Energy Matters

A local hotel owner, spying a deal, purchased an air makeup unit, at auction, for the restaurant in his hotel. The unit had been salvaged from a community club, but was in excellent working order and the price was a mere fraction of what he would have paid for a new unit. Unfortunately, he lost a great deal of money on the transaction.

First, the unit was sized far too large for his operation (10,000+ sq. ft for the community club, 240 square feet for his kitchen, 800 sq. ft. for the secondary room, his dining room. Second, he directed the output directly at the wall where his thermostat was located, meaning that the temperature setting did not reflect the room temperature.

Third. He had his air conditioning unit set separately from his furnace, with the heat set to engage at 20C (68F) and his air conditioning set to start at the same temperature. Consequently, both ran simultaneously.

Fourth, his cold air draw was behind his grille, so cold air was drawn over the heating unit, requiring more energy to operate the stove while creating hot and cold spots for cooking. With the size of the air makeup unit, the breeze was substantial.

Three simple solutions reduced his energy costs by over $1,900 per month: adjusting the thermostat properly, relocating the thermostats to a non-direct wall where there was representative air movement and installing a smaller pulley on one end of the drive-to-fan link on the makeup unit to slow it down.

Usually, it is the simple solution that saves the most money, but those are the solutions that are most often overlooked in developing an energy conservation program.

In the same manner, business owners often neglect preventative maintenance programs, assuming that they are a cost rather than an investment. But preventative maintenance programs cut operating costs, cut capital cost for equipment replacement and reduce down time that results in poorer quality or lost sales. Like the old Fram filter advertisements, “you can pay me now, or pay me later.”

Energy conservation and energy management programs should be simple to implement and easy to maintain. However, almost any program to conserve will pay for itself almost immediately and should be one of your business’s top priorities. 

Asset Tracking -- A Critical Part of Business Operations

A key part of the MOI Inventory is the practice of asset tracking. This includes all assets: inventory, supplies, tools, equipment and even employees and customers. Each is an essential asset of your business. Although we often view assets as hard goods, even Canada Revenue Agency and IRS consider that there is a business value to personal services and goodwill – the reputation that is accrued during business evolution. A degradation or loss of any of the soft or hard assets impacts on business profitability, making the need to track those items and services critical to business success.

As an illustration, imagine that your key customer relations employee has a bad day and, in dealing with one of your new clients, acts in a manner that leads that customer to decide that he will no longer deal with your firm. Given that it is much easier to keep a customer than find one, your business suffers a long-term loss. Perhaps a new product that you have introduced experiences a series of failures. Even if you are not the manufacturer, but merely a retailer, your reputation and your relationship with that customer is jeopardized, unless you have a consistent warranty and/or service policy. Maybe an employee in the field demonstrates inferior skills. Unless you have a consistent practice of training, follow-up and retraining, you will place your company’s reputation at risk. These examples of soft goods and service issues show the need to implement a system of monitoring that allows you to respond to and pre-empt problems that may arise.

The SAP system used by many larger corporations attempts to integrate all aspects of the business operation. The MOI Inventory, on  the other hand, serves the purpose of identifying issues, allowing the small business operator to respond as budget, time and preferences allow. Tracking, though, is the vital first step. Once concerns are identified, you may choose your individual response.

Tracking enables you to evaluate consumption patterns across the entire business spectrum. Need to know whether your employees are operating efficiently and effectively, or whether your labour costs are not properly recovered in your end price charged to your customers? Track performance, pay, down time and so on, using a tailored spreadsheet or simple personnel software. Need to know if supplies are being used in the proper manner, or if supply cost is too high? Track consumption and yield per supply item. Want to know and control product performance? Implement a Mini/Max system and conduct regular counts. Need to know if your tools are finding their way into your employees’ garages? Track and control each item and develop a system of accountability.  Is equipment used appropriately? Your preventive maintenance schedule will reveal issues.  How about customer loyalty? A variety of programs can be devised to monitor, either passively or overtly, your clients. Tracking is the integral element in each solution.

