Going Green Can Mean Less Red for Your Bottom Line

Companies should combine automated activity-based costing and analytics to create not just dashboards measuring carbon emissions or waste generated, but also in-depth measures to evaluate the costs of recycling, retooling, conserving and maintaining equip

Many companies still view green and sustainability as little more than good public relations. Given the current economic state and the struggle most manufacturers are facing just to survive, undertaking green initiatives may seem like a low priority. But rethinking overall operations and committing to modest cost-saving expenditures can bring a large return on investment that positively and quickly affects both top-line profit and bottom-line costs -- especially if companies have a way to track costs and analyze results. Changing how a capital-intensive company acquires, deploys and manages production assets requires strong executive leadership and can reap tremendous bottom-line benefits if done thoughtfully and strategically.

Let's talk about the state of green initiatives -- especially in light of the economy. In a November 2008 study by the Economist Intelligence Unit, companies that consider their green initiatives part of a strategy to cut costs and increase profits are actually more likely to make green initiatives work. Those companies report they are "much stronger than their closest competitors in their ability to find and exploit new opportunities (20%, compared with 11% of respondents who do not say that revenue growth is their primary motivation). They are also much stronger in terms of profitability (24% versus 13%) and overall revenue growth (23% versus 11%.)"

Those motivated by revenue and profit growth are looking at real numbers. A March 23, 2009, Wall Street Journal article detailed an academic group's independent confirmation that a Subaru auto plant in Indiana not only decreased solid waste 99%, but also saved millions of dollars along the way. The article notes that Subaru has spent years studying and revamping processes to reach this point.

We believe savings can be achieved more quickly if companies combine automated activity-based costing and analytics to create not just dashboards measuring carbon emissions or waste generated, but also in-depth measures to evaluate the costs of recycling, retooling, conserving and maintaining equipment in the most green and cost-effective way possible.

It's the Little Things That Count.

If you ask a typical CEO what they could do today to reduce their carbon footprint or save money on energy bills, they might mutter something about replacing diesel trucks with hybrids or acquiring energy-efficient IT servers. Big ideas are easy to grasp -- and they're also quite expensive to execute. In reality, it's often a series of little ideas that will actually produce more in the long run.

In a factory setting, asset maintenance provides a great example of how money leaks from the company through a thousand loose valves or one poorly maintained piece of equipment. Compressed air, for instance, is not an environmentally friendly power source. To create 1 kilowatt of compressed air energy takes 10 kilowatts of power. The energy drain increases as small parts fail, jacking up the ratio to 12 or 13 kilowatts of power to create 1 kilowatt of compressed air. Recently, Gardner Denver, a leading supplier of industrial compressed air systems, estimated that over a 10-year period, keeping a 200 HP air system in tune can save more than $300,000 -- which equates to more than 2.000 metric tons of carbon dioxide emissions.

Manufacturers of equipment (like compressors) have tried to help their customers by including sensor technology that triggers an alert when the system is out of specification. As anyone who's managed a high-tech factory can tell you, many alerts turn out to be false positives so technicians often turn them off. Additionally, the amount of smart instrumentation is so prevalent now, which makes the sheer number of alerts so vast, there is no time to react in a timely way.

It doesn't have to be this way. Feeding the sensor data into predictive analytical models can help separate the true problems from the false positives, surface the highest-priority alerts first and help factories customize maintenance schedules to the way a piece of equipment is used. One-size-fits-all maintenance schedules can cost money, either because too much maintenance is performed or equipment is breaking down from lack of attention because the production environment varies from what the equipment's manufacturer assumed.

Predictive asset maintenance can play a critical role in extending the life of useful equipment in a cost-effective and energy-efficient manner. Many industries, utilities, oil and gas extraction and refining, and capital-intensive manufacturing are either investigating this avenue or deploying programs today.

What are Companies Waiting For?

Going green in a way that strategically and positively affects the bottom line requires a holistic approach that measures all initiatives, looks at their costs, analyzes different options and provides companies with a fresh view of their operations. Sustainability isn't a strategy for fat times -- it is one that can help companies through the lean times as well. If it is a real business case with real value, it makes sense to do it now not later. If you have been thinking of going green, get analytical to get the results that win with all stakeholders.

Michael Newkirk is a Product Marketing Manager for SAS in Cary, N.C. SAS is a leader in business intelligence applications with particular expertise in data quality and analytics. http://www.sas.com/

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