The four levels of sustainability

Many people are familiar with the four stages of competence as described by Steven Covey and others. As companies develop their energy management and sustainability programs they go through similar levels.

Level 1 – Unconscious Incompetence – These are the companies that just don’t get it. Management sees no payback in sustainable programs, so any interest by employees in this area is quickly extinguished. They don’t see the point to industry or government regulations and will often try to circumvent even the most basic of regulations. They’ll often have comments like “energy management/sustainability doesn’t apply or doesn’t matter to our business”.

Level 2 – Conscious Incompetence – At this stage management still isn’t sure that there is a payback to sustainable practices, but they’ll let interested employees develop programs and take some steps, as long as they don’t have to spend money and it doesn’t take too much time. Any green initiatives are usually started by individual employees who are passionate about the topic and are willing to put their own time and effort into promoting it. While they meet government standards and regulations, they’ll only meet minimum standards.

At this level companies will be doing things like replacing their lights (but only if it is paid for by government subsidies), putting up posters to promote energy savings, having brown bag lunches and other  “feel good” activities. Programs are heavy on clichés without any in-depth understanding of the issues. If the employees that started the programs leave, the programs will likely not continue.

The approach at this level is tactical (see our other blog Energy Management – Is a Tactical or Strategic Approach Best For You?), the belief that technology alone can make a difference. Savings due to green initiatives are often hard to prove and will often diminish with time.

Common comments heard from these companies are “you can do a lot without spending money”, “little things make a big difference” and “it’s hard to get people to change”.

Level 3 – Conscious Competence – Management is supportive of sustainable programs at this level and are willing to spend money and time, but results do have to have a return on investment. In larger companies there will be employees whose job description includes energy management or sustainability, and they might be as high up as middle management. Green Teams will be prominent and actually have some influence over how things are done. Programs are driven by policy, not individuals, so they will continue even if individuals leave the company. Senior managers may have goals related to energy efficiency or sustainability written into their annual objectives.

A deeper understanding of the issues is evident and companies are implementing systematic procedures and implementing software to identify baseline activities as well as develop long-term plans for identifying energy savings and other sustainable issues. Carbon tracking software is used in smaller companies while larger firms are implementing EMIS (Energy Management Information Systems) or M&T (Monitoring & Targeting Software) to identify trends, prioritize spending and maintain increased gains over time.

The approach at this level is strategic, and it is understood that behavioural changes are the key to long-term success and planning.

Level 4 – Unconscious Competence – The progression from tactical to behavioural continues, at this level sustainability is ingrained as a cultural issue. Everything from the company’s products to it’s buildings and offices are developed with energy management and sustainability being primary considerations in all decisions. Management wholeheartedly supports, promotes and leads by example in all areas of sustainability, and there will be someone at the “C” level whose primary function is in this area. Most if not all employees will have annual sustainability goals in their annual objectives.

They’ll often ignore government regulations because they feel that they set the bar too low!

Probably the best known example of a company at his level is Interface, Inc. and their CEO, Ray Anderson. They changed everything including their products and manufacturing processes to further their goals of sustainability. They’re also profitable and set a high standard for others to follow.

Unfortunately most companies never rise above Level 2. Where do you think your company stands?

Energy Management – Is a Tactical or Strategic Approach Best For You?

Energy never used to be a problem. For industrial or manufacturing companies it may have been a major cost, but it was relatively stable and seldom a concern.

That has changed dramatically. Costs are changing all the time, with electricity costs in Ontario slated to be the highest in North America in the next few years, gas and oil are bouncing near record highs, natural gas costs are actually going down, but who knows for how long. Your customers are greening their supply chains and expect you to prove that you are green and getting greener. Utilities are being forced to reduce consumption and expect you to help them. The media is quick to jump on any “dirty” industries that aren’t seen to be doing their part to improve the environment. Even investors want to see quantified energy savings as they fear exposure to potential liabilities.

For these and many other reasons developing an energy management strategy has become a priority for many companies. Whether by plan or by accident, most strategies fall into two main types that I’ll call tactical and strategic. It isn’t a case of one being better than the other, more of what fits better with your goals.

