Budgeting for the Future

One of the most valuable uses of the PCL, or performance characteristic line (see “Energy-Saving Tip” #54 in last month’s Plastics Engineering, p. 57), is in forecasting future energy costs for budgeting. Many plastics companies have no procedure to predict energy use or energy costs, but knowing the PCL makes this easy:

1. Convert the sales forecast into a monthly production volume (in kilograms of plastic).
2. Convert the forecasted production volume into a forecasted energy use using the PCL relationship between production volume (kg) and energy use (kWh).
3. Convert the energy use into energy cost using current (or future) energy costs.

This method of energy budgeting shows that energy costs are directly related to production volume. Energy costs that were previously seen as simply a fixed and uncontrollable cost are now seen as a variable cost. This will result in finance-based involvement in the control and management of energy costs. It also allows rapid re-calculation of the energy cost to the site with changes in production volume.

The information from this method also allows finance functions to forecast energy costs in absolute terms and as a percentage of sales revenue—to highlight the importance of energy management in overall cost management.

Actions:

• Find the PCL for the site (again, see last month’s “Energy-Saving Tip” #54).
• Use the sales forecast to find the forecasted production volume.
• Use the PCL to convert the production volume forecast into an energy use and energy cost forecast.

Dr. Robin Kent — ©Tangram Technology Ltd. (www.tangram.co.uk)

Note: Dr. Robin Kent is the author of Energy Management in Plastics Processing, published by Plastics Information Direct, and managing director of Tangram Technology Ltd., consulting engineers specializing in energy management in plastics processing. rkent@tangram.co.uk.