Adidas has recently turned its focus on attaining energy efficiency in its manufacturing processes in a bid to reduce production costs and improve its global operations.
The giant sports company is counting on Eric Shrago to help them achieve these two goals, even if Shrago does not know anything about distribution centres or the complexities of how they are run.
In fact, that is exactly why Adidas hired Shrago. When he stepped into this company’s massive 2 million square foot Spartanburg, S.C. distribution centre, he was tasked to help Adidas Group trim its power costs by using his analytical skills, not his knowledge about the company.
Adidas wants an outsider’s perspective to develop the most effective ways to improve the energy efficiency of all the production components in the facility such as the motors, controls, sensors and belts that keep it running.
The company hopes that this will facilitate the delivery of its products to the retailers that sell them.
Shrago worked with Goldman Sachs as an analyst and is currently a graduate student at Columbia University. In Adidas’ perspective, with these credentials as well as being a member of the Environmental Defence Fund’s Climate Corps, he is really a company outsider.
“I thought in two hours on Google I’d be able to find an example,” says Shrago about his initial research on models for distribution centre efficiency. “In two weeks on Google I didn’t find an example,” he adds.
But soon, Shrago was able to recover from his initial shock of the complexities of the operations of a commercial distribution centre. He started to have some visions on the areas that need improvement.
Shrago started thinking that he can cut the cost of Adidas energy use by improving the existing process. He wondered how the inefficient motors got there and how they can be improved.
The questions that ran in his mind were: should the company use these old motors until they run down before replacing them, or is it better to replace them with the latest energy efficient motors? Does Adidas even know the actual lifetime costs of all the equipment it is now using?
“What was abundantly clear is lifecycle has got to be considered,” says Shrago. “These aren’t small cap ex things that you’re doing,” he continues.
Most of the Adidas’ material handling equipment was bought under a 10 to 30 year lifetime expectancy. Therefore, the decision has to be made on the economic viability of retrofitting them.
Replacing the equipment is not wise considering the locality’s $0.08 per kWh electricity rate. The company would rather wait until the motors burn out before buying “premium efficiency” models. These types of motors usually pay for themselves within two years.
Shrago was able to formulate other remedies on Adidas energy use by just merely observing how the facility operates.
For instance, there was one automated software process that kept on running on a loop but was originally designed to shut down after a 15-minute cycle. He just ordered for a re-programming of the software.