In a tactical approach, the big question is what can I do now to reduce energy use? The usual first step is to have an energy audit performed on your facility. This will identify sources of waste and offer recommendations which most frequently relate to upgrading lighting, HVAC or compressed air systems. These are one time upgrades that are likely covered by a grant through the OPA or other agency, and once they’re done there is no further action. For something like a warehouse/distribution centre, office or light manufacturing facility this might be as much as can be done without making modifications to the building, which can be expensive or just not possible if you don’t own your space.

While the savings can be significant with a tactical approach and you can claim “green” points, there is no long term plan put into place. Behaviours don’t change, there are no ongoing goals or targets to encourage further energy conservation. And if your facility has a complex energy profile with many energy consuming items, it can be difficult to prioritize or see the results of any changes that are made. (See  How an M&T System Can Reduce Equipment Operating Costs)

With a strategic approach, results over a longer time are key. In this case the question is more likely to take the form of how can I reduce my energy use by 10% each and every year? A long term goal which has senior management support and is incorporated into employee annual performance goals can be very powerful. It creates an atmosphere that supports a culture of energy conservation and behaviour change, which has proven to be a far more effective tool than technological changes alone. While the same tools are used as with a tactical approach, the emphasis is on continuous improvement, not just one-time upgrades. Energy conservation becomes a “participation sport”!

Those who are familiar with Lean Manufacturing will see the similarities in approach. An emphasis on continuous improvement and the journey are key.

The best tool to help implement a strategic energy management plan is an Energy Management Information System (EMIS) using Utility Monitoring and Targeting (M&T) software with modeling capability. It allows you to develop benchmarks to identify and quantify current energy usage. By developing models based on production data, weather or any other energy drivers unique to your situation you can track and quantify performance over time as energy management plans are put into place. The cost benefits of changes in activity or capital investments can be quantified before any investments are made so projects can be prioritized to get the best returns. Once implemented, energy savings can be compared to expected results to ensure equipment is working as promised or if additional work or even refunds are necessary. All stake holders both within the company and externally can be shown actual quantifiable and ongoing results to foster confidence in the plan and encourage additional conservation activities.

Whether you take a tactical or strategic approach to energy management depends on your specific circumstances and goals, but “business as usual” is no longer an option when it comes to energy!

Win an order, lose your company

Some years ago when I was selling capital equipment we participated in an internet auction. The potential client was one of our bigger customers and the project was around a half a million dollars in value so it was a good opportunity, although internet auctions weren’t our favourite way to sell equipment due to the emphasis on price.

Our primary competitor was the industry leader and this was one of their strongest products, but we had comparable technology and were somewhat smaller so hopefully our lower overhead would allow us to offer a better price. We had a reasonably good ERP system and had a solid handle on our costs, so we decided on a competitive margin and came up with our lowest possible offer. We not only lost the order, but our competitor’s price was so low it was well below our cost, much less our asking price. After much gnashing of teeth and discussion, we had to assume that our competitor knew something we didn’t and just had better control of their costs.

Fast forward a few years and low and behold our esteemed competitor that had once been an industry favourite was bankrupt and shutdown. During an interview one of their former managers said “We never really knew if or how much money we made on a shipment”! Aha! The truth comes out, after all these years!

Turns out they had an ancient ERP system that was so old and clumsy that they couldn’t get any consistent data out of it, their pricing was a total guess. Needless to say, once the technology gap between themselves and their competitors narrowed and the declining economy made competitive pricing a priority, they either lost bids or lost money on the projects they won (including ours), eventually going broke.

The morals of this story:

Your competitors are never as good as you fear. Everyone has to work with the same raw materials and the same people with all their habits and foibles. As industry conditions and the economy change, their weaknesses will eventually come out.

The flower of success contains the seeds of failure. My former competitor had been the industry leader for many years until the economy started to slow down. Once price become the biggest factor for their customers in a slowing economy, what had been a minor problem became a fatal cancer.

Put systems into place before you need them. Business conditions change all the time, you have to be ready for every eventuality. Upgrading software such as ERP or implementing new procedures is a lot easier when you’re on top than when you’re on the way down, it’s tough to fight momentum.

