Energy deregulation has made it mandatory for businesses to react quickly to a rapidly changing market in order to optimize energy expenditures. But how does an executive address these issues in a timely manner without it being at the expense of core business functions? Some companies, with much success, have turned to independent energy management consultants to help them assess energy use, suggest alternative purchasing strategies, and even represent clients in negotiations with suppliers.
One such company is Greif, the worldwide industrial packaging products and services supplier. With more than 75 operating locations within North America, managing the company's energy expenditures is complex to say the least. That's why, in the fall of 2004, they turned to Summit Energy, an independent energy management specialist. Summit is not owned by, nor is it affiliated with, any utility or supply company. Its relationships with many suppliers and utilities enable it to negotiate the best possible contracts for its clients.
"Due to the number of manufacturing locations within North America, understanding the complexities and regulations of the energy markets by state can be extremely time and resource intensive. For most locations, we did not have the internal resources to know when the best time was to buy in every single market, nor could we feasibly build such a team," said Myron Gramelspacher, Greif's vice president of Global Logistics & Indirects. Gramelspacher's position requires him to manage not only energy, but a number of other spend categories as well. Summit provided him with the resources, training, input and budgeting support that have allowed him to greatly increase his energy acumen. "Now, we are able to service our manufacturing sites much better, and manage energy overall much more effectively," said Gramelspacher.
Don't Just Manage -- Optimize
Like many executives charged with the management of energy for their companies, Gramelspacher's responsibilities extend beyond the efficient management and sourcing of energy resources. While his primary focus has been in North America, Gramelspacher also has responsibility for sharing best practices and driving a global energy strategy in collaboration with the various business units. During the past several months, Greif has undertaken initiatives around the world to focus on the reduction in consumption of energy through energy workshops and audits.
To achieve these goals, Greif moved from a decentralized energy management and procurement approach to a centralized one within North America. Gramelspacher needed a way to have timely, relevant and actionable information -- from a variety of locations with disparate information-capturing practices -- at his fingertips. The answer was a strategic data management plan and the implementation of Summit's dashboarDView online reporting tool, which provides real-time, site-specific natural gas and electricity procurement reports, view savings projections and weekly risk management updates, as well as track the progress of implementing the overall strategic energy plan.
The next step was to assess energy procurement and move the company into a strategic energy sourcing mode. This helped identify strategic buying opportunities when they occurred, as opposed to simply renegotiating contracts at their time of expiration. Grief's energy procurement is now intelligence-driven, giving them a true advantage in the marketplace. "We wanted to make sure we were getting the right suppliers and were aggressive, taking action when the markets demanded," said Gramelspacher. "Rather than waiting around and renewing our contract once a year, we wanted to go out when the market provided opportunity to reduce costs or mitigate risk."
An outgrowth of the "smart procurement" strategy is the development of an internal entity that could make decisions on time-sensitive initiatives -- quickly. A formal Energy Risk Management Committee was set up, made up of a few key executives who could assess and authorize the implementation of recommendations in a timely manner to take advantage of volatile market conditions. "The idea of having a committee focused on natural gas exposure was introduced and implemented," said Gramelspacher. "Now, the committee is well-established and it has grown in scope to include other key commodities."
Efficient -- and Responsible -- Usage
Next Greif began taking a look at exactly how the company was using its energy. Key issues related to reducing consumption as well as minimizing energy waste and environmental impact are on the radar screen. Grief is working diligently to reduce kilowatt consumption to maintain competitiveness for their customers.
Results for Today -- and Beyond
Data centralization techniques, sourcing resources and risk management strategies have allowed Greif executives to become more informed -- but less involved when it comes to energy management. They no longer have to spend time chasing down information and invoices -- the information is readily available on-line. That leads to greater communication between the corporate supply chain staff and plant level personnel. And that, in turn, lets the plants focus on core production issues.
What's more, new locations get up and running on the energy management program quickly and easily, maximizing the consulting expenditure even further. So they, too, become energy management experts -- by letting someone else do it for them.
Steve Wilhite is president & CEO of Summit Energy. Summit Energy currently represents more than 10,000 commercial and industrial facilities in all 50 states, Canada, Mexico, Puerto Rico and Europe. Summit harvests value for clients through strategic energy procurement and price risk management in the increasingly volatile energy marketplace. For more information on Summit Energy Services, please visit http://www.summitenergy.com.