There are countless areas within a complex supply chain where companies can realize substantial savings in their energy costs. Some of these constitute "low-hanging fruit," while others are more difficult to achieve. In fact, just identifying those opportunities can be a daunting task. Then there's the challenge of selling key initiatives to senior management, which isn't eager to sign off on projects that don’t promise a quick and substantial return on investment. Nick Finia, himself a trained energy-management engineer, is well aware of the complexities involved in targeting energy savings within the supply chain, then undertaking the necessary efforts to make them happen. In this interview, conducted at the SCOPE Fall conference in Las Vegas, Finia discusses how he moved forward with a multi-year effort on behalf of Walgreens – an undertaking that required strong management backing and the help of trusted outside partners. And he hints at where the company’s energy-saving initiative might go next.
Q: Let's talk about some of the efforts that you've initiated at The Walgreen Company in order to cut costs on the energy side of the supply chain. How long have you been with Walgreens?
A: Finia: For about four years now. In the first year, my assignment involved working on the store side of the business. Later on, I was asked to get involved with the distribution centers, and support the business with respect to infrastructure maintenance, capital projects and energy management.
Q: How do you go about identifying the energy cost savings that are available to you?
A: Finia: The approach seems to be an easy one, but it isn’t really. You have to look at it from many different facets. Basically, you’re looking for the low-hanging fruit first – those things that require the least amount of effort in terms of labor, contractors and funding, and would give you the quickest return on investment. After that, you look at the age of your equipment and buildings, and utility rates throughout the country, to see which areas are ripest for capital investment. You also look at utility rate incentives, and identify those areas that could give you a quicker return on your investment.
Among other things to be considered is the type of technology that’s available to you, and the cost of it as well. All of these things have to happen with the help of an energy audit. You’ll either use inside resources or hire someone from outside, such as an energy management or audit company, to take a look at the facility as a whole and its current practices, and provide you with a comprehensive report. With that, you’re able to highlight the opportunities and prioritize them.
Q: What you just described sounds like a massive effort. How long did it take Walgreen to complete?
A: Finia: I’ve been on this journey for about three years now. I started looking into the distribution centers, and traveling from one to the other. I’m an energy management engineer myself, so I could see the various opportunities. The whole journey has taken three years until now. There were many steps to be taken from start to finish, but I would say that one D.C. take a good year or year and a half to undertake the energy audit and complete the initiatives that you’ve. With the large number of D.C.s that we have, it’s been a rolling effort over three years, executing multiple energy initiatives.
Q: Are you guided in your efforts by any outside certification bodies or metrics?
A: Finia: We use several resources in that area. We look at industry best practices – what companies are doing in terms of energy per square foot, and cost per kilowatt hour. We also use the resources of Energy Star. [A voluntary program of the U.S. Environmental Protection Agency, to promote energy efficiency among businesses and individuals.] And there are other resources available to us in the market as well. We use them to benchmark ourselves, see where we’re at in comparison. In fact, Energy Star has a very interesting program that we use to allow our buildings to compete with each other – the “Battle of the Buildings.” When you register a building, you specify a certain kilowatt-hours per square foot, and that’s published information. Our building maintenance managers will see that, and try to compete with each other to lower their energy usage across the board.
Q: What do they get for winning?
A: Finia: First of all, a pat on the back. And number two, the most important thing they get is a return on investment for the company. That goes directly to the bottom line – it’s their contribution, besides the day-to-day work that they do.
Q: You talked about going after some of the “low-hanging fruit” first. I imagine there are a lot of one-time hits that you can get from this. But how do you make sure that these energy cost savings are sustained over a long period of time?
A: Finia: It takes a lot of my time to figure out how to do that. Once you replace a lighting system, or upgrade the air conditioning, or set up the air compressor to become more efficient, someone needs to monitor that – to make sure that the gain that you’ve achieved is sustainable. One of the ways to approach that is through the use of in-house resources. But with the austerity measures that all companies are going through, those resources aren’t always available. So you end up relying on outside contractors and consultants to support those efforts. A reliable maintenance contractor can use technology to monitor the systems, then report to you and adjust any variance to targeted energy-consumption levels. If they detect that the system is walking away from you, and the savings are not sustainable, they’ll alert you. They’ll tell you what you need to do in terms of further capital investment, training, or system software upgrade. That’s how we can regain our energy savings, and make it sustainable.
Q: Obviously, every company has just so many resources that it can devote to the projects it would like to do. How do you lobby for the capital for your efforts?
A: Finia: It’s pretty much based on the return on investment. Because our business is more focused on the throughput of product through our D.C.s, it becomes challenging for someone like myself to make a business case. Really, when you look at energy conservation and cost reduction, and the investment that you require, which is not small, you’d have to have a very strong case to make at the executive level. You have to demonstrate that the investment that you’re asking for will have a certain return that is acceptable to the company’s bottom line. So far, I’ve been so far fortunate to be able to do that, and we’ve accomplished quite a few initiatives throughout the business.
Q: So what lessons have you learned along the way?
A: Finia: Number one, when you’re working with contractors and vendors, it’s very important that you’re selective up front, and go through the proper due diligence. Examine them closely. Make sure they’re going to stick around with you for the long haul, that they have a vested interest in doing the best for your company and achieving the targeted savings. Next would be to spend more time developing a comprehensive approach when it comes to energy conservation and policy, and communicate it to the senior management. Then you need management support from the top down. That will make things go a lot smoother.
Q: What’s next for you, in terms of identifying additional energy cost savings opportunities at Walgreens?
A: Finia: Energy cost saving is a never-ending endeavor. The technology evolves and develops. Take, for example, the use of LED lighting – it’s been improving, not just in terms of lighting levels and energy consumption, but also price, which has been dropping precipitously. There are always new things developing.
Another avenue I would look at are advances in technology in the air-conditioning industry. Certain refrigerants are not being produced anymore. There’s constant research going on, which requires new equipment and heat-transfer surfaces. The industry is always looking for things that are cheaper, more easily made and more efficient. It’s a never-ending cycle. When it’s time to retire older equipment, you’re always looking for better and more efficient products to replace it.
To access this video interview online, click here.
The Walgreen Company
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