Reduce Energy Consumption by 15 Percent

Industrial companies have been heavily focused on establishing strategies to reduce the overall operational costs across different plants.

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Much has been written about strategies such as operational excellence, Lean Manufacturing and demand-driven manufacturing, among others, and how such strategies can help industrial plants drive efficiencies and reduce cost.

Energy, which is a major cost, is often left out of the equation while executing these strategies in the majority of plants. But now, with the pressures of global economic recession, volatility in energy cost and increasing awareness by the Obama administration, senior executives in the industrial sector are looking into driving efficiencies and reducing cost by being more energy efficient. This is especially critical in an energy-intensive plant in which energy cost is a large percentage, often upwards of 25 percent, of the total operational costs of the plant. In such a scenario, the ability to cut even a small percentage of total energy consumption can result in significant savings for the organization.

The results of the “Energy Management in Industrial Environment: Driving Business Value” report showed that Best-in-Class companies are reducing energy consumption by 15 percent, realizing 90 percent overall equipment effectiveness and outperforming corporate goals for operating margin by 14 percent. Best-in-Class companies are not only able to reduce energy consumption, but are also able to successfully translate these into operational and financial gains for the organization.

The top strategy, as selected by the majority of Best-in-Class, as well as other responding executives, is to redesign/optimize processes to be more energy efficient. Best-in-Class companies are redesigning and optimizing production, maintenance and energy delivery processes, among others, to effectively manage energy across different plants. Energy management is not just about tracking energy consumption through utility bills; it is also about how effective companies are when it comes to considering energy in operational decision making.

One factor that strongly differentiated Best-in-Class companies is their priority and focus on energy management. Best-in-Class companies are found to be more than two times as likely as laggards to have energy management as one of the top three focuses of the company’s strategic agenda, and are also twice as likely to establish an energy-aware culture across the enterprise. Best-in-Class companies understand the criticality of managing energy and the impact such programs can have on organization’s corporate goals. By having both the above capabilities, Best-in-Class companies are not only making sure that the energy management programs are supported by senior management, but are also ensuring that all the employees are bought into such initiatives and are actively pursuing it in their day-to-day activities.

Make it visible

An important differentiator for Best-in-Class companies is the ability to improve visibility into energy data to make effective decisions. Best-in-Class companies are able to have such visibility by investing in technology to automate the collection and monitoring of energy data. Energy management tools help companies to automatically collect energy-related data, providing decision makers with real-time insight into energy management processes that aid in operational decision making. This information is critical in making decisions as to how to efficiently utilize energy across different plants. Having such visibility is one of the main reasons Best-in-Class companies are able to reduce energy consumption by 15 percent.

There are many different approaches that companies are taking to manage energy efficiently across different industrial plants. Best-in-Class companies have truly taken a holistic approach toward energy management by establishing the right strategy and effectively executing the strategy through change in business process and organizational structure. Best-in-Class companies have invested in technology to automate these business processes and improve visibility into energy data, and they are using it to optimize plant processes.

Matthew Littlefield, matthew.littlefield@aberdeen.com, is Senior Research Analyst, and Mehul Shah, mehul.shah@aberdeen.com, is Research Analyst, at Aberdeen Group Inc., in Boston.

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