Internal supply chain coordination in the electric utility industry

Electric utilities have a well-established vertical internal and external supply chain. Theoretically, information sharing, involving production, inventory, and other policy variables, between chain entities can improve supply chain performance. Such sharing relies on a systematic determination of the optimal policy variables for the chain. This paper presents an analysis of the electric utility’s decision problem based on an optimal control model in a competitive market environment. Optimal production and inventory policies are developed for a centralized supply chain under full information sharing. The model and policies are tested with electric utility industry data, and performance implications are discussed for electric utility managers and public regulators.