Managing In-House Energy Resources for Competitive Advantage

Abstract

Most energy intensive product manufacturing organizations rely upon in-house plant organizations to provide their primary sources of energy: power, steam and fuel. Unlike the manufacturing side of the business, however, the energy supply side of the business has both an obligation to serve (like a regulated utility) and usually operates in the absence of direct competitive pressures. It is therefore subject to more opportunities for becoming inefficient. Many corporate managements have decided that staff support functions within their companies are therefore inherently inefficient, and need to be jettisoned. Consequently, it has become fashionable to announce massive support function terminations, accompanied by wholesale "outsourcing" of the same support functions. Within the process industries, outsourcing is nothing new, but the extent of it is becoming enormous. Companies that have long since eliminated their in-house project construction forces, design drafting forces, turnaround maintenance forces and equipment procurement staffs are now dumping their in-house process design capability, information systems capability, R&D capability, recurring maintenance capability, and in some cases their energy supply capability. Having recently completed 3 competitive benchmarking projects in the fields of capital project development, process plant field construction practices, and manufacturing maintenance practices, we believe that the lessons learned with respect to creating and managing competitive staff functions can be applied to in-house energy supply functions. This paper identifies the major differences between the best staff organizations and the average staff support organizations, why their performance record varies, and lessons for achieving the same results as the best organizations within the domain of an in-house staff function.