Energy prices are going up. Energy consumables (oil, natural gas, and coal) are going down. Electric vehicles are still not an option for major forms of supply chain transportation (plane, train, and tractor trailer). And they need to be charged from a grid that is probably not set up to handle large quantities of renewable energy, as production is not constant (as winds come and go, tides ebb, and clouds mess with direct sunlight) and grids require constant power levels (or they overload and blow — and even though the sky lights up a beautiful shade of blue when it happens at night, it’s a pretty sight you really don’t want to see).
As a result, energy conservation, which starts with energy management, is becoming more important by the day — especially when supply management needs to keep costs down (which are starting to skyrocket in manufacturing plants and data centers), be socially and environmentally responsible, and deal with (impending) carbon legislation. For some organizations, that’s easier said than done and they need a roadmap from an external expert. The goal of this post is not to provide that, but to define what best-in-class in energy management is and key capabilities required to get there.
According to a recent Aberdeen study on Energy Intelligence, best-in-in class is defined by:
- High Operating Equipment Effectiveness (91%+)
- Aggressive, continual, reduction in energy consumption
- Aggressive, continual, improvement in operating margins
And, in particular, best-in-class organizations exceed their energy consumption and operating margin goals by 20% or more.
To this I’d add:
- aggressive, continual, movement to renewable sources
- continual shift to low-energy technologies and process
Let’s face it. High OEEE is good, but if the equipment being used is an energy hog, 90% efficiency is still bad if there is an alternative piece of equipment that only uses half the electricity at 88% efficiency. And energy reduction is good, but moving to renewable sources is better. No coal is better than less coal.
So what are they key capabilities you require to become best-in-class in energy management?
According to the Aberdeen report,
- accessible real-time and historical energy data,
- standardized energy management processes across the enterprise, and
- metrics to benchmark the performance of the energy program across different plants.
This is a good start, but your energy management expert in supply management also needs
- a solid data analysis tool to analyze the cost and usage data,
- a strategic-sourcing decision optimization solution that can handle energy models in all their complexity to allow the analyst to optimize the buy in a manner that balances cost with sustainability and risk management goals and provides the most value to the organization, and
- a supply chain visibility solution that allows an analyst to monitor the energy usage across different plants in near-real time to find usage patterns that are problematic or appropriate for optimization.
If an analyst had all these capabilities, there’s a good chance the organization would be on its way to becoming a best-in-class energy manager. Unless you think these capabilities are not sufficient and they also need a few SCRAPS. Thoughts?