Energy and the Spring Industry:
SMI Members Look for Ways to Combat Rising Costs
By Gary McCoy
Energy drives the spring industry. It takes energy to make springs, and it take energy to deliver completed springs to customers. So it’s not surprise that rapidly escalating energy costs are hitting springmakers on all sides, along with increases for raw materials and freight.
David Weber, president, A.V. Weber Co., Inc. in North Wales, Pa., says his company has faced numerous fuel and raw material surcharges from suppliers, with the largest so far this year at 7.5 percent. “We’ve seen a marked increase in surcharges over the past three months,” Weber explained.
For Tom Armstrong, chairman and CEO of Duer/Carolina Coil, Inc., energy costs haven’t hit as hard due to forward contracts the company locked in that hedge against cost increases for natural gas and electricity. He said the greatest surcharges his company has faced this year are for steel raw materials. Surcharges and price increases have occurred both within and outside the springs industry.
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[AV Weber has curtailed] the use of a small pickup truck they use to make local deliveries. “We have limited or consolidated runs with the truck,” explained Weber. “We now utilize UPS and other services to make deliveries.” He says the company has realized savings by making the move and estimates they have cut back on usage of the truck by about 10 to 15 percent. He said the only downside is that shipments now are slower both in and out of the plant. |
Recently, Veyance Technologies, the exclusive manufacturer and marketer of Goodyear Engineered Products, announced it was boosting prices for its industrial and consumer products. Bob Herbolich, vice president of sales for North America said the company has ongoing programs to manage its costs, but the persistent increases in oil- and energy-related raw material, production and transportation prices have been severe.
The subject of energy is affecting springmakers and their employees in many different ways. As a result, springmakers are looking at methods to save energy in their manufacturing operations and strategies to help their commuting employees cope with rising gas prices.
Saving In and Around The Plant
Since springmaking operations typically require a lot of energy to run machinery, many SMI members have looked at ways to save energy in their manufacturing operations.
Weber says his company has taken two important steps to conserve energy. One action has seen the company curtail the use of a small pickup truck they use to make local deliveries. “We have limited or consolidated runs with the truck,” explained Weber. “We now utilize UPS and other services to make deliveries.”
He says the company has realized savings by making the move and estimates they have cut back on usage of the truck by about 10 to 15 percent. He said the only downside is that shipments now are slower both in and out of the plant.
In a second major move, Weber says the company’s heat treating batch ovens that are used for stress relieving, are no longer turned on until it is absolutely necessary to begin work.
Weber’s building is older and not as energy efficient as he would like. “We are looking at major increases this winter in the cost of heating oil,” said Weber. “Our supplier normally projects the cost for the upcoming winter, but as of now (August) they have not yet told us.”
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Methane Gas Powers BMW Plant There is no greater example of a creative alternative energy source than the one that helps power the BMW Manufacturing plant in Greer, S.C. Located just two miles from SMI member company Duerr/Carolina Coil Inc., the massive manufacturing complex is partially fueled using recycled methane gas from the nearby Palmetto Landfill. The operation—in cooperation with Waste Management—captures the methane gas, which otherwise would escape into the atmosphere, and converts it to energy. |
As a result, he said “we are trying to keep the heat down and doing preventative measures like sealing windows.”
He said other things they have done, include changing to more energy efficient light bulbs as older ones burn out.
Linda Froehlich of Ace Wire Spring & Form Co. says her company is also taking fewer trips with company vehicles and consolidating trips as much as possible. She says the most pain the company is feeling right now is in the area of transportation and electricity/gas costs.
“We are trying to do small things to help cut down on cost, like keeping the temperature in the office a little higher in the summer and cooler in the winter.”
Greg Heitz, president of Exacto Spring in Grafton, Wis., says his company hasn’t done “anything in particular to save energy. We still run our machines and ovens to make products for customers.”
