This blog post is based on Dr. Robin Kent’s Energy Management Bootcamp webinar presentation. You can view the presentation below.
Reducing energy expenses is top of mind for almost everyone in the plastics manufacturing industry. Energy expenses account for about 6% of costs (very close to labor which equals about 10% of costs) and that number grows every day.
You’ll find the near-complete recording of Energy Management Bootcamp below, due to technical issues the first 10 minutes have been excluded, but we’ll do our best to sum up what’s missing.
Dr. Kent begins his presentation by talking about the new words – the words that drive media and activists; global warming, greenhouse effect, carbon management, carbon footprint, sustainability, life-cycle analysis, corporate social responsibility, stakeholders, and energy efficiency. These are words we won’t be focusing on today, instead we’re going to focus on the old word (and the most important word) Money.
Dr. Kent is not a tree-hugger. He is in this for the money and while he believes the new words are important, he reminds us that none of us would be here without the money.
Energy costs can easily be reduced by up to 30% with a 3-pronged strategy. 10% is management, 10% is maintenance, and 10% is technology or capital investments. Management must walk the walk instead of simply talking the talk to seriously impact energy costs. That’s a different session though, today we’re talking about the technology, and the low-cost investments that can bring the largest returns.
Taking energy management seriously is difficult because energy has always been low-cost and low priority. Most facilities aren’t equipped with the right tools and skills to handle the job, but energy is now the second or third largest variable costs – and rising. Energy supplies are no longer assured and totally secure and other countries and companies are already ahead of you in their efforts to reduce energy costs.
Where are our costs and where are our efforts?
Dr. Kent then points out that the relationships between our costs and our efforts are generally very poorly weighted. We spend about 14% of our efforts on reducing costs of direct materials which account for 55% of our costs. On the opposite end of that we spend a whopping 75% of our efforts on controlling direct labor which only accounts for 10% of our costs.
Now let’s change that model to accommodate the new concerns of direct energy costs. 6% of our costs are tied up in energy, but we’re not putting any effort into controlling that cost. This may not seem like a problem now but consider the rising cost of electricity and that 6% will soon be more like 15 – 20% of costs.
And here is where we meet up with Dr. Kent himself in our recorded webinar.
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