Opinion: Vibhor Mahendru, Head – Procurement & Supply Chain, Fourth Partner Energy
Project Procurement in the Solar Industry – Best Practices
Utility scale solar projects on a megawatt scale are executed by EPC companies, which at the design or engineering stage, may decide about purchasing components such as PV modules, inverters, structures and balance of supplies by identifying, mitigating associated risks. This is done by evaluating supplier credentials through suitable inspections and qualification mechanisms. This process involves checking the supplier’s reputation in the market, supplier onboarding, related inspections and tests until the end of the procurement process.
The procurement team’s clock starts ticking the moment the approved BOM (Bill of Material) is uploaded into an ERP system (process tool/platform) – this is seen as a formal go-ahead to begin the process of arranging raw material for a specific project. The procurement team should typically study the BOM & raise queries immediately – in case information like the specification or rating or brand preferred, is missing.
A comprehensive BOM forms the backbone on which the procurement team executes activities. It is often the output of a detailed site survey by the projects team or I&C (instrumentation and control) party – the BOM is made after the customer shares the preference for particular brands PV for modules & inverters, post a detailed site survey. In case of approximations made on the balance of supplies – a budgetary buffer is provisioned for, in advance.
Once the suppliers are identified, the procurement team gets into commercial negotiations –which include the cost offered for the product, payment terms, delivery timelines, agreed QAP (Quality Acceptance Parameters), datasheets, product manuals, certificates, warranties & spares.
Supplier Selection – a breakdown of the processes involved in Solar PV Project Procurement
Usually, for solar projects, large quantities are procured within certain deadlines. Hence it is important to access the supplier’s production capacity and whether that can meet the deadlines. The commitment for the available capacity should be a part of the contractual terms. In the pre-production stage, it is better to evaluate the availability of the BOM parts, especially long lead items which would be imported.
Delivery of Goods
It is important that agreed upon terms for post-production (prior to material dispatch) are in place for accessing the fulfillment of quality parameters. These should be implemented before commencing the construction of the solar PV project and needs to be verified in the pre-dispatch inspection. Ideally, this process should consist of visual inspection, power verification, other tests and a fit-for-shipment verification. The critical tests are ideally performed on random samples taken from the production lot, which is ready for shipment.
Logistics: Movement of Raw Material
For a Solar PV project – panels, inverters, structures, HT Panels, LT Panels & transformers make up about 90% of the material cost. Hence, post the pre-dispatch inspection, these products are sent directly to the project site, instead of routing to the central warehouse of the EPC. This helps save transport costs as well as transit time. The balance of supplies like cables, hardware, walkways, lightning arrestors and earthing material on the other hand, are part of the inventory in the central warehouse and dispatched to the different site or project locations, as per the requirement.
Importance of thorough documentation
The documentation process often directly reflects the superiority of the solar developer or EPC player. Maintaining thorough documentation is a top priority and a matter of pride at Fourth Partner Energy. Goods Receipt Note (GRN): Against the Invoice and on the acknowledgment from the project site against the received material – a GRN is created, and bills are booked.
This is a critical milestone in accounting. This quantity captured in the GRN is considered as the inventory.
Remember, a GRN entry and the subsequent acknowledgment of a Delivery Challan (DC) is critical to record the material received. Any delays, lapses or errors in these result in a mismatch of inventory and general accounting issues, which is always avoidable. At 4PEL, we follow a thorough tracking mechanism and system of processes using our ERP platform to monitor and tackle these issues.
Importance of Best Practices in Solar PV Project Procurement
Similar to any business, following best practices is imperative for solar players – irrespective of the scale of execution. Often any large solar EPC player or developer has multiple projects being executed simultaneously across different geographies. These are often in different stages of execution – initiation, construction, nearing completion and others.
In this scenario, there can never be a dull moment and hence it becomes imperative to have effective processes and systems in place, along with regular reviews. Open collaboration and timely communication across stakeholders is the mantra for any successful project execution.