He says in regard to fuel, “We are trying to shift costs to customers.” Among other things he says the company is encouraging monthly shipments, instead of weekly. And at the time of the interview, Heitz said they were considering a fuel surcharge for those who need weekly shipments.
Heitz says Exacto Spring took many energy saving measures years ago, such as more efficient light bulbs and using motion sensors in bathrooms and storages rooms “so the lights are out when the room is not occupied.
“Overall, we’re just trying to be smarter about the way we run our business and everyone else is doing the same thing.”
Looking To Alternative Sources
Terry Bartel, customer technical services manager, Charter Steel, says when he was with Elgiloy they considered installing an electrolysis system to produce hydrogen for the plant. Bartel says after the company performed a cost analysis on the system they determined it would be too costly as compared to its current method.
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[Distributed Energy Systems Corporation’s] gearless wind turbines were originally designed for use in remote wind-diesel applications. But more recently the company says, in a news release, that its wind turbines are starting to be used “as an alternative power generator for grid-connected customers such as small businesses, commercial farms, small communities, schools and universities, and small corporate and industrial sites.” |
This decision confirms the results of a recent study (see sidebar on p. 26) that companies who are trying to “green” their supply chains are most constrained by the inability to justify cost of implementation.
Bartel believes that more companies will closely examine such opportunities in the future. “The same goes for the capability to produce your own power (electricity) by the use of on-site generators, such as microturbines.”
Bartel’s belief is confirmed by Distributed Energy Systems Corporation, a leader in wind power technology. The company’s gearless wind turbines were originally designed for use in remote wind-diesel applications. But more recently the company says, in a news release, that its wind turbines are starting to be used “as an alternative power generator for grid-connected customers such as small businesses, commercial farms, small communities, schools and universities, and small corporate and industrial sites.”
The use of solar power is also beginning to heat up. An August USA Today article noted that Pacific Gas and Electric (PG&E) in California has committed to buy 800 megawatts of solar powered electricity from two companies, enough to light 239,000 homes. The article says that within three years, PG&E will buy its solar energy from OptiSolar and SunPower, which plan to build the world’s two largest solar farms in California as part of the deal.
“It would nearly double the USA’s entire solar-panel capacity. Driving the trends are solar’s falling costs and state alternative-energy mandates.”
The article goes on to say that solar power has grown but still makes up well under 1 percent of U.S. power generation. More than 90 percent of solar panels have been installed on rooftops by maverick consumers and businesses. “Utilities embrace of solar energy will help push it to about 10 percent of power generated by 2025,” predicts Ron Pernick, principal of research firm Clean Edge.
Bert Goering, president of Precision Coil Spring in El Monte, Calif., said his company actually investigated putting solar panels on the roof of their building. He said they were open to the idea but the payback on investing in this energy source would take 13 to 14 years to recover. “That’s just too long to justify the cost,” said Goering. Ironically, he said the proposal came from his brother-in-law who works for a major solar power company. “I told him we would do it if the payback would come sooner, like in five years,” Goering explained. “But ultimately I had to tell him that for now it just couldn’t be justified as a capital expenditure.”
Goering says he’s still open to the idea down the road, when the technology is hopefully more affordable.
Another alternative energy source that is gaining traction is using recycled methane gas to generate electricity. Experts predict it will become more prevalent, although right now it is used mainly by large manufacturing operations (see sidebar on page 24). In a promising development for the future, Waste Management has announced plans to expand its use of recycled methane gas.
Utilizing Energy Audits
Some manufacturing companies have hired consultants to help reduce electricity usage, or like Kirk-Habicht (see article on page 37) they have utilized resources available from the state or their local utility.
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Study Says Cost Justification Largest Barrier to Green Supply Chain Initiatives Companies striving to “green” their supply chains are most constrained by the inability to justify cost of implementation, according to “The Green Supply Chain Study,” a new survey jointly conducted by CSC, Manhattan Associates Inc., IBM and Supply Chain Management Review magazine. |
Emmit George is the founder and president of EletriTech, Inc., an energy services company which contracts with commercial and industrial electricity consumers to reduce electricity usage. A detailed engineering study enables ElectriTech to project the level of savings they can achieve for each company they work with. Plus, they guarantee the results.