Rental and leasing operations often are vulnerable to loss, most frequently because of lessee default. By keeping accurate records of your rental clients and their business or personal history, you will be in a better position to recover those assets. More importantly, obtaining the best information prior to renting or leasing serves to make clients aware of your diligence and thus decrease the likelihood of default or conversion. Similarly, any time your assets are allowed offsite, you expose yourself to greater risk which, in turn, demands greater pre-emptive vigilance.

The process of tracking may seem tedious and not worth the effort, but a good tracking program, integrated into your general operation, can be both inexpensive and efficient.  Using the MOI Inventory, many businesses report an increase of profitability ranging from .75% to over 4%, while costs of implementation and maintenance generally fall below .25%. This simple cost versus benefit statistic reveals a significant reality: using tracking systems does not cost. It is an investment.

MOI: Motive (Method), Opportunity & Indicators to Prevent Business Shrinkage

Since more than 55% of thefts are ego-driven (a theft of something that enhances one’s ego or that serves a personal desire), it is appropriate that the best acronym for a strategy to detect and deter theft is MOI – the French word for “me.” However, almost all thefts and frauds, as well as inadvertent losses and shrinkage, can be monitored more effectively using a modified MOI Inventory.

MOI Inventories examine the three essential elements of any intentional loss: motive, opportunity and indicators. Losses and shrinkage other than theft and fraud also can be tracked using an Opportunity and Indicator spreadsheet. “Motive” becomes “Method” in the revised MOI Inventory. These include accidental shrinkage and failures in administrative or operational systems.

Loss occurs when a combination of the three – motive (or methods), opportunity, indicators -- reaches a critical mass. Critical mass results from reaching a threshold level of opportunity and motive, in specific. Little opportunity but very high motive, little motive but very high opportunity, average amounts of each, or any variety of those combinations will result in loss. An abundance of indicators also reveals that critical mass has or is being reached.

More than a decade ago, I was conducting a seminar on loss in a very tightly-knit community. As an illustration of the MOI principles, I placed a five-dollar bill on the front podium, one on the back table next to the coffee and snacks and one on the floor just outside the conference room door. By the end of the session all three bills were still there. However, in the eleven prior seminars across the province, I had lost every one of the bills placed outside the door, six of the ones placed on the rear table and none of the ones placed on the podiums, even though the podium was left unattended occasionally during each two-to-three-hour program. All of the bills had a telephone number written on them. To me, that illustrated opportunity at work, and motive. In sixteen instances, the two had reached critical mass.

Where the five-dollar bill lay outside the door, there was extreme opportunity and, while the amount was relatively small, the risk in taking the money was negligible. Critical mass was achieved mostly through opportunity. At the rear table, opportunity was moderate, but sufficient enough for some to take the cash. At the front, there was almost no opportunity and motive would have needed to be extreme for theft to occur. However, in the closed community, even the risk outside the door was high, if anyone had happened to pass by when the bill was being taken.

By reducing opportunity, even in the face of relatively strong motive, theft can be averted. By understanding individual motive and defending against it, opportunity can remain fairly strong and theft will be less likely to occur.

Indicators simply show where theft likely will occur, or where it has. These “tracks” will reveal the most available opportunities for deviant behaviour. Thus, by understanding motive, recognizing the indicators and responding to opportunity, loss can be reduced or eliminated in almost every environment.

But what of loss that occurs inadvertently, through administrative error, miscalculations and oversight? These, too, can be mitigated by attention to opportunity first, then by examining indicators or tracks and, finally, by looking at the methodology involved in production, distribution, presentation, development and delivery of goods or services. Within such methodology analyses are determination of yields, supply lines, market, money handling and various other aspects of operations.

Shrinkage is the cause of two-thirds of business failures (CFIB), with market conditions contributing the largest impact to the remaining one-third. Shrinkage is preventable. Shrinkage also is detectable. Thus, the use of the MOI Inventory is a vital strategy to help ensure that your business remains viable. However, most business managers and owners focus more on the marketing, rather than on the more tedious details of operations. In order to provide any business with the greatest probability that it will be successful, more emphasis needs to be placed on these technical aspects. MOI may well be the most viable of the tools available to do so.