5 Ways Outsourcing is Changing Energy System Management for Manufacturers
The energy-as-a-service, equipment outsourcing model is beginning to take hold in the manufacturing industry - and it’s easy to see why. By outsourcing the, operation, maintenance and replacement responsibilities of energy systems like lighting and HVAC, manufacturers are circumnavigating new, rising challenges in the industry like staffing and skills shortages, time constraints and budget limitations. Instead, they are saving on operating and maintenance costs while freeing up staff for more strategic projects.
Below are the top 5 benefits manufacturers have realized from a technology outsourcing model.
1. Outsourcing Costs Less
Compared side by side with traditional energy systems management approaches, a service model will cost manufacturers significantly less over time. One of the biggest potential saving factors is favorable accounting treatment. The Sparkfund Technology Subscription™, for example, qualifies for off-balance sheet treatment*. By switching technology upgrades from a capital expense to an operating expense, industrial businesses can have their cake and eat it, too, by using their capital for other projects while still getting the energy system upgrades they need.
Outsourcing also adds cash value through several other cost-saving factors such as:
- Bulk procurement
- Condition-based maintenance
- More efficient technology operation and, therefore, lower energy use
- Reduced emergency repair costs
- Extended equipment life
- Anomaly detection
- Peak demand reduction
At the end of the day, a manufacturer gets all the benefits above for a predictable monthly fee.
2. Technology Outsourcing Includes Maintenance
In the manufacturing business, time is money. Just a single hour of downtime could cost manufacturers at least $100,000, according to Information Technology Intelligence Consulting. The costly risk of business interruptions can be mitigated with preventative and predictive maintenance. By following industry best practices and manufacturer recommendations, and from using data from smart-monitoring equipment, preventative and predictive maintenance schedules:
- Promote energy efficiency and reduce energy costs
- Avoid expensive emergency repairs
- Extend technology life, putting off expensive replacement projects
- Prevent costly technology downtime
Perhaps most importantly, relying on an outsourced maintenance provider means plant managers have one less thing on their to-do lists.
3. Outsourcing Optimizes System Performance
Implementing predictive maintenance would be impossible without monitoring and controls, which are a key part of the technology outsourcing offering. Installing advanced monitoring and controls provides visibility into how systems are performing, allowing the maintenance team to predict when a system failure is forthcoming and schedule servicing to address the failure before it occurs. While a manufacturer could implement monitoring, controls and a predictive maintenance strategy on their own, such a program involves particular expertise and the time and effort necessary to audit assets, establish databases, produce effective analysis and run pilot programs.
Subscribing to these services alleviates this strain because outsourcing provides an extensive network of experienced workers and innovative monitoring technology that otherwise might not be available to or feasible for manufacturers.
4. Existing Systems are Covered
A subscription type of model is often used as a mechanism to install new technology — but what about the old systems that are already installed? Unlike with traditional energy management systems, a comprehensive outsourcing approach covers both new and existing systems. This means manufacturers have the option of replacing their old systems, simply outsourcing the maintenance responsibilities of their existing systems, or implementing a combination of both. This allows manufacturers to focus precious resources on projects that improve overall operations and increase margins.
5. The Outsourcing Model Can Be used to Modernize Facilities
Modernizing manufacturing plants with the latest and greatest energy technology has myriad benefits, including improved working conditions and aesthetics, reduced energy spend, and a competitive edge against the competition. The Sparkfund Technology Subscription™ includes the replacement of old, ailing energy systems and covers 14 different types of energy technology, spanning from the latest in essential technologies like lighting, HVAC and backup generation to new, state-of-the-art technologies like electric vehicles and EV chargers, among others.
The Revolution Is Here
The outsourcing model may sound like something of the future, but many manufacturers are already implementing this model and finding success. In the case of one consumer goods manufacturer’s Midwestern plant, the organization saved 19% on LED lighting alone. The same organization scaled service agreement to include another plant on the West coast and saved 16% on lighting and HVAC. The numbers tell the full story — an outsourcing approach is revolutionizing how the manufacturing industry handles it ancillary technology systems.
*Sparkfund is not an accounting firm and this is not intended as accounting advice. Actual accounting treatment depends on customer tax and legal guidance.