Understand and control your costs. While you might think that selling price is not a major factor in your success today, controlling your costs is. SME’s often aren’t overly concerned with controlling costs as long as they make a profit at the end of the year. As they grow and get involved with larger projects small variations can grow out of control. The sooner you can get control of your real costs and identify what needs attention, the better.

And above all, avoid internet auctions, they’re abominations!

Can ERP solve a service problem?

While an Enterprise Resource Planning (ERP) software system can provide many benefits to a small to mid-size business (SME), business owners often struggle with the decision to purchase a new system because of the costs. They usually have an accounting software package already, and perhaps another software  system in purchasing or the plant, is it really worth the time and cost to upgrade?

A fully integrated ERP system can have benefits far beyond accounting and inventory, it can open doors to more efficient operations and eliminate problems that you might not think were even related.

As companies grow they often develop systems that are based on the skills of the individuals involved rather than with any overall plan, there just isn’t enough time in a day. As the company grows, it eventually reaches a point where they can’t rely on just the memories of key people, systems have to be developed that operate consistently regardless of the people involved. Companies that introduce systems that take them to the next level continue to grow and prosper.

For example, the owner of a machinery manufacturer was struggling with what he thought was a service problem. He had more clients demanding service than he had service techs and he couldn’t justify finding and training new techs. But was service really the issue? It turned out that the company didn’t have any capacity planning capability. When they were chasing new business, they quoted whatever delivery time they thought would get them the order, based on their experience with similar past orders. As long as they only had a couple of major orders on the go at one time, they could keep a lid on things just by memory. When they got busy, people became overwhelmed, small things were overlooked and the system (such as it was) broke down.

With a paper based order entry system, they were behind before they even started. Engineering would be rushed and unable to create a complete bill of materials, but that would be “fixed on the floor as the guys had made something like this before”. Without the bill of materials smaller parts weren’t ordered and put into inventory so there were constant delays as parts had to be brought in, slowing production. Since the owner had to approve significant purchases, there were further delays as he was often on the road or in meetings. As the delays built up, the customer would start screaming, adding more pressure. When the machine was finally built, the testing was rushed and incomplete as the service managers who normally did the testing were in the field (fixing the last delayed project), so the order was rushed out the door with the hope that the service techs would fix any problems on start-up. Since solving problems in the field takes many times longer and costs more than doing it in the shop, there were cost overruns and unhappy customers, and a service problem.

How did an ERP system remedy the situation? By providing capacity planning capabilities, they could predict how a new order would affect the flow so they could plan where they might have to either reschedule assets, add temporary capacity or farm out work. Even if they had to commit to a shorter delivery time to get an order they could at least see the bottlenecks beforehand so they could plan around them. Since they made similar machines with only a few customized features, they could call up previous orders to quickly develop a complete bill of materials to reduce engineering and have all the parts in inventory before they were needed. This was a major improvement as chasing parts was a primary cause of delays on the floor. Since the owner had access to a daily screen of planned purchases on his laptop, he could approve everything in a few minutes per day via remote access, eliminating another delay. With improved planning and inventory management, even multiple projects were completed on schedule, leaving time for testing and debugging in the plant. And with start-ups taking less time, the service techs were able to handle more projects, solving the service problem, which was never really a service problem at all!

If you would like to find out  how we can help your business grow to the next level, contact us today!

Small businesses can use ERP to find hidden costs and increase profit

Keeping control of costs is crucial to the success of any business, but it’s particularly important for an SME (small to mid-size business) as any errors can have a greater impact on them than on larger businesses.

Most companies have a good handle on the “big ticket” items, the major components that go into either a discrete manufactured item or a chemical process. It’s tracking the lesser costs that can create problems as freight, customs and a host of many other charges are hard to track and split amongst many items, especially if they come in after the project has been shipped.

