LNS Research provides executives a platform for accessing unbiased research and benchmark data to improve business performance
The LNS Research Blog provides an informal environment for analysts to share thoughts and insights directly with our community on a range of technology and business topics
Over the past five years, there has been a major shift among Fortune 1000 companies to publish sustainability reports in addition to traditional financial reports. In fact, 81% of the Global 500 are now participating in the CDP Climate Change Report. Managing the complete flow of energy through an organization, especially for these mammoth companies, requires a robust operational excellence model that optimizes people processes and technology.
This post is the final in our three-part series on the technology piece of the operational excellence model as it relates to the industrial energy management framework. With the first two posts focusing on the procurement and use elements of IEM software, below I’ll discuss the role of reporting. I’ll focus on four main areas: Energy Intensity, GHG Emissions, Project Management, and Continuous Improvement.
Tweet this post! | Share on LinkedIn!
In general, reporting and analytics are areas of enterprise software that have seen some of the most fast-paced innovation over the past decade. By leveraging technologies such as cloud computing, big data, and mobility, software providers have been able to offer key decision makers real-time, role-based analytics, visualizations, and alerts.
Tailored toward the needs of industrial and manufacturing organizations, these advancements have breached the IEM software space. There are several key areas of functionality that companies should focus on when selecting a provider:
Energy is much more than just electricity. In the industrial setting, energy should be thought of as the set of resources required for plant operations and production. In addition to electricity, these can include water, air, gas, and steam. It’s important to have reporting capabilities for these different types of energy, as well as drill-down analytics and the ability to correlate and normalize performance with external conditions like weather, production demands, and so on.
Water, gas, and electricity can be thought of as primary forms of energy. They’re generally metered from utilities, but also may be generated on site. Industrial companies should have analytics for the billing and meter data (procurement) as well as the unit- and asset-level consumption (use) for each of these types of energy. Alternatively, air and steam can be thought of as secondary energy sources. These types of energy are generally measured at the unit or asset level, though, they still require strong analytic capabilities.
There’s an inexorable link between energy use and carbon emissions (along with other GHGs). In many regions, the reporting of GHGs to regulatory bodies is mandatory. LNS only expects to see an increase in regulatory reporting for carbon and other GHGs in the coming years. However, it still remains that for the large majority of industrial companies, carbon and other GHG reporting is for not for compliance purposes.
Both internal and external stakeholders tend to place a lot of importance on carbon and GHG emissions. Consequently, many organizations are focused on improving them, making the ability to streamline measurement and reporting data a necessity. However, this is typically done at the enterprise level with manual reporting tools. Corporate reporting tools are often disconnected from the hardware and software solutions that are doing the detailed smokestack measurements at the facility level.
To reduce emissions and accurately communicate performance data to stakeholders, the first step is to invest in an automated data collection solution with web- and role-based reporting and analytical capabilities. After implementing a solution, for many of the industrial companies that focus on energy and carbon management, overall system performance and efficiency increases. This happens for a number of reasons, on which LNS Research will be focusing future research reports.
As with all business decisions, energy projects are evaluated on financial merit and ROI. Within a large organization, there can be hundreds, if not thousands, of energy efficiency and energy management projects happening simultaneously across a large footprint of facilities. It’s important for energy managers, engineering managers, and financial managers to be able to clearly see opportunities as well as costs as each relates to the broader portfolio of production-based capital projects.
This set of managers also needs the capability to do advanced analytical modeling for both current decisions and to validate past decisions based on historical data. For current decisions, it’s often the case that companies put a different level of priority on energy versus other capital projects, each of which tends to have a varying hurdle rate. Having the ability to run and differentiate ROI scenarios for different types of projects is critical in a large enterprise.
For historical decisions, organizations need the ability to answer questions on the effectiveness of past projects. Companies that can answer these questions will find it easier to foster collaboration between energy, engineering, and finance. As a consequence, these organizations tend to have a better performing project portfolio over time.
Continuous improvement is the lifeblood of manufacturing and many industrial companies. Executives are capitalizing on established skillsets and corporate culture to push ahead sustainability performance. Often, this approach comes in the form of a lean manufacturing or an operational excellence initiative that either creates a subgroup focused on sustainability performance or builds sustainability into the goals of the entire program.
Most companies that have implemented an operational excellence program use a “Plan-Do-Check-Act” methodology and may have also incorporated similarly inspired energy management programs like ISO 50001. For these initiatives to succeed, it’s important to provide a consistent set of metrics supported by a solid reporting structure to benchmark and measure success over time.
Reporting and analytics are the final and arguably most critical piece of an integrated approach to Industrial Energy Management Software. Market leader are taking advantage of their capabilities to strengthen energy programs and provide the level of analytics needed to support continuous improvement that every operational excellence program strives for.
You might also be interested in:
Slides: Sustainable Manufacturing: Strategies for Energy Management
Enterprise Sustainability Management: A Global Approach
Sustainability Definition | More than CSR
© 2013 matthewlittlefield.com