This is a Round 2 brainstorming case that tests the candidate's ability to systematically decompose a profitability problem using a framework (Profits = Revenue - Costs) and drill deeper into root causes. The case emphasizes qualitative problem-solving over quantitative analysis, requiring candidates to think critically about supply chain inefficiencies across coal acquisition, electricity generation, and transmission stages.
Our client is GPE, a producer of electricity. Here are a few concepts about electricity generation that will help you in this case: • There are several ways to produce electricity: water, coal-fired plants, nuclear, wind, etc. • Electricity can be supplied to a wholesaler or to consumers directly. • Electricity transmission is highly regulated because the wires used to transport electricity are mostly government controlled. However, electricity usage is mostly deregulated (i.e. the government does not set the price, it is set by competitive forces).
Our client has 10 plants that produce electricity using coal. The client obtains coal partly from its own coal mines and partly from 3rd-party providers. Of late, the client has seen the profitability of its coal generated electricity decline.
What could be causing this?