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Table of Contents

Editor's Corner with CompuCom's John McKenna

Virtual Data Provider Securely Manages Law Firm's IT System

Ocean Spray Saves $500,000 Annually by Outsourcing Energy Operations and Keeps the Regulators Happy

Financial Services Outsourcing

Lenders Benefit When U.S. Law Firm Outsources Their Due Diligence Work

On-Demand Desktop Hardware and Software Support Simplifies Management and Cuts Costs for Peruvian Bank

How a Money Management Firm Benefited from Outsourcing Its HR to a PEO

Guidebook - Evaluating the Business Impact of Oracle On Demand

HRO Innovation: Building Blocks to Derive Full Value

Service Oriented Architecture for Offering Outsourcing Solutions

Total Cost of Ownership: Analysis of a Global Service Desk

Leveraging Information Technology Infrastructure Library (ITIL^®) Best Practices to Attain Organizational Maturity

Achieving Business Goals through Managed Services IT

Impact of Web 2.0 on Outsourcing

Undertaking Data-Protection Initiatives in Enterprise Systems

BPO: The Year Ahead- A Perspective on Evolving Worldwide Requirements

Ocean Spray was steamed. The fruit juice manufacturer had issues with steam generation at its Bordentown, New Jersey, facility. "We would lose steam pressure, which would shut down our packaging operations. That downtime was having a disastrous impact on us," reports Michael Browne, director of engineering at Ocean Spray.

Processing and packaging juice is Ocean Spray's core competency at Bordentown, Browne continues, and the problems with its steam system were negatively affecting the heart of its production in that plant. The company, which had fiscal 2007 gross sales of roughly $1.7 billion, has 300 of its 2,000 employees working in the Bordentown facility.

Ocean Spray solved the problem by outsourcing the management, operation, maintenance, and repair of the Bordentown powerhouse so it has a continuous supply of steam.

Ocean Spray wanted to achieve five goals through outsourcing, according to Brown. They were:

1. Reduce the cost of goods sold
2. Improve the reliability of its powerhouse
3. Create a safer plant
4. Meet its compliance requirements
5. Find ways of continuously improving operations

In the spring of 2006, after bids from several suppliers, Ocean Spray signed an outsourcing contract with Armstrong International Inc.'s subsidiary, Armstrong Service, Inc., to optimize the Bordentown powerhouse. Armstrong is uniquely qualified to service the power plant because many of its engineering, operations, and maintenance personnel have food manufacturing backgrounds, and all managers have broad experience in utility operations and maintenance. Also, about 60 percent of Armstrong's operations and maintenance contracts in the United States are in the food manufacturing sector.

The outsourcing contract also includes the process refrigeration system, a vital part of factory operations. Problems solved

Ocean Spray's steam pressure problems were due to several factors. According to Dan Musson, general manager, Armstrong Service, Ocean Spray's manufacturing processes "are designed to receive steam at a particular pressure -- the higher the pressure of steam, the more energy it contains per pound."

Each process's operation is designed to get steam at a particular pressure and in whatever quantity is required by the process. So, Musson continues, "If there's a lack of steam due to a boiler not being in service, or the demand of the plant exceeds the total capacity of the boilers that are installed, steam pressure can fall." When that occurs, the process that needs the heat isn't getting enough to run the process at the normal speed, so operations have to slow down. Or, if the pressure is too low, the plant must shut the process down.

In either case, Ocean Spray's production suffers - it can't make as many pounds of product per day. By implementing a preventative maintenance program and improving the utility equipment's performance capability, Armstrong ensures that boilers and steam mains are operating at maximum efficiency and capacity.

Armstrong has also improved boiler efficiency by installing an economizer on the largest boiler. Until this installation, the exhaust gases coming out of the furnace, which contain substantial thermal energy, were simply going up the stack and into the atmosphere. The economizer is a large heat exchanger that recovers the waste heat from the boiler exhaust to heat boiler feed water using the available BTUs that would otherwise be lost.

Related to steam operations is what's called "condensate recovery," the recycling of condensation from steam-powered equipment converted back to steam for reuse. Musson says Armstrong conducted a survey of steam traps throughout the facility and found many defective traps. Traps remove condensate from steam mains or process equipment that use steam and send it to a condensation collection system. Here it's pumped back to the utility's boiler and recycled as steam.

Musson explains that Armstrong tries to collect and return as much condensate as possible for two reasons: It reduces Ocean Spray's purchase of water to replace that unrecycled condensate, and it cuts the chemical costs for treating the water for use in the boiler because it returns pure as a condensate. What's more, because the condensate is approximately 200 degrees Fahrenheit, it also contains a large amount of thermal energy and, by recycling it, the energy remains within the system. The company, therefore, does not have to buy as much natural gas from the local gas company as fuel to power the boilers for creating steam.

Armstrong also maintains the company's ammonia refrigeration system, which is responsible for maintaining the safety and integrity of the powerhouse. Ammonia is hazardous to human beings; and if the systems leak ammonia into the environment, it violates environmental emissions regulations. Recently, the state of New Jersey did a surprise inspection on the ammonia refrigeration system and gave the plant high marks.

The plant's operation must also comply with environmental and regulatory permits, and Musson says Armstrong is careful to operate utilities assets within those limits. Any waste water that goes out of the facility through floor drains cannot be contaminated. Armstrong has reduced the amount of water consumed in the plant and makes sure nothing in the drains from utilities is out of range for appropriate pH or temperature.

Money saved

To verify that the plant's efficiency is continuously improving, Armstrong tracks the energy consumed from all sources and compares that to Ocean Spray's overall production rate. With the changes that Armstrong has made since its arrival, the company's energy costs have fallen while its production has increased. Because reliability has also increased, the plant runs more hours per year, so Ocean Spray produces more product. Since the actual cost to produce the product is going down while the sales margins remain the same, Ocean Spray's profitability has increased.

That translates to significant bottom-line savings. When it hired Armstrong Service, Ocean Spray wanted to save $500,000 a year on energy systems and waste reduction. According to Browne, Armstrong "has certainly delivered and met our expectations."

Lessons from the Outsourcing Journal:

• Utility optimization reduces the buyer's energy costs while increasing powerhouse reliability. When the cost to produce the product goes down and the sales margins remain constant, the manufacturer enjoys better profitability.
• Outsourcing can improve plant safety when dangerous chemicals like ammonia are involved. Outsourcing can also improve operating conditions, which help manufacturers comply with government regulations.

Publish Date: April 2008

Copyright © 2008 - Everest Partners, L.P.

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