Many companies will just gather these costs into a “slush fund” often called overhead, and recover it by applying a fixed percentage against the bigger costs of a project, such as a markup on estimated costs or labour. While this can save time and effort, it can have major consequences as the company grows and takes on larger projects. Those “minor” costs tend to grow out of proportion to sales and can lead to a nasty surprise at the end of a project or accounting period. As you quote on bigger projects where there is more competition just adding a fixed percentage could make your prices uncompetitive. Also, it can hide the difference between profitable and unprofitable products.

Our ERP software allows SME’s to track each individual cost and assign it to a specific project so they can know the real cost of every item that is bought or produced. Even if the cost needs to split amongst several orders or if it comes in after the order is shipped, anything that relates to a specific order can recorded and tracked.

The results of this greater insight can be surprising. One client in the chemical processing sector found that his real cost on a specific item was actually 80% higher than the number they had been using with their old software system! Once he had overcome his disbelief and confirmed that the numbers were indeed correct, he came to a couple of realizations. First and most obvious, it explained why their year-end summaries never seemed to reflect what they thought were good sales.

More importantly, once they took a close look at the numbers they not only realized how much more significant some costs had been than they had previously believed, but now they could see a plan for moving forward with effective cost cutting programs. previously, they had introduced initiatives to lower their costs but were frustrated by the lack of results which they now knew was because they had been targeting the wrong items. Once they knew what was actually affecting their costs they could identify and target  specific areas with much greater effect.

At the end of the day, the greater insight provided by the software gave them a far better understanding of the factors that affected their prices, identified areas for cost savings and made them more competitive in their markets giving them a fast return on their investment in ERP software.

If you’d like to find out how we can help you become more competitive, contact us today!

ERP for SME’s

For any size business, choosing an Enterprise Resource Planning (ERP) software system is a challenging proposition, but that’s particularly true for the small to mid-size market (SME). All the major software suppliers want to sell million dollar systems to multi-nationals. Their offerings to the SME market are either “dumbed down” versions of their larger programs, or they just put their label on a package supplied by a third party developer. Either way, an SME buyer can wind up paying top dollar for a package that wasn’t designed for their unique needs, or they have technical issues that take forever to get resolved.

We represent a company that provides an ERP solution designed specifically for small and mid-size businesses and targets their unique needs. You get to deal directly with people who have over thirty years of experience in this market and understand the need for flexibility, reliability and low risk. In fact, they’re the only company in the industry that offers a full money-back guarantee on the software and implementation!

The first thing to consider if you are thinking about a new ERP system is to write down your specific business reasons for buying a new system. Most people get too many quotes and get overwhelmed. If you don’t have a plan going in you could easily lose track of what of you need and buy what someone is trying to sell you rather than what you need.

Some of the most common reasons to upgrade:

You’ve outgrown your software – Many SME’s start with Quickbooks, Simply Accounting or some other generic package. They’re good products, but as you grow your business and expand your capabilities, you will outgrow them.

Multiple Software Systems – As holes developed in your capabilities, you added software to address each particular need. Now you have several systems that don’t talk to each other, aren’t used across departments and it’s increasingly difficult to get the information that you need, when you need it.

Month-ends are getting longer – Related to the last point, accounting takes longer and longer to get all the information together to close out each month as they reconcile different software systems and spreadsheets.

Your clients want more – Are you losing business or not making profits because you don’t have access to current information about your products, or does it take too long to get it? Is your inventory system not current, leading to delays? Worst of all, are your customers starting to comment that you’re not performing as well as you used to?

The solution to all the above is an Integrated Business Solution that will give you current access to all the information that you need to run your business in real-time, without having to wait for a month-end process. Using an integrated solution allows you to track accounting, multi-warehouse inventory, a planned manufacturing system, purchasing and inventory as well as giving your salesforce immediate access to current pricing and inventory levels in multiple currencies so you can respond to your customers quickly and reliably.

If you feel like you’re spending more time trying to work with your existing software than you are on actually doing business, it’s time to look at a new ERP solution!

