External Context

There are numerous external factors which are beyond control but which do influence daily operations and the company's ability to maximize profit and achieve other specified business objectives. Figure 2.14 provides a simplified overview of the main external aspects that define the context for EEMS implementation. It highlights those that are important for a business's energy and environmental performance. The relevant aspects are:

• business environment, constituting markets, customers, competitors, labor;

• conditions and limitations for purchasing natural resources such as raw materials and energy;

• climate conditions;

• environmental issues arising from the significant environmental impacts of industrial operations, and relevant regulations, etc.;

• social and political changes;

• technological advancements.

These issues will be covered in more detail in Part I Chapter 6 within the context of strategic management considerations. We will focus here on identifying the external factors that may have a critical impact on energy and environmental performance and the overall production costs of a company's operations. The most important external factors that affect company operational performance are

• Market demand - if production output drops by 25 %, production planning and management must be adjusted in order to minimize the increase of the energy and other operational costs in the unit of production. For example, after the 1997 crisis in Thailand, many companies experienced a drop in output of 30 % or more. Companies continued their operations just as before, when output was at the full capacity level. A number of them, as we have experienced, have not adjusted their production planning and equipment utilization scheduling to the lower overall output level, so as a consequence their unit production costs have increased by much more than necessary.

• Weather - energy used for heating or cooling will be added on top of energy use for production. It will also vary as a result of seasonal changes of temperature and humidity. Therefore, the weather dependent portion of total energy use should be identified prior to analysis of energy performance.

• Energy prices and tariff system - the impact of prices or tariff system charges must always be analyzed in order to ensure that energy is bought at minimum cost.

• Environmental regulations - the increasing costs of compliance can justify changing process inputs such as fuel type, raw material, waste treatment technology, etc.

Tariff systems and environmental regulations will have a so called 'one-off' impact, because they are not changing constantly and suddenly. It is easier to adapt to the impact of their changes. Market demand for products or for types of products varies most of the time; hence there should be a cross-functional understanding - between utility, production and sales on how these variations will impact upon overall performance and therefore the costs of production. This will be explained later in the text.

Weather conditions may have a significant impact on overall energy consumption (depending also on the type of industry) and, if this is the case, appropriate corrections should be made. The most common temperature corrective method is based on heating or cooling degree days. This method requires a collection of both weather and energy data and uses a statistical model in order to adjust to the impact of weather on total energy use.

Figure 2.14 External Aspects of Industrial Operations

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