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Finding and implementing energy efficiency projects in industrial facilities

Author: Aflaki, Sam ; Kleindorfer, Paul R.INSEAD Area: Decision Sciences ; Technology and Operations Management Series: Working Paper ; 2010/59/DS/TOM Publisher: Fontainebleau : INSEAD, 2010.Language: EnglishDescription: 29 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: This paper addresses the challenges of finding and implementing profitable energy efficiency (EE) projects, a critical foundation for sustainable operations. We focus on manufacturing enterprises, but many of our findings are applicable to the back office of service operations as well. Our starting point is that there are many profitable EE projects in nearly every industrial enterprise that are not implemented. Two problems are often identified as the culprits for failing to harvest such projects: 1) lack of a rational and feasible approach to risk management and finance for these projects; 2) lack of an efficient internal operations management approach in the enterprise to package these projects in such a manner that they can be implemented while the "plant is running". Focusing on the second of these problems, we describe a framework for understanding the context of EE projects in industry, with an underlying analytic foundation in optimal portfolio analysis. We note behavioral and other impediments to finding and implementing EE projects as well as the characteristics of management systems required to overcome these impediments. A case example of a large manufacturing site illustrates emerging best practices, based on the principles of kaizen management, for the integration of EE project management with operations and engineering.
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This paper addresses the challenges of finding and implementing profitable energy efficiency (EE) projects, a critical foundation for sustainable operations. We focus on manufacturing enterprises, but many of our findings are applicable to the back office of service operations as well. Our starting point is that there are many profitable EE projects in nearly every industrial enterprise that are not implemented. Two problems are often identified as the culprits for failing to harvest such projects: 1) lack of a rational and feasible approach to risk management and finance for these projects; 2) lack of an efficient internal operations management approach in the enterprise to package these projects in such a manner that they can be implemented while the "plant is running". Focusing on the second of these problems, we describe a framework for understanding the context of EE projects in industry, with an underlying analytic foundation in optimal portfolio analysis. We note behavioral and other impediments to finding and implementing EE projects as well as the characteristics of management systems required to overcome these impediments. A case example of a large manufacturing site illustrates emerging best practices, based on the principles of kaizen management, for the integration of EE project management with operations and engineering.

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