Chemical Management Services by MO8kc34A

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									       Efficiency Performance
              Contracting
   Reducing Wastes and Costs through
       Innovative Supply Contracts
                                         iSU
             Energy Management Seminar
                 November 13, 2008


Thomas J. Bierma, MBA, Ph.D.,
  Environmental Health Program
  Illinois State University
           Research since 1995
                                                          iSU

      Change incentives for suppliers

   to pay for performance and savings
             rather than “stuff.”

                     Does it work?
Funded by the Illinois Sustainable Technology Center and the
  U.S. Environmental Protection Agency
             Manufacturing SME
Typical Spend in Key Non-Core Areas
    Plant F - $1,009k
        Chemicals Wst&w tr
           6%       5%


                               Electricity
Paint                             32%
10%                                          Total spend:
                                              $0.5 – $2 million/yr

                                             Energy spend:
                                             $0.2 – $.9 million/yr
                             Nat. Gas
        Tooling
                              12%
         35%
           Question…                                                iSU
How much could these costs be
reduced by implementing projects with
a payback period of….
                                Plant F - $1,009k
1 year?                      Chemicals
                                6%
                                         Wst&w tr
                                           5%



2 years?             Paint
                     10%
                                                      Electricity
                                                         32%


3 years?
4 years?
                                                    Nat. Gas
                             Tooling
                                                     12%
                              35%
          Question…               iSU

Yet these opportunities go untapped
year after year…

Why?
        A Major Cause…                               iSU
             Core Competence
“The key skills or knowledge needed to build and maintain a
               competitive edge.” (Quinn 1994).




These technologies lie outside the core
competence of the business, so time and money
go elsewhere.
          Question…                  iSU

Since suppliers have this core
competence…

can we create incentives so suppliers
apply that competence to increase
customer efficiency rather than only sell
them “stuff?”
           Answer…                                              iSU
For chemicals – Absolutely!

                            Plant F - $1,009k
                         Chemicals   Wst&w tr
                            6%         5%



Chemical         Paint
                 10%
                                                  Electricity
                                                     32%


Management
Services
(CMS)                                           Nat. Gas
                         Tooling
                                                 12%
                          35%
           Answer…                                               iSU
For tooling – Absolutely!

                             Plant F - $1,009k
                          Chemicals   Wst&w tr
                             6%         5%



 Tooling          Paint
                  10%
                                                   Electricity
                                                      32%


 Management
 Contracts
                                                 Nat. Gas
                          Tooling
                                                  12%
                           35%
                 Answer…                                          iSU
For energy in the M.U.S.H market –
Absolutely!
                              Plant F - $1,009k
                           Chemicals   Wst&w tr
                              6%         5%




ESCOs              Paint
                   10%
                                                    Electricity
                                                       32%




Energy savings
performance
contracts                  Tooling
                                                  Nat. Gas
                                                   12%
                            35%
            Question…                                        iSU

Can we learn from these examples to
create a market in energy savings
outside the M.U.S.H. market? (for the
rest of us?)               Plant F - $1,009k
                                    Chemicals   Wst&w tr
                                       6%         5%


                                                             Electricity
                            Paint                               32%
                            10%




                                                           Nat. Gas
                                    Tooling
                                                            12%
                                     35%
    What the customer
   (energy user) wants                iSU

1. Savings and performance – not
   “stuff”

2. Work with one, trusted supplier

3. Pay for it out of savings – if possible
    What is the lowest-
     hanging fruit?       iSU
•   Lighting

•   Waste heat recovery

•   Compressed air

•   Cooling

•   What else?
        One supplier?
                                      iSU

•   Can one supplier handle all these?

•   Would it require an alliance of
    suppliers?

•   Who would lead the alliance?
    Financial Incentives
                                 iSU

Two models

•   Pay-for-performance / Shared
    savings

•   Sole supplier with targets
   Capital Financing?
                                     iSU

• Delta Institute, Chicago
   non-profit, member of CCX

• Will there be additional Federal
  incentives?
          Discussion
                                    iSU

• We have not found working examples
  of this yet in our research.

• Are there ideas about how to create it,
  or how to improve it?
              Contacts                  iSU
Tom Bierma, Illinois State University
 tbierma@ilstu.edu
 309/438-7121


Dan Marsch, Illinois STC
 dmarsch@wmrc.uiuc.edu
 309/671-3196 ext. 202
Hitachi Metals and DCT
                          Engine production, coolant usage, and coolant waste
                                    haulage, Navistar, 1989-1996.
                                                                              Engine production
                                                                              Coolant usage
                          140%
                                                                              Coolant waste haulage
                          120%
Percentage of Baseline*




                          100%

                          80%

                          60%

                          40%

                          20%

                           0%
                             1989   1990   1991   1992   1993   1994   1995        1996




                          Plus 93% reduction in engine head and block rework
                                     Coolant Usage, GM-EMD, 1994-1998


                           120%



                           100%
Percent of 1994 baseline




                           80%



                           60%



                           40%



                           20%



                            0%
                              1994       1995        1996       1997    1998

								
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