I’m sure I’m stating the obvious, but often times the things that seem obvious in hindsight are almost always not so obvious at the outset. This might be one of those things.
What Do We Mean by Energy?
At the most basic level, “energy” from the perspective of a business comes in the form of electricity, gas, petroleum, etc. From the perspective of finance, energy use is often an overhead cost. For some industries, this overhead cost could be significant. Thus, it makes sense to evaluate and assess our operations to make sure that they are operating efficiently and using the right amount of energy needed.
Doing so could bring about the following benefits:
- Cost Savings: reducing energy cost can have a significant impact on business performance. Often, energy costs are hidden as overhead or facility costs.
- Competitive Advantage: reducing recurring operating costs will allow the company to take the money saved and allow it to reinvest in growth areas of the company.
- Environmental Stewardship: While a long-term benefit, it is a benefit nonetheless.
But, there is also a type of energy that is more difficult to see and even harder to quantify – the waste of human energy.
Rework is Wasted Human Energy
When a process is not performed correctly the first time, the second pass at doing the process results in wasted energy. The initial energy is consumed but it didn’t produce the right output, thus requiring more energy to be expended to fix what wasn’t done right the first time. Here are the outcomes of rework:
- The customer has to wait longer for the product or service – until it’s done right.
- The company has to spend more time and money to make it right the second time.
- The persons performing the task a second time are expending wasted energy – energy expended the first time should have resulted in the right output, but it didn’t, thus requiring a second go around.
Strategies for Reducing Energy
Here are a few methods from Lean Manufacturing one could employ in reducing energy cost, often classified as overhead or operating costs:
- Right-sized Equipment: Evaluate your machines and replace oversized equipment with smaller equipment, tailored and more suited to the needs of your business.
- Use Standard Work, Visual Management, and Poka-Yoke to prevent the waste of rework. Doing so could eliminate added labor costs that come from having to correct mistakes, further burdening people and overuse of energy.
- Use of Total Productive Maintenance (TPM) prevents critical machines from downtime and interruption. A TPM board is often a tool used to see all relevant information related to the maintenance of that process or equipment. It is an application of Visual Management and shows all data transparently for that machine of piece of equipment.
Below is an example of a TPM Board:
As you can see from the picture, all the information for this piece of equipment is available and public – not in a binder somewhere or in the inner recesses of a laptop: it’s out in the open; simple, effective, and obvious.
There are more ways, but these are just a few. What have you done at your organization to reduce energy use and to reduce the portion of overhead costs driven by energy use?