By: Bill Holmes, P.E.

I was in Madison for the week I taught each year in the University of Wisconsin’s Continuing Education Program in Energy Management. The director, Charles Dorgan, had heard me give a presentation titled, “An Energy Management Program that Produced Immediate Costs Savings of 30-50% in Six Buildings,” at an Energy Cost Avoidance in Educational Buildings Conference at the University of Michigan in Ann Arbor. After my talk, Chuck invited me to teach my methods in his program at UW.

Keith Kempski ran the specific courses that I taught and he was my contact. Keith was about my age and had also been in the energy conservation field since the beginning. He was a very knowledgeable guy who coordinated the program, worked with the presenters and taught part of each course. I’m pretty sure he also consulted with actual building owners. He struck me as one of those former hippie types who could never break away from the university scene; someone I enjoyed spending time with. We always went out for a couple of beers and to swap information about the latest in the world of energy conservation. Along with drinking beer and eating in some of the great restaurants in Madison, I always tried to learn everything I could from Keith, the other presenters and students.

Some of the students were operating and maintaining industrial plants and other large facilities all over the world. No BS’ing those guys. They could tell the wheat from the chaff and they weren’t there to waste their time; they wanted to learn things that would help them do their jobs better. Although it is something we have all heard, I had discovered for myself that you do actually learn more from teaching a course than the students do.

Energy Savings at Goodyear

One year, Keith introduced me to Al, the energy manager for Goodyear Tire and Rubber, worldwide. Yes, companies actually used to have energy managers back in the old days. It amuses me to read how the value of such a person is again being recognized. A fairly recent article in the New York Times noted an increasing trend among larger companies to hire a chief sustainability officer. Amazing! The discoveries that are being made. And the new titles, impressive!

Keith and Al and I were drinking a beer together when a group of four or five coeds came into the little bar and we did actually notice, so we weren’t complete geeks. We may have even told one of our Thermodynamics jokes loudly trying to impress them, I’m not sure. Anyway, we were talking about what we did in the real world. I think Keith had actually spent some time in the real world before he returned to the university. Al said he worked directly for the CEO of Goodyear, who had identified energy savings as the single largest opportunity to increase Goodyear’s profitability. We didn’t get into a lot of detail; we may have been having a little trouble concentrating after a couple of beers in that environment. But I attended Al’s talk the next day.

Al made three points that I have never forgotten. The first was the CEO’s statement that energy savings were the single largest opportunity to increase Goodyear’s profitability. At that particular time, their profits were 5 percent and their energy costs were 5 percent of their expenses. The CEO had told Al that reducing their utility costs by 20 percent, from percent to 4 percent, could essentially increase their profits by 20 percent. Think about that. He had asked, “Do you know how many more tires we would have to make and sell to increase our profits by 20 percent?” I don’t remember the actual numbers, but a simplified analysis, assuming their annual income was a billion dollars, and their profit was 5 percent, the profit would be $50 million and so would their energy costs. A 20 percent energy savings would be $10 million. Since energy is a direct overhead expense that comes off of the bottom line, their profit would increase to $60 million. That would be a lot of tires.

The second thing that has stuck in mind was the first thing they did, the thing that produced the greatest savings: they made every department pay their own utility costs. Obviously, that would have involved adding some type of an energy monitoring system or submetering to break out the individual costs, but it wasn’t rocket science. I read the following in 1993 and it just seems like common sense: “Submetering added to apartment houses in New York City resulted in a 15-30 percent drop in consumption. It is simple enough, if you have to pay for something you will use it more carefully.” (Peter H. Judd, Ph.D., Strategic Planning for Energy and the Environment, Vol. 13, No. 2, Fall 1993.) It had worked in apartments in New York and in Goodyear plants all over the world; there must be something to it.

The third point, which you may have missed; the most important one, was that Al was working directly for the CEO. The CEO was determined to reduce energy consumption and costs. Without that you have nothing. I don’t care what nice things you read about how every employee will respond once you point out the opportunity for them to increase their profitability by cutting energy costs. After I had been in business for a few years I stopped doing audits, surveys or studies to see if I could determine if a facility had potential opportunities to save energy. I realized that every single facility had potential. I decided that there were only two criteria; number one was, is there support from the very top management? Number two, was the facility spending enough on utilities to justify our efforts?

Why I Look for Top-Level Commitment

I had given a talk at an energy conference on the Notre Dame campus in South Bend, Indiana. After the talk, I remember a couple of men coming up to me. One said he was the director of facilities at the university and he wanted to meet me; he was a fan and had read all of the articles I had published in the Energy Engineering Journal. Of course that made me feel good; at least one person had actually read one of my articles other than my mother. We talked a little about his job, all of his responsibilities and demands on his time. It was another reinforcement from one of the guys in the trenches that I was on the right track.

The other man, Dick, said he was the plant engineer for a facility in northern Indiana owned by an automotive supplier. I really don’t remember much about him from that meeting but a few days later he called and said he was interested in putting an AutoPilot Monitoring System in his plant. Our salesman made an appointment and went to the plant. We made a proposal which they quickly accepted. They didn’t ask us to estimate savings or provide an ROI. They obviously had a need and understood our approach. Dick assigned Jarrod, one of his young engineers to be our contact point. Although I didn’t know it when we signed the agreement, Jarrod was enrolled in a company-wide Six Sigma training program and he needed a project. I originally had heard about Six Sigma when reading about Jack Welch and some of the things he did at G.E. to increase their profitability. (As a side note, we ended up supplying an AutoPilot System to G.E. for a Six Sigma Project that also produced tremendous savings.)

