Bright ideas for cutting overheads

This month, how to be thrifty with electricity. By Alexandra Welch, 381 Consultancy.

This is the second in a series of articles on cutting overhead costs.

Whenever companies try to reduce overheads, the usual suspects tend to appear on the hit list. Telecommunications, energy, business travel, couriers, mail, office supplies, stationery and cleaning all go under the microscope but there are many other areas to look at. Although there are organisations offering specialist solutions in specific cost areas, a bespoke consultancy will ensure that all overheads are reviewed and any unnecessary costs identified. Solutions can then be tailored to the organisation’s needs.

Blind spots

Experience shows that clients are generally surprised by the major areas of saving, where costs can almost be halved. These surprise areas are known as “blind spots”. There are typically two or three of these where savings of between 30 and 50 per cent can be made without detriment to quality or service. These blind spots may well lie in the list of usual suspects but could be elsewhere.

Switch on to saving electricity

There is a bewildering array of choices when it comes to essential overhead costs such as electricity. Companies are bombarded with offers from apparently cheaper providers. After years of steady price reduction, the upturn in utility prices in recent years has come as a shock to businesses. Huge rises in electricity prices have meant that some contract rates are now no better than the tariff rates.

The benchmarking of prices and negotiations with the supplier are beginning to take second place to more technical solutions. There are structural changes that can be made that can lead to permanent savings. Setting the right level of KVa (kilo volt ampere), removing maximum demand charges or taking a sub-100 kilowatt supply and moving it into the half-hourly market, are all solutions that could reduce electricity costs.

Electricity providers are allowed by EU law to supply electricity at any voltage between 207v and 254v. Electricity suppliers aim to supply at the upper end of this scale, so that more kilowatt-hours (kWh) are chargeable to you.

Companies can reduce their kWh consumption by installing a device called a Voltage Ace. This helps to reduce bills and provides intangible savings by reducing maintenance and capital costs on machinery that will benefit from operating at an improved voltage. Machinery operating at a high voltage is often damaged by momentary variations in voltage, known as transients, and by high temperatures induced by the supply voltage. Rather than cutting the costs of each kWh, the Voltage Ace can increase the efficiency of the existing supply. The device makes no perceptible difference to the operation of electrical equipment.

The benefits of improving voltage include:

•  reduction in costs and energy use of up to 20 per cent
  
•  fewer carbon dioxide emissions
  
•  improved power quality
  
•  protection from voltage transients and short-term power surges.

Typical savings

Savings can be calculated before the device is even installed. If considered appropriate, a voltage logger can be temporarily set up on site. This records a voltage profile which will be used to calculate the level of cost savings that can be achieved by increasing the supply efficiency.

Despite the costs of these devices, businesses can still achieve a healthy return on investment. They have no adverse impact on the core business and in some cases may even enhance a company’s environmental standing. The devices have a useful working life of 30 years and savings will continue year on year.

As with all overhead cost reduction solutions, the success of improving voltage is specific to the organisation concerned. Although it may achieve huge savings for some organisations, for others it may be totally inappropriate.

For more information visit 381 consultancy.

Next month we continue our series on overhead reduction with a look at telecommunications.

September 2005