Cost reduction is a high-priority goal for most companies that have transitioned from stable growth to a fight for survival in current crisis conditions. For many the first anti-crisis measures were large-scale cuts in the workforce and foregoing comforts and unproductive overhead costs. These measures failed to yield the anticipated results, but led instead to a decline in production output, in some cases an increase in the cost of goods sold, and no improvement in the competitiveness of the products produced. The realization arises that there is a need to analyze cost structures and determine the most significant approaches that can help companies not only stay afloat during the recession, but also put the company in a leading position once growth returns.
One area where organizations may look to reduce costs is in the area of energy costs. The share of energy expenditures in the overall infrastructure costs of enterprises and organizations depends on specific features of the business, its nature of activity, level of realization of energy-saving programs, etc. Nonetheless, it is possible to single out general patterns that characterize most industrial enterprises and service sector organizations.
The overall infrastructure costs for heat and energy supply consist of expenditures dependent upon the implemented design solutions of the facility, and expenditures for its servicing and operation. Therefore it is reasonable to wage a war against infrastructure costs by improving the quality and effectiveness both of the installed design solutions and of the servicing and operation.
Which costs are dependent on the design solution in the area of the enterprise’s engineering and power systems?
At the design-solution stage, a choice is made between:
1. the primary and reserve fuel types;
2. an energy supply plan that includes the selection of equipment, the generation plan (co-generation, tri-generation), organization of the heat-supply system (optimization of hydraulic and temperature parameters, etc), and the electrical supply (choice and location of equipment);
3. the level of automation; and
4. energy-saving devices and materials (installation of radiator thermostats yields a saving of 6-7%; installation of controllers, 10-15%; installation of heat meters, 10-40%; creation of systems of radiant and/or air heating, 10-25%; and convectors with mechanical agitators, 7%).
What do costs for servicing and operation include?
Costs for servicing and operation energy solutions include the documentation proving and accompanying all work being carried out, dealings with inspection and supervisory agencies, performance of routine service, performance of preventive service, accounting costs, organizational and disciplinary pressures on personnel (work routines), etc. At the same time, it is well known that automation, metering, and monitoring (computer-controlled release of heat) bring a 3% saving. Also important is motivation of personnel (work schedule, promotion of energy saving).
From everything above, it is evident that there are two approaches, which are different in principle:
1. enhancing the effectiveness of the engineering systems
2. enhancing the effectiveness of their maintenance and operation
If almost everyone agrees with the first approach, and the level of realization of energy-effective solutions depends only on the will of the leadership and the capabilities of the enterprise, with regard to the second approach there are heated debates over how to organize maintenance and operation more sensibly. Which is better – to try to enhance the effectiveness and quality of maintenance through in-house services, or to outsource all the engineering systems to a specialized organization?
To understand which alternative is reliable and economical, it is necessary to understand what is most desirable for the owners of the enterprise.
According to the results of a survey our organization conducted, the overwhelming majority of enterprises would like to:
1. avoid solving routine matters with inspection and supervisory agencies with regard to the enterprise’s power and engineering systems;
2. avoid unpredictability for the enterprise’s budget with regard to operational costs;
3. minimize the consequences of possible downtime of the power and engineering equipment; and
4. avoid excess outlays on upkeep of the power and engineering systems, both at the present time and in the future.
How are operation issues being solved today in enterprises that have in-house engineering services?
Most often, according to this model, uncomplicated tasks are completed in-house. This is because in most organizations the chief engineer is a narrow specialist in either electrical or heat supply. If companies attempt to solve all problems with in-house manpower alone, then it is extremely complicated and expensive because of the need to hire additional specialists on either a full or part-time basis to tackle more difficult tasks. Hence, it is understandable that maintenance based on in-house capacities is a compromise decision, which does not yield satisfactory results for any of the problems of the enterprise that are related to the operation of engineering systems, and which entails additional and unknown costs that make it difficult to budget with any accuracy.
And after all, it is indeed difficult to maintain and improve energy solutions in-house with the need to react successfully to dynamically changing external conditions, including inspections and supervisory agencies, evolving federal legislation and ecological standards, the need to upgrade the qualifications of personnel, and especially the need to predict costs and market developments. This does not even take into account the all the problems connected with personnel (selection, training, and certification, providing them with gear and tools, remuneration of labor, reimbursements, sick pay, leave, payroll taxes, etc).
How are these problems solved by outsourcing?
These problems are solved, above all, by an outsourcing company that creates a systematic approach to work at the facility, putting together all the necessary paperwork, and using all its resources to bring the infrastructure of the enterprise or organization in line with the demands being made now by the governmental inspection and supervisory agencies. A professionally operated outsourcing company has adequate skills and resources to solve all problems arising regarding servicing and emergencies, and can cooperate with in-house resources. This reduces expenditures in terms of both cost and time. There are even examples of outsourcing companies that compensate a certain share of costs for downtime of energy systems, and to give firm guarantees for the repair time of defects in the equipment.
What other reasons are there for operation of a facility’s infrastructure by a specialized organization?
There are several reasons to outsource energy services:
1. an integrated approach to operation of all the engineering systems of energy-consuming facilities;
2. a staff of certified, qualified specialists and, as a rule, broad and successful experience in installing and operating systems for heating, water supply, ventilation, air-conditioning, elevators and escalators, video monitor systems, dispatch systems, fuel reservoirs, gas mains, etc.
3. a uniform payment schedule spread out over the year, taking into account expenses for emergency repairs as well.
The cost of services for technical servicing and operation depends primarily on the amount, capacity, and condition of the equipment and engineering networks of the facility, while the only additional expenses of the facility’s owner throughout the year may be outlays on acquiring equipment that has broken down. All this makes it possible to plan with maximum precision the annual operating budget for the facility.
Summing up, one can conclude: a specialized operating organization copes with issues of servicing and emergency service, as well as with the operation of the facility as a whole, far more effectively than in-house capacities, especially in crisis conditions. Although this is the rule, there are exceptions. Therefore it is also good to remember that in making any decision, one has to be guided by common sense and make a detailed analysis of the situation.
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