Energy Costs Crash Course: A Manufacturing CEO Masterclass

After Russia’s barbaric invasion of Ukraine, energy costs skyrocketed, and we’re just feeling the bow wave of the shock. While every business in every industry is vulnerable, manufacturers—who already consume some $200 billion a year in energy, not even counting transportation costs—are even more vulnerable than others.

That made the latest edition of our ongoing Manufacturing Masterclass Series—made possible by the Indiana Economic Development Corporation—pretty timely.

Indiana University’s, Amrou Awaysheh, an assistant professor of Operations and Supply Chain Management at Indiana University’s Kelly School of Business and executive director of the IU Business Sustainability and Innovation Lab led the session.

The trick, he said, is really about getting much more clarity on where and how you’re using and misusing all forms of energy—power, fuel—at as detailed a level as you can, tracking it, and making your employees mindful of it.

His presentation was chockablock with tips and strategies—all very, very doable on tight timeframes and surprisingly CAPEX-light—to help as your energy costs skyrocket in the weeks and months to come (and yes, he expects they could rise by 30% or more from here—and quickly). I encourage you to watch his whole presentation.

Here are three takeaways I found particularly useful:

More Smart Meters, More Data

Smart meters allow you to access—often within 15 seconds or so—data on how you’re consuming power, and how you’re consuming power over time. The key is not only to have one for the entire production facility, but also to have smart meters throughout—say, on individual lines—so you can monitor each discretely and see variations and discrepancies, dig deeper and take action.

“We can find out that line B, for instance, was not running for certain times, it should not be consuming any energy,” he said. “So when we have a smart meter on the front of line B, we know exactly how much energy draw that site is drawing.”

The endgame here is to establish your zero baseload—really understanding where your load is, where your demand is and how do you manage that throughout your facility. Ferreting out differences in use due to just time of day—holiday weekends for instance—and trimming during those times can reduce your overall energy costs by 14%—without altering production one iota.

Get Help—On The Cheap

One of the simplest, fastest ways to get a read on all this and start rethinking systems is to get an energy audit done on your facilities. “You have someone come in from outside the firm and look at where you’re consuming energy and where you have energy losses,” he said.

And while there are lots of private companies that will come in and do this for a fee, he also recommended reaching out to a broad range of engineering colleges across the country to take advantage of a free U.S. Department of Energy-sponsored “Industrial Assessment Centers” who will send you a masters-degree candidate to do the work—at no charge.

Leverage An Energy Audit For More Than Energy

To take full advantage of the audit, make sure you get the whole team involved, so they can understand where they are consuming energy, understand the relationship between energy consumption and manufacturing production and—perhaps most important—understand the impact of energy audits on overall manufacturing performance.

For Awaysheh, this is often the most surprising part of the work for manufacturing leaders, because he invariably finds having auditors asking the team deep questions about energy consumption leads to deeper rethinks on operations—with big productivity gains. “What we see is that every time an energy audit occurs, the plant’s manufacturing efficiency improves.”