Some satisfied clients talk about the benefits of our software:

“We needed the tools to obtain accurate reports, better processing, efficient inventory management, better sales tracking… your system not only fit the bill, it did it easily…so we noticed right from the start… an overall increase in the clarity of our mission…”

VP, mid-size manufacturer

“Ours is a high-volume, high inventory rotation environment. We receive raw materials by the trainload, and deliver to scores of customers throughout the state. I wanted great software and I wanted to make sure that it was easy to use, I recommend it for any size business.”

Operations Manager, distributor

“Absolutely critical to our operational control is the ability to track supply chain distribution from start to finish. We assessed quite a few possible software solutions, but it was your system that fit the bill. Through its batch tracking capabilities, we gain the advantage of reliable identification of product and component batches – so critical for HACCP (Hazard Analysis and Critical Control Point) in the manufacture and processing of food products.”

VP Operations & Planning, food processor

Contact us today to find out how we can help your small or mid-size business become more efficient and profitable!

Increase Productivity and Overall Equipment Effectiveness

Operational and Enterprise Intelligence solutions acquire data in real-time and provide enterprise-wide visibility, including key operating data, consumption, profitability, efficiencies, capacity and cost data. These systems are easy to deploy, asset agnostic and have payback periods of only a few months.

When a leading manufacturer of quality packaging materials in North and Central America wanted to improve plant performance and reduce operational costs, they faced two main challenges. The first was transitioning to an automated  data collection process without significant downtime, the second was to translate the automated data into a measurable value that could tie-in with their operator’s incentive program.

Our OEM provided a real-time reporting and analysis solution that was rolled out to nine plants in total. Management was provided with real-time reporting and analysis capabilities that provided visibility into operations to support planning and strategic decision making. At the plant level, they provided real-time visibility of equipment performance to each operator with an LED display located above assets on the plant floor which empowered the operator to take immediate action to improve machine performance as issues occur rather than after the fact.

Installation of the equipment in each plant was easy and completed in only half a day with virtually no downtime. According to the client’s project manager, “The product was highly intuitive and within a few hours our operators were trained and interfacing with the system without skipping a beat”.

As a result of the implementation, the client achieved their goals of improving plant performance and reducing costs. Make ready times were reduced by 36% and run speeds increased by an average of 23%.  This was accomplished with significantly reduced operator involvement as there was also a 65% reduction in labour required for reporting.  “Eliminating our manual data took out the guesswork. We no longer question the reliability of our machine data so we are able to make production decisions with confidence”, according to the project manager.

The client had incentive programs in place where operators received bonuses based on individual accomplishments. With the new system installed the company was able to assign accountability and identify key contributors to reward them appropriately during performance reviews. As a result, operators aspired to higher levels of operational excellence, promoting a culture of continuous improvement.

“Our operators are more proactive and better equipped to improve the output of their machines while supporting our productivity goals. At the same time, our management team is able to make better and more informed decisions based on real-time equipment information. Within the first few weeks of installing the system we identified a significant amount of unused capacity on our die cutting machines. Knowing exactly where to focus our efforts, we increased our Overall Equipment Effectiveness (OEE) by 40%. With this additional capacity, we deferred the purchase of additional equipment, saving us millions of dollars in capital investment” according to the client.

The client’s project manager said  “We are truly leveraging the skills and knowledge of operators with this system. It has elevated us to a whole new level of productivity and we are closer to our vision of manufacturing excellence”.

Can a small business reduce it’s carbon footprint?

You’ve heard about the benefits to your business of “going green”. Sustainability is first and foremost about reducing waste in all its forms, which means reduced costs. Buyers like Walmart are choosing suppliers based on their sustainability scores. It improves your reputation to be seen as being green, which means improved branding plus more potential employees are attracted to your company. Or like many people, you want to leave a better planet and company to your kids. But if you’re a small company, perhaps just a group of people working out of a rented space, what can you do to make a difference?

Actually, there’s a lot that you can do. But there are three crucial factors to think about before you get started:

Talk to the boss – It’s crucial to have the support of senior management. Unless the boss approves of the time and money commitments and holds people accountable, your green initiative won’t go anywhere.

Plan and Measure – Before you start making changes, you need to know where you’re starting from and what effect your actions have. You need to quantify results to avoid charges of greenwashing, plus it keeps people motivated if they can see the results of their efforts. It’s the same as dieting, if you step on the scales every day it’s rewarding to see results and a motivator to continue your efforts.

