Tackling the business case for power conditioning
Organisations are certainly starting to recognise that power quality is an important issue when it comes to the negative effect of power disturbances, such as electrical noise and voltage impulses, on sensitive electronic systems.
But the problem is in accurately calculating how much this ‘bad power’ is costing business. Simply put, how can you establish the Return on Investment (ROI) when selecting from different power protection systems?
For most of us, power quality problems are ‘out of sight, out of mind’. While the frequency of spikes, surges and other phenomena in power distribution is generally understood and accepted, many fail to make the connection between these irregularities and the impact to the bottom line.
Powervar has worked closely with its customers over the past two years to identify a technique to help quantify and educate the industry about calculating real ROI. A major focus has been about understanding what we call the ‘service burden rate’ – this is the proportion of the price of a product allocated to cover ongoing maintenance and repairs during the warranty period.
This extensive research found that the typical service burden rate ranged somewhere between 4% and 8% of the price of the equipment or solution. But results gathered from more than a thousand pieces of equipment installed by customers showed a reduction of between 43% and 88% in warranty service costs. Even taking into account the cost of buying the power protection equipment, the ROI in these applications varied between 154 and a top level of 1,148%.
Benefits were not just financial either – there is a ‘softer ROI’ to consider, such as a reduction in service calls to the manufacturer, improved customer satisfaction and greater customer loyalty, as well as competitive advantage, important in commodity-based businesses largely driven by price.
Challenging the quality of power
Whether power comes from externally via a public utility or produced onsite, the quality is always a challenge for today’s sensitive electronic equipment. The power from utility companies, even in developed countries, still largely meets standards set in the very earliest days of electricity.
This was fine for many years until the advent of hi-tech equipment incorporating sensitive components like integrated circuits.
The power supply in the US and other developed nations experiences an average of 8.8 hours of outages a year. Less visible is the annual average of 79 hours in which the quality of power is poor. Spread over the course of 12 months, these incidents can cause costly damage or failures.
Such power irregularities are not always immediately fatal to equipment, but can produce cumulative damage that will eventually cause sudden system failure or lock-up without warning. As soon as one component is replaced, the cycle begins again and it’s only a matter of time before the failure is repeated.
The key to delivering a higher ROI for OEMs is a direct and fast reduction in the service burden. We focus on increasing equipment reliability and uptime on the one hand, and reducing operational and service costs on the other. A notable proportion of service problems result in ‘no trouble found’ service calls, caused often by power quality problems. The ability to reduce these calls has a positive impact on warranty costs and customer satisfaction.
By reducing service costs by up to 88% or even by 43%, as reported in our study, customers are saving millions in some cases.
In addition, the average number of helpdesk calls dropped by 60%. These are savings that every business wants to achieve. Harder to measure though is the impact on reputation and sales, although these are real benefits too. An additional benefit is the increase in profits from service contracts – so manufacturers can look to extend their product warranties from say two to five years.
Of course, power quality is not the only factor impacting the service burden rate.
There are all sorts of software, training, hardware and personnel issues that can also play a role, but addressing and eliminating the ‘hidden’ and often hard-to-trace problems caused by power fluctuations frees up time and resources to sort out other important areas.
There are a number of markets where focusing on controlling the power variable and protecting the equipment’s processes will significantly increase ROI, including:
Medical & Healthcare – clinical and diagnostic equipment, patient monitoring, patient imaging, etc;
Analytical Instrumentation – gas chromatography, mass spectroscopy, etc;
Banking & Retail – PoS, ATMs and kiosks;
Electronics Manufacturing – semiconductors, industrial automation, automated test equipment;
Graphics & Printing – page layout and makeup, digital feed presses.
The common element in all of these sectors is that an improved ROI is not just about savings, but also about these ‘softer’ benefits as well – so, reduced service calls, customer satisfaction and competitive edge.
One example is James Hall & Co, a major Spar Group wholesaler, which has seen an 80% reduction in hard disk failures and data corruption in its EPOS and back office systems at its petrol retail forecourts compared with its retail outlets that had no power quality equipment in place. This has led to an investment in power conditioning equipment right across its retail base of 500 stores. The company is considering extending the lifecycle of its retail systems before replacement, from five to six years. It currently rents the equipment to its outlets for five years, but is confident that an investment of around £130,000 in Powervar equipment would make it possible to extend the trouble-free life of front and back office systems by 20% and deliver additional rental income of more than £2m.
The financial case
Over the years, the power quality market and associated UPS business, which is highly competitive and largely driven by price, has been unable to demonstrate to customers how much power disturbances are costing their business and how power conditioning technology can deliver savings directly to the bottom line. But there is a financial case for investment in such equipment.
Rob Morris, UK Country Manager for POWERVAR
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