George, a former vice president of ComEd (the electric utility in Chicago), says “electrical retro-commissioning is a systematic process applied to existing buildings for identifying and implementing equipment and system improvements to optimize energy efficiency and reduce electricity costs.”
He says the biggest area for potential energy efficiency savings is in lighting. “Depending on what is installed, the savings can be as high as 50 percent from lighting retrofits.” For instance, T-12 fluorescent tubes are the most inefficient, while T-5s are the most efficient. George points out other commonly overlooked areas include the treatment of motors/equipment and air-conditioning compressors.
George says overall savings vary greatly from five percent at a heavy industrial facility, like a foundry, to as much as 35 percent for an older office building. “Much depends on the age and efficiency of the equipment being replaced and what is being installed,” George advises.
Goering says his company has utilized the services of their two public utilities, SoCal Gas and SoCal Electric, to conduct free energy audits.
Goering says when Precision Coil Spring was looking to buy new ovens, they consulted with SoCal Gas. “They gave us a small rebate for the purchase we made and lots of great insights on what we should purchase to maximize energy efficiency.” He says recommendations included buying a more expensive oven, but one that is more energy efficient in the long run.
He says SoCal Edison conducted an entire plant audit for his company that resulted in relighting their plant with more efficient fluorescent lights that have helped save on lighting costs. Some rebates were available from the utility for making the move.
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“Creating smart energy management strategies is about much more than just comparing rates... It requires knowledge of how the electricity and wholesale energy markets operate, the fundamentals affecting the price of generation fuels, and the variety of products available, including green energy products, and the risks associated with each type of product.” Ben Parker, director of national accounts |
Also, Goering says SoCal Edison in their audit advised Precision Coil Spring to deactivate their salt pots for the proofing of a first article part. Goering said they decided to deactivate the pots and now use small electric ovens instead “at a fraction of the cost.”
Armstrong of Duer/Carolina Coil said his company has done routine energy audits over the years for their plant which was newly constructed in 1997. The facility consists of a hot wound, cold wound and finishing/shipping department. Being a newer facility, Armstrong says the company has not made any global plant wide changes in years. But he offered that the company has benefited from grants and rebates that have been offered by natural gas and electricity providers to make energy improvements.
Both Armstrong and Goering advise other SMI members to take advantage of what their local utilities have to offer.
Ben Parker, director of national accounts for Tradition Energy, a full-service energy management advisor and one of the nation’s largest energy procurement firms, addressed attendees to the International Facility Management Association (IFMA) in May. In his presentation, he stressed to the group that in analyzing the price of power it’s crucial to understand the underlying influences of the natural gas market, the fundamentals of supply and demand, and the effects of weather and politics.
“Creating smart energy management strategies is about much more than just comparing rates,” said Parker. “It requires knowledge of how the electricity and wholesale energy markets operate, the fundamentals affecting the price of generation fuels, and the variety of products available, including green energy products, and the risks associated with each type of product.”
Helping Employees Cope
As prices for both regular and diesel fuel have skyrocketed this year, employees of springmakers who travel by car or truck to work have felt the pinch. Some springmakers, like Weber, have gone to a flex time scheduling approach.
As a result, A.V. Weber employees, which number 15, have the option of working four, 10 hour days instead of the traditional five day, 40 hour work week. Weber says 95 percent of his employees have opted to work this schedule. The plant still operates five days a week, “we just stagger the schedule of employees so production doesn’t stop during the week.”
Weber says his employees like the fact that they can save a little on gasoline.
Reb Banas, president of Stanley Spring & Stamping Corporation in Chicago, says his company tried flex time scheduling about five years ago when things were a “little slow.”
