System design: first cost or operating cost?

[Brian_UK]

I understand that our supermarket managers here in the UK are paid a bonus for 'energy savings' (or similar expression). Therefore they are concious of a poor quality service or repair which results in increasing energy usage.

It tends to generate another call to the service provider and quite correctly too.

But as you say Iceman, a sensible discussion with the customer has got to be the best way forward.

[oldwolf]

First cost or operating cost ?

Here is my ten cents, for what it is worth,

In Canada, and I suspect in the states, the bigger the supermarket chain, the more stupid they are. The problem : each department has a budget. Each department head gets rewarded differently. The result is that nothing is optimized. They invariably end up buying the lowest cost and getting a system that consumes too much energy or is too costly to maintain in good operating condition.

Iceman is right. Your quote should show more than one solution. Always a cheap alternative, and one with added value. You have to make someone think twice about the lowest cost.

Why is it so hard? Quantifying precisely lower operating costs is difficult to prove. Even when you succeed in convincing someone, they will only look at a higher price if the payback is 6 to 9 months. Sometimes up to a year. Vary rarely 2. Yet they will operate these stores for years and years.

The buyer is usually a powerful guy within the organisation. He gets a bonus on cutting costs. So he always goes for cheaper prices. And he definitely likes to bargain things continuously. It makes him look good.

The chain maintenance guy (when there is one) wants a product that does not fail often, that is easy to replace, with great service, and easy to maintain. But he usually weighs less then the first guy. And he is not always focused on energy savings. Most of the time he focuses on simply making sure that things keep on running. Most of the time, he ends up having to live with the cheap stuff that they ended up buying.

The chain energy manager (when there is one) has a budget for reducing energy costs. But he only gets his say after everything has been purchased anyway. In other words, he has a budget to patch things afterward.

It is a bit sad that even if we work in the customer's best interest, we have to work so hard to make them understand that better products actually pay off.

Ok, said enough. I vented my frustration.

[US Iceman]

Why is it so hard? Quantifying precisely lower operating costs is difficult to prove. Even when you succeed in convincing someone, they will only look at a higher price if the payback is 6 to 9 months. Sometimes up to a year. Vary rarely 2.

Yet they will operate these stores for years and years.

One thing I have noticed is that sometimes the use of the term payback creates problems. Just for the reason oldwolf mentions.

If you state this a little differently, a 6 month payback means you are recovering the additional money spent (for the improvements to the system) in six months. That's equal to a 200% return on investment (ROI) of the additional money spent.

A 2 year payback is equal to a 50% ROI.

Even a 4 year payback is still 25% ROI. That's darn good income from that investment.

Can the store generate this kind of money anywhere else? Maybe, but the store manager should really take an interest (pardon the pun) in this type of investment.

And as oldwolf mentioned, this keeps going on every year as long as the system is maintained (there's that dirty word again). It also assumes the ROI is constant, which it will not be. As energy costs continue to escalate, the ROI actually increases with the increase in energy.

Everything oldwolf said I agree with. Especially about the buyers. That takes a lot of time to develop their trust.

Here is my ten cents, for what it is worth,

I would say that was worth every penny and them some.