Lean Manufacturing Processes Improve Energy Intensity and Profitability for Utility Industrial Customers

By Advanced Energy | May 5, 2016

Advanced Energy’s Michael Stowe authored a report recently published by  the Electric Power Research Institute (EPRI), outlining the processes and benefits of lean manufacturing. EPRI requested the article to benefit the industrial customers of its member utilities. Electrical utility account executives and their industrial customers should be interested in lean manufacturing because it can reduce energy intensity, which is the total input energy needed to create one unit of manufactured product.

Lean manufacturing, or simply “lean,” is a philosophy aimed at trimming away the “fat” from the production process. This fat consists of any expenditure of any resource that does not create value for the end customer. For example, because customers are not willing to pay for scrap, for parts waiting for processing, or for moving parts from one point to another, these are considered waste (or fat). Lean aims to eliminate or minimize all such waste.

Lean manufacturing can have a direct impact on a utility’s concerns with energy efficiency. It can also dramatically increase the customer’s profits through greater output with fewer breakdowns, errors and defects, and less waste and scrap, among many other benefits. In the report, Stowe emphasizes the particular benefit lean brings to reduction in scrapped parts. Scrapping just a few parts per shift can have a large impact on company profits and represents a significant waste of energy. By helping its customers adopt lean manufacturing, utilities can increase energy efficiency efforts, and their customers can see increased profits.

A bar chart showing $50K profits and $950K operating costs for a manufacturer that does not use lean manufacturing and $200K profits and $800K costs for a manufacturer using lean manufacturing.

This chart illustrates the dramatic impact lean manufacturing can have on profits


Lean manufacturing concepts were originally implemented in the Toyota Production System. For the purposes of Stowe’s EPRI report, the following four key areas can help to measure, record, and document lean characteristics of industrial process equipment.

Andon— Andon is an information tool that uses visible and audible signals and real-time communication displays to bring immediate attention to process problems when they occur. The system then notifies the correct personnel, who can help to correct the problem. For example, when an operator runs short of a part, she may activate a light. This signals personnel who can bring more parts without causing system down time.

Andon is a focus of Advanced Energy’s EPRI article because it is key to eliminating waste, improving overall equipment effectiveness, and guiding continuous improvement activities, all of which are key components of lean. The report also provides specific information on Andon equipment and vendors.

Muda— Muda is waste in the manufacturing process that may be categorized into the following areas: transportation, inventory, motion, waiting, over-processing, over-production, defects, and plus one, which is the ineffective use of the full range of employee talent. Even though energy is not explicitly noted as a category of waste, it is easy to see that in at least the first seven areas energy is also wasted.

Overall Equipment Effectiveness (OEE)— OEE is a methodology to measure how effectively a specific machine or a production line is utilized. OEE is made up of the product of three factors: availability, performance, and quality. Each factor is measured as a percentage with a maximum of 100 percent each. The factors are reduced from 100 percent by losses and wastes. It is nearly impossible for any manufacturing process to run at 100 percent OEE.

Kaizen—Kaizen is a continuous improvement process with the aim of eliminating all waste. The process involves all employees in improving standard manufacturing activities and processes. It features four iterative steps: plan, do, check, and act, which are repeated as necessary.

In his 29 years serving the manufacturing industry, Stowe has gained extensive experience with lean manufacturing, both with Advanced Energy and in industry. As a conclusion to his EPRI report, he identified several recommended next steps to assist utility executives in encouraging lean with their customers. These include: conducting surveys and case studies on the current use of lean, developing educational materials and training, developing an ROI tracking tool, and investigating the feasibility of financial incentives for the use of lean. Any of these activities could support utility executives and their industrial customers in adopting lean principals that improve energy efficiency and increase profitability.