How Manufacturers Use Energy Insights to Create Competitive Pricing
For many industrial and manufacturing businesses, energy can be a significant factor of cost of goods sold.
While it can be useful to see facility-wide energy usage trends, many of the biggest opportunities to improve efficiency and cut costs lie in specific equipment or processes that contribute to production. This not only enables manufacturers to uncover the issues dragging down efficiency, but also to factor the exact cost of energy into their pricing for customers.
A good example of this was recently highlighted in a profile of custom mold builder Automation Plastics for Plastics Technology magazine. Using energy intelligence software, Automation is evaluating how much energy its specific machines use in production. For example, this enabled the team to compare the efficiency between some of its newer and older machines to see exactly how much more power the older technology required to run.
Going forward, the team at Automation plans to use this capability to help inform its pricing. According to the report, Automation is planning to use energy intelligence software to chart how much energy is required to run some of the different cells in its plant. As a provider of custom molding, the company can use this insight to get a more accurate idea of the profitability of running these cells when making parts for its customers, according to the report. Not only will the company be able to determine the profitability of its current pricing structures, they could find ways to reduce energy costs in production and potentially create more competitive pricing for their customers.
This is a sign of a larger trend in the industrial and manufacturing world. As the industry gets better visibility into energy use and sustainability in production, manufacturers are increasingly expected to live up to that standard. Beyond keeping up with the growing number of manufacturers that are using energy intelligence to create more competitive pricing, many manufacturers need to abide by their customers' increasingly strict sustainability requirements. In a 2014 study of the sustainability reporting practices among 600 of the world's largest businesses, nonprofit corporate sustainability advocate Ceres found that 58% had set standards for the social and environmental practices among their suppliers. As investors and consumer come to expect businesses to minimize their carbon footprint, this pressure to improve sustainability in the supply chain will only intensify—making energy management critical to attracting and retaining customers.
For decades, energy was largely ignored as an uncontrollable cost of doing business. But as these trends continue to put pressure on businesses, the ability to gain insights into the root causes of inefficiency will become key to remaining competitive in the market.