In procurement, the easiest way to reduce expenses is to buy cheaper goods. A price comparison is simple and shows instant results. To take cost-cutting to the next level though, requires a big-picture look at your organization as a whole, the products you’re sourcing and how well they perform in your plants. This is the total cost of ownership (TCO).
A small increase in procurement expense can deliver a huge reduction in TCO and vice versa.
Electricity is the lifeblood of manufacturing plants. A little hiccup in a plant’s electrical system can have a huge cost in terms of downtime and repairs. Working with electricity can be a dangerous business and accidents cost companies millions in fines, litigation and abatement costs each year.
Electrical and lighting safety is one of the most under-utilized ways to dramatically reduce your TCO. Here’s how:
1. OSHA citations: Iceberg expenses
Getting slapped with a citation from the Occupational Safety and Health Administration (OHSA) for safety violations can be a very expensive business:
- OSHA cited companies for 9,451 electrical violations in 2014.
- Electrical issues consistently list in the top 10 most-cited violations (commonly represented categories are Lockout/Tagout, Electrical – Wiring Methods, and General Electrical Requirements).
After remaining unchanged since 1990, in 2018, OSHA fines for individual offenses leapt 78 percent, from $7,000 to $12,934 for Serious/Other-Than-Serious/Posting Requirements issues and $12,943 per day for Failure to Abate Prior Violation issues and from $70,000 to $129,336 for Willful/Repeated Violations. These fines can be quite substantial, especially if multiple citations are issued for a single incident or if your company has a history of OSHA violations.
The fine is just the tip of the iceberg. Once OSHA cites your company, there are a whole host of assorted other costs to pay that make TCO soar.
2. Abatement costs
Once cited by OSHA, companies have to correct the hazards that caused the incident. This could range from simple employee training all the way to significant capital projects to revamp whole plants. Plus, OSHA expects dangers to be rectified quickly, typically with a 30-day timeframe.
3. OHSA investigations
Many companies regulated by OSHA are regulated by other agencies, like the Environmental Protection Agency (EPA). A citation from OSHA can open the door to parallel investigations from the EPA or other regulatory bodies. Also, an OSHA citation increases the risks of litigation, including civil lawsuits related to liability, workers’ compensation and personal injury/wrongful death suits.
4. Reputational damage and loss of future business
Getting dinged by OSHA is bad news for your company and carries a reputational cost to it. It’s negative press and no company needs that. Amazon would rather talk about its much-hyped HQ2 than their poor safety record, but it’s that record that put them on top of the National Council for Occupational Safety and Health’s (National COSH) “Dirty Dozen” list of dangerous employers. As if Tesla didn’t already have its hands full dealing with fallout from the erratic behavior of CEO Elon Musk, it’s on the list too.
Your safety record can also play a large role in landing new business or keeping current contracts. This “safety tax” can be especially strong in highly competitive industries, as companies rebuff vendors with a history of violations.
The Solutions and Savings:
5. Real electrical and lighting expertise
If your electrical MRO supplies come from the same vendor that provides your janitorial products and office paper, you’re missing out on a substantial opportunity to reduce TCO. A generalist selling everything, by definition, lacks the expertise to recommend the best products for your unique situation. All they can offer is the cheapest products, based on unit cost.
When you partner with an MRO supplier that concentrates on electrical and lighting parts, then you benefit from their industry know-how. A specialist supplier can offer a wide range of advice and guidance to keep your plants OSHA-compliant, so you avoid fines and accidents. This partner can work with your plants to enhance safety, while also recommending the best products for your strategic goals—whether that is reducing energy use or procuring longer-lasting parts which require less maintenance and downtime.
This big-picture approach can significantly cut your TCO and deliver huge savings for your organization.
6. Correctly maintained equipment
Year-over-year, one of the top-cited OSHA violations are lockout/tagout incidents. Lockout/tagout products and procedures safeguard employees while they work on machinery. They prevent equipment from unexpectedly being electrified or turning on during maintenance. (If you’ve ever been shocked when changing a light switch on a live circuit , you’ll readily understand the safety value of this.)
Your MRO supplier will help keep all electrical parts up to date and recommend better quality parts, so your assembly lines will require less-frequent repairs. Fewer repairs equals a safer environment for plant personnel.
7. Reduced accidents
Upgrading your plants to energy-efficient LED lighting will not only drive down energy costs but can have dramatic productivity and safety bonuses too. LEDs offer better quality light and enhance visual clarity. Under better lighting, employees can see things better and do their jobs safer and more effectively.
One manufacturing company profiled in a 2018 paper enjoyed a 0.7 percent increase in productivity after upgrading to LED lighting in their factory. This translated to an increase in profits that shortened the payback period from 3.5 years (based solely on energy savings) to just a couple months (energy savings + worker productivity increases).
Other studies have found similarly dramatic improvements in worker cognitive function and productivity from using LED lighting. One study comparing fluorescent and LED lighting, found an 8.3 percent performance improvement in visual and cognitive tasks. The same study found employees working under LED lighting had faster reaction times, reduced fatigue and increased activity. That translates to safer facilities with fewer accidents.
Your electrical and lighting MRO supplier can help your company build a safer environment and avoid fines while also reducing spend and TCO. That’s why it’s critical to partner with an MRO supplier that specializes in electrical and lighting products.
Learn more about how IM Supply helps companies keep their plants safe while reducing downtime and cutting spend.