&E) and Employee Cost (EC). Companies with PP&E < $1 – $2 billion and EC < $50 – $75 million per year tend to have (on average) higher productivities and are more sensitive to changing their size in the form capital assets and labour cost. Significant direct and indirect effects of the considered performance variables on company energy output and productivities were also identified and analysed using the path analysis in the generalised structural equation model. The conducted research has thus made significant contributions to the existing knowledge and methodologies for the analysis of average productivity trends in a ii significantly heterogeneous sample of production units/companies on the market, including the statistically based clustering of the heterogeneous production entities and their subsequent analysis by way of the generalised structural equation modelling to establish and quantify the networks of causal relationships between the productivity- related performance variables and factors. Specific recommendations for the regulating authorities and company management were proposed. These included the need for different managerial approaches in different company groups/categories, different recommended company sizes, managerial approaches to overcome the general negative productivity trends on the power generation market, and the need for government support to ensure the successful transition to renewable energy sources. iii Declaration This dissertation is submitted to Bond University in fulfilment of the requirements of the degree of Doctor of Philosophy. This thesis represents my own original work towards this research degree and contains no material which has been previously submitted for a degree or diploma at this University or any other institution, except where due acknowledgement is made. 01/09/2015 Nedal Aburadi Date iv Acknowledgements I would like to thank all the people who contributed in some way to the work described in this thesis. First, I would like to express my sincere gratitude to my advisor Professor Michael Regan for the continuous support during my PhD study and related research and for his patience, motivation, and immense knowledge. His guidance helped me in all the time I spent research and writing this thesis. I could not have imagined having a better advisor and mentor for my PhD studies. Without him, this thesis would not have been completed or written. One simply could not wish for a better or friendlier supervisor. I would like to thank my parents for their material and spiritual support in all aspects of my life. I also would like to thank my brothers, sisters for the assistance they provided to me in numerous ways. I want to express my gratitude to my lovely sweet daughter, Jwan. Finally, a person that moved with me to Australia, leaving her family and friends because of it, my lovely wife, dear Rawan. Without your support and encouragement, I could not have finished this work. It was you who kept the fundamentals of our family, and I understand it was difficult for you, therefore, I can just say thanks for everything and may God give you all the best in return. v Table of Contents Abstract .................................................................................................................. i Declaration........................................................................................................... iv Acknowledgements .............................................................................................. v Table of Contents ................................................................................................ vi List of Figures ...................................................................................................... ix List of Tables ....................................................................................................... xi List of Abbreviations .......................................................................................... xii 1. Chapter 1: Introduction .................................................................................. 1 1.1 Evolution of Energy Generation in Australia .......................................... 2 1.2 Performance and Productivity ................................................................. 6 1.2 Knowledge Gaps...................................................................................... 9 1.3 Aims of this Study ................................................................................. 13 2. Chapter 2: Literature Review ...................................................................... 15 2.1 Background ............................................................................................ 15 2.2 Productivity and Efficiency ................................................................... 19 2.2.1 Definitions of Productivity and Production Efficiency .................. 19 2.2.2 Determination of Productivity and Production Efficiency ............. 23 2.2.3 Critical Evaluation of Research in Productivity ............................. 29 2.3 Supply Chain ......................................................................................... 37 2.4 Electricity Supply Chains and EGDCs .................................................. 44 2.4 Summary ................................................................................................ 49 3. Chapter 3: Examples of Supply Chains ....................................................... 52 3.1 Snowy Hydro Limited ........................................................................... 52 3.1.1 Background ....................................................................................