A number of companies had picked up the Six Sigma program and had instituted extensive training. The basic principles involve finding ways to measure and analyze management processes, make improvements, institute controls to ensure the improvements were effective, then go back to the beginning in a continuous loop. Since it was designed originally, I believe, for management processes, I didn’t know if many had applied it to utility costs, but that’s what Jarrod planned to do and he had the support of his boss.

We installed the system in their plant, put the PC in Jarrod’s office and trained him to use it; the training was a 15-minute process. The plant made rubber stripping for card doors and windows. Jarrod was young, bright and excited about finding ways to improve his plant. He knew the plant from top to bottom, all of the workers, and understood the equipment and the processes. It didn’t take him long. Right away he found some equipment running during periods when it should have been shut down and he found that the plant was paying a significant penalty every month for running one particular line that created a spike in the electrical demand during the middle of the day. He made some changes, used the monitoring system to evaluate the results, made some more changes and so on until he had his systems tuned the way he wanted for both peak production efficiency and energy usage.

Jarrod was spending a few days each month in Ohio attending Six Sigma training with employees from a number of their other plants. He would take his results back to the class where they would each discuss their projects. At the end of his training, he was to receive a Green Belt or Black Belt or something like that. Now Jarrod was this mild-mannered skinny guy who looked like he probably ran cross-country in high school with a slide rule hanging from his belt. Is it just me or does the idea that you take some type of a class where you are learning statistics, studying matrices, multivariable analysis and hypothesis testing, and you end up a killing machine, bother anybody else? You walk into accounting and say “I want to see that 17.1 percent savings in rubber band expenditures,” and when it’s only 16.9 percent, you assume the position, scream a few phrases you heard in a Bruce Lee movie, and kill them all with your bare hands? Come on – a Black Belt?

Anyway, Jarrod submitted the final report on his project along with the actual and projected savings and he won First Prize in the Six Sigma Training Program. Not only that, his project was identified as the Number One Opportunity to Cut Costs Corporate-Wide; the best opportunity to increase efficiency and profitability. After he got back to the plant, he called me and said “I have some great news. I won first prize. The company is going to implement this in all of their plants worldwide; they are going to put an AutoPilot System in every one.” Way to go Jarrod. Congratulations! I’m seeing myself as the next Al at Goodyear. I’ll get an office next to the CEO’s with a sign on the door that says “Number One Cost-Saving Guru” and desk with a nameplate that simply says “Thank Bill for Keeping Our Jobs out of Mexico.” I will be commuting back to Columbus in the CEO’s private jet. All of my hard work has finally paid off. They actually get it.

We set up a meeting with corporate. I drove up to the plant to meet with the corporate big shot, R. Crews something or other. Nice guy. Really impressed with what Jarrod had done, the results he produced. We took R. Crews through the plant, showed him the monitoring system and Jarrod explained how he used it. Well, “R.” (I later find out that his given name was Ralph, apparently a little too earthy for corporate America) says he will go back to his office and put things in motion. Finally! Just show them how to minimize waste, reduce overhead and increase profits and they will jump at the opportunity.

While I was waiting to be summoned to corporate headquarters, I got a call from Dick and he said he was going to retire. It had been a pleasure working together. He hoped to do consulting in the future and would be recommending my services. Jarrod and I talked every few weeks and he happened to mention that part of the reason Dick retired was a new plant manager had come in who was a real SOB. Apparently he and Dick bumped heads a few times and being in his early 60’s, Dick decided that life was too short and it was time to hang it up. I guess this guy was like a bull in a china shop and heads were rolling. As you might have guessed, it wasn’t too long before I got a call from Jarrod telling me he was leaving too. I went up to meet the plant manager and make whatever arrangements I could to transition to someone else. He wouldn’t meet with me; saw no value in what Jarrod and I had done. That was the last time I was ever there.

You’re thinking, “You’ve got to be kidding!” You think I’m making this up, right? I wish I were; I’m not smart enough to understand what happened. I wasn’t then and I’m not now. Where was Peter Drucker or Tom Peters when I needed them?

Maybe someone out there reading this can explain it to me. We installed our AutoPilot Energy Monitoring System in a plant owned by a world-wide company, a major U.S. and Japanese auto supplier. A really sharp engineer, one of their own employees used the system to whack a chunk off of their utility costs, a major overhead expense. He increased their profits. He used the project as a part of the Six Sigma Training Program he was in. The project won First Prize; not only that, it was identified as the Number One Cost-Saving Opportunity Corporate-Wide and the company decided to implement it in all of their plants. A new plant manager came in and cleaned house. The plant engineer left, Jarrod left, the project died and was never heard from again.

What am I missing? Can someone explain this to me? Is it because utility costs are just a fixed overhead expense and you can’t do anything about them anyway? You just have to pay them? You finally find some people who understand that utility dollars can be managed just like all other dollars and, in fact, may actually present a tremendous opportunity to increase profits. Then, not only do they talk about it, they do it and it is recognized all of the way to the very top. Please tell me why I never got that office, the rides in the corporate jet, the golf games and dinners at the CEO’s house. What am I missing here?

I hope they never identify having JP4 (jet fuel) in all of their corporate jets as the Number One Opportunity for their planes to fly successfully.

#http://www.sustainableplant.com/2012/01/how-to-quickly-lose-the-single-greatest-opportunity-to-increase-profits/?start=2