He says employees really enjoyed it “without any added expense.” But Banas, who is serving this year as president of SMI, says the “trouble we ran into was a ‘rush’ job, meaning having the right people here or scheduled, and Fridays always proved to be a problem to ship things out for a Monday morning delivery.”
Stanley no longer offers flex time scheduling and Banas says the company has no plans to go back to that option.
Though he’s not aware of any springmakers offering this, Banas has heard of employers offering “fuel” raises of $25 to $50 per week to combat fuel costs.
Heitz of Exacto Spring says although his employees have raised the idea of a four-day work week, “we are not considering any flex time program at this time.” His company has raised its mileage reimbursement for employees who travel on business for Exacto to reflect the dramatic hike in gas prices.
Meanwhile, Froehlich of Ace Wire Spring & Form Co. says her company also has no plans to pursue this schedule. “I’m not sure we could do it from a logistics point of view due to our current busy schedule.” She says if business slows down they might consider it.
Though they may not enjoy it, Froehlich says, “Our people seem to be accepting the high gas prices and adapting to it.”
Armstrong of Duerr/Carolina Coil says the company has considered flex time scheduling, but feels at this time a schedule like that could be “damaging to productivity.”
He says there is the “usual carping about gas prices from employees, but it doesn’t appear that anyone has made any dramatic lifestyle changes.”
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He said employees were resistant to change and opted not to make the move. He said they also looked at having employees work two 44-hour weeks in a row, which would make them eligible for the next Friday off. But he says there was little interest in that idea, as well.
What has been popular with Precision Coil Spring employees, who number around 85, is a commuter shuttle service the company offers between its plant and the Metrolink station. Metrolink is a commuter rail service and the nearest station to the Precision Coil Spring plant is about 5 miles.
Goering says they pick-up and drop-off employees using the company’s shuttle van at least once a day and usually twice, depending on employees schedule and when their train arrives. “We try to coordinate this with people’s schedules, as best as we can.”
He said the number of employees who use the service varies from month-to-month. “Some will opt not to use it if they need to drive to a doctor or dentist appointment, or to some other personal function,” explained Goering.
One thing Precision Coil Spring has done over the years is move up the time the work shift begins. To beat the Southern California heat and traffic, he says the company now begins work at 6 am which allows workers to leave by 2:30 pm.
“If we are busy, employees understand that we need to work overtime so employees know they have to stay longer,” explained Goering. “But we try to accommodate people who have personal things they need to take care of.”
Into the Future
Professor Jerry Osteryoung from the college of business at Florida State University was recently quoted by Fleet Owner magazine regarding changes that will occur as a result of high fuel prices. He says, “…it is time to start thinking about the structural changes that we are going to experience in our economy and in our businesses. With the exception of the Internet revolution, this is one of the most dramatic changes that’s come along in the last 50 years.”
Professor Osteryoung says you can expect telecommuting to become the norm rather than the exception. “With high fuel prices and congested roads, businesses will simply not be able to recruit or afford workers that have to commute. Businesses will have to design the workplace so that more of their workers will not have to come into the office every day. Of course, mass transportation will eventually fill this void, but this is going to take a long time to develop.”
He says every business will have to change the way it thinks about fuel. “Businesses will have to limit travel, opting to conduct more meetings using video conferencing technology. Smaller vehicles will have to become the rule rather than the exception.”
Professor Osteryoung believes that each business will have to redesign itself assuming that fuel hits $7 a gallon.
“Now, there is a solution to this fuel price issue, and the answer is technology,” he says. “Will this be a quick fix? No, but I believe it will come within the next seven to ten years. But do not be satisfied with minor tweaking here and there. The scope of this issue demands a major structural change — a re-engineering of each and every business.”
Froehlich believes the current energy situation is a good thing. “We have a lot of smart people in this country and I believe when something like this happens someone will step forward and figure out alternative fuels and methods to meet this challenge.”