The best tool for this is Carbon Footprint software. GOBI is a great example, it’s an inexpensive, easy to use carbon management software package that organizations of all sizes can use to measure, report and reduce their carbon footprints and GHG emissions.

The Critical Choice – While it’s charming to lease space in an old mansion, unless it’s seen major renovations recently it’s likely a carbon sinkhole. Look into LEED certification and make sure the building you work in is built and maintained to current standards, otherwise managing heating, cooling and lighting could be problematical.

Now that you’ve laid the groundwork, what steps can you actually take? Sustainable Waterloo is an impressive organization that promotes sustainability in businesses and their annual report describes the measures that their small company clients have found to be effective. Some examples:

Think out of the box – Getting to and from your “box” (otherwise known as your office) can have a big impact. Instead of driving their cars, can your employees carpool, take transit or bike to work? Work travel is a big source of GHG (greenhouse gas emissions). While face to face contact is still crucial in business, other options are increasingly available and accepted, such a teleconferencing, webinars, etc.

Flick the switch – An office building found that their peak energy use for the entire year came at 3AM on a Tuesday morning in February. It was like a science fiction movie, heat on full blast, all the lights and computers were on, coffee was brewing, but no human had been or was going to be in the building for many hours. With peak energy pricing in effect, this was a huge waste of money and energy. Turn it off or turn it down!

Think before you throw – Somewhere around 40% of printed documents aren’t necessary, and a significant portion of them are forgotten and don’t even get picked up from the printer! By reducing and recycling paper, bottled water, paper towels and other materials you can make a big impact.

By developing and implementing a plan and measuring the results with GOBI, even a small business can significantly reduce their carbon footprint. If you buy carbon offsets to match what you can’t eliminate, you can actually reduce your GHG emissions by 100%!

How a Monitoring and Targeting System Can Reduce Equipment Operating Costs

When the recession hit the automotive industry a few years ago, an Ontario based  supplier of highly engineered sintered metal parts used in automotive power trains faced a  major challenge. They had to cut back to a five day production week, but didn’t know the most efficient way to operate their furnaces. Should they be shutdown completely over the weekend or idle at full or setback temperature? The natural gas fired furnaces were difficult to restart and bring back up to operating temperature, would the gas savings justify the extra work?

While equipment manufacturers are great at designing equipment, they have little experience with operating machinery under production conditions, and they almost never address energy efficiency so there were no written procedures available.

Utility consumption reports were of little use, they weren’t current and only monitored the mainline coming into the plant. Trying to manage energy with historical consumption reports is like driving a car by only looking in the rear-view mirror – you know where you’ve been, but have no way of planning ahead. As the Operations Manager said, “when we made operating changes, the impact was lost in the whole scope of the factory”.

The solution was to install an Energy Monitoring and Targeting system, also known as EM&T, M&T or EMIS, Energy Management Information System. The M&T system provided vastly improved insight into the operation of the equipment. First, by adding sub-meters to each line, managers were able to view energy use in real time through their web-browsers, giving operators and managers immediate feedback on changes to the line.

Next, energy models were developed by identifying the key drivers that affected each line, such as throughput rates, temperature settings and even the outside weather. By comparing energy use against the models in real time, managers were able to see the effects of changes to the line, and how they varied against the model. They could develop “what-if” scenarios of different operating and shut-down procedures to optimize energy performance.

The end result? By optimizing their operating and shutdown procedures, the company reduced energy costs by $240,000 per year, without any additional capital expenditures. They also found that one of their two “identical” furnaces actually used 10% less gas than the other, which became a key factor in planning production.

With the M&T system in place, the Operations Manager said “we have precise information on how much energy we’re using in different parts of our processes and we can see changes instantly – both positive and negative. And anybody can use it. For instance, the people in charge of the furnaces can check for themselves. It gets the information to the people who need it – those running vital operations.”

To find out how Energy Monitoring and Targeting can help you reduce costs and develop a long-term energy management plan, contact us at