Demand management software + Lean energy programs = exponential savings

by Kevin Klustner, Powerit Solutions

Lean manufacturing — which has boosted labor and capital productivity by eliminating waste, increasing flexibility, accelerating response times and stressing continuous quality improvement — has deeply influenced and benefited the industrial sector of the U.S. economy in recent years.

But despite all the positives, many manufacturers haven’t been able to apply Lean principles to energy usage and productivity yet. It’s unclear why, but we know that energy represents anywhere from 15 to 45 percent of overall productions costs in industrial companies, so this is critical.

One theory why Lean hasn’t been applied universally to energy efficiency strategies in industry is based on our not having a holistic way for a company to include energy consumption metrics as part of its total manufacturing metrics. As a result, continuous process improvement is difficult. Companies such as Siemens have a vision for incorporating energy metrics into a plant’s overall operational efficiency metrics, but this holistic integration remains in its infancy.

There are encouraging signs, however. The Environmental Protection Agency (EPA) notes that most large U.S. companies that have been recognized by the EPA’s Energy Star program are also leaders in implementing Lean.

And a recent McKinsey report also indicates progress.

One chemical manufacturer cited in the McKinsey report optimized its variable costs associated with both energy use and materials yields. Theoretical-limit analyses identified a series of process control improvements, as well as opportunities to lower thermodynamic energy losses and optimize mechanical equipment. Taken together, these moves helped the company reduce its energy consumption by 15 percent.

In all fairness, industrial companies in the United States improved their energy productivity by nearly 1,000 percent in the half-century between 1960 and 2010. But in today’s financially constrained era, reductions in energy costs often fall straight to operating profits, so manufacturers have lots of incentive to do even better.

This might require a new Lean business model for the 21st century, though.

And a key part of the new model means that manufacturing companies must offer stable demand volumes and long-term relationships to what soon will be more trusted and committed Lean energy suppliers; in exchange, manufacturers must receive high-quality and rock-bottom unit costs.

Another part of the model extends beyond the manufacturing facility itself because we must optimize energy production and consumption on the overall grid to make real progress here.

Unfortunately, this Lean model hasn’t taken shape or hold at many industrial companies because it’s still difficult to fully and accurately quantify energy cost savings that result from waste elimination and decreased electrical demand.

It’s also hard for smaller manufacturers to dedicate the right resources to Lean energy reduction efforts.

Northwest Energy Efficiency Alliance report, for example, found that just 1 percent of small company food processing facilities and 4 percent of beverage manufacturing facilities had all the necessary resources for a Lean energy reduction program.

The report states, “Awareness and interest in energy efficiency practices and cost savings is high among smaller organizations, (but) the knowledge and internal resources needed to systematically manage energy use and optimize operations, equipment and external resources is limited.”

From my perspective, this shouldn’t get in the way of implementing Lean energy processes and practices.

Why?

Because the industrial companies in our country that gain enriched insight into their operations through the deployment of analytical energy demand-management software and disciplined Lean energy programs will almost certainly generate exponential savings that have a significant and immediate impact on the bottom line. 

Kevin Klustner is CEO of Powerit Solutions, an international energy management technology company based in Seattle that strives to make the smart grid real, profitable and effortless for utilities and energy-intensive businesses worldwide.

Click here for McKinsey report

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