Korea connection: How commitment to supplier diversity saved PSEG (and N.J.) during pandemic

When supply chain seemingly had dried up, PSEG found 2 saviors halfway around the world

SEOUL, South Korea — During one of the darkest periods of the pandemic, Public Service Enterprise Group’s Ralph LaRossa saw the big picture: There would be no reason to squabble about masks or social distancing (or any of the other silly arguments that took place then), if there wasn’t any work to do.

And, if PSEG couldn’t find transformers — a supply chain item that everyone in the industry was looking for — the New Jersey economy, already slowed, would grind to a halt, as the ability to provide power would have been greatly reduced.

Two companies, located on the other side of the world, helped save the day.

Michael Hyun, who serves as vice president, procurement, and deputy general counsel at PSEG, and his team found Seoul, South Korea-based Cheryong Electric and quickly struck an agreement to provide tens of thousands of transformers (the boxes you see on the wood poles).

That relationship led PSEG to Taihan Cable, which provided the massive amounts of cable PSEG also couldn’t locate.

Just like that, a major problem no one in the state really knew about was avoided.

The three companies — PSEG, Cheryong Electric and Taihan Cable — came together during a special ceremony Wednesday in Seoul during the 2023 New Jersey East Asia Economic Mission trip to mark the moment.

PSEG Chair and CEO Ralph LaRossa said the company — and the state — was saved by Cheryong and Taihan.

“We were in a tough spot,” he said. “All of our regular suppliers dried up. Micheal and his team did a fantastic job.”

LaRossa said the team fell back on the company’s core values.

“We had to think out of the box, and his team did that — and they did that by falling back on our core values,” he said. “A lot of people only think about diversity in one way. We think about everything from a diversity standpoint, everything.”

Hyun remembers the moment — how a solution was found during a time that was unlike anything anyone in the industry had ever faced.

“It was really exciting when we found Cheryong, because that was the peak of the distribution transformer crush,” he said. “Everybody was suffering. All of our peer utilities, without exception, couldn’t get new transformers. All of our domestic suppliers were calling us and saying they couldn’t make our delivery schedules.”

Hyun said such a scenario had never happened before.

“Before, it was, ‘OK, we need five transformers in three weeks, we’ll put the order in and then they’ll show up; it was just-in-time purchasing,” he said. “There was no need for alliance agreements, no need to secure capacity or factory slots or anything like that.”

Hyun said the moment — and the save — has changed the way PSEG will do business going forward. He said it has changed the way PSEG thinks about the diversity of its supply chain.

“It’s about risk mitigation,” he said. “And the diversification of the supply chain is critical to that.

“Diversification doesn’t mean you have 12 suppliers that are all similarly situated — they have to be differently situated, and part of that is geography.”

That geography was one of the reasons that Cheryong had those transformers. The reason: There wasn’t a labor shortage in East Asia.

“I still remember, when I asked them about their labor challenges, they said, ‘What labor challenges?’” he said.

And the movement to onshore everything? Throw that out the window, too, Hyun said.

“Everyone’s talking about nearshoring and onshoring, asking whether it’s worse to bring something in from Asia,” he said. “It is if the risk you’re trying to mitigate is transportation. If it’s product, it’s not.

“So, going forward, we’re going to always try to have a mix of domestic and foreign suppliers.”

LaRossa agreed. Not everything can come from New Jersey and the U.S., he said.

“We’re not going to have a transformer manufacturer in the state of New Jersey, and we’re never making cable like this in New Jersey — we’re just not set up for that,” he said. “To find somebody like this, who’s so willing and able, is incredible.

“And they kept their word during the toughest of times. They supplied us then and have been supplying us ever since.”