Energy savings and the supply chain

Saving a dollar in energy costs is said to be equivalent to generating $20 in new revenue, according to Mike Reid, vice president of Amerinet Choice Energy Solutions. With energy costs rising, the need for healthcare facilities to engage in a comprehensive energy management program is readily apparent. And supply chain professionals possess the necessary talents, skills, and abilities to ensure their institutions are financially responsible and effective stewards of the environment.

Hospitals spent $6.07 per square foot for energy in 2008, up from $3.89 per square foot in 2003, according to the U.S. Department of Energy. It is estimated that hospitals are spending at least $8.5 billion on energy costs, and as much as $11 billion to $15 billion. In general, direct energy costs can be anywhere from 1 to 3 percent of a healthcare facility’s total operating expense. For larger facilities, that can translate to millions of dollars. Indirect energy costs, often associated with operations of antiquated or obsolete systems, can be extraordinarily higher.

 

Senior leadership buy-in 

 

What are the key challenges in drawing up a comprehensive plan of energy management and conservation? Most important, there must be buy-in from senior leadership that such a policy is warranted and can generate significant savings. In some circles, there is a long-standing belief that the sum total of energy expenses are only related to utility bills, and that energy costs can’t be impacted. A large stumbling block is also the hesitation to considering spending money to save money. Senior leadership must be engaged and understand the scope of the energy program and the significant financial impact, both in hard dollars and projected ROI.

Executives from the supply chain can have a major influence on the acquisition of energy-related products and services. This can prove to be quite challenging, as energy management and conservation is typically relegated to the plant engineer, and supply chain professionals have very little involvement. The fact is, supply chain folks should have a role in energy, as the costs can be extraordinary and supply chain protocols can be quite effective in helping to achieve savings in this area.

Natural gas and electric are often the two largest expense items in the facilities management budget. Supply chain professionals can positively affect the outcomes related to price, quality, and service for energy and energy consuming systems. They can also ensure that any contracts or contract language includes the necessary terms to protect the interests of the institution. Further, active involvement in energy matters can elevate the supply chain professional within his or her facility by tackling the non-clinical spend arena.

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