Large portfolio benchmarking: Utilities

January 2017 — Organizations with a large quantity of properties in their portfolio can use benchmarking to their benefit in a number of ways. An organization with a large number of facilities in their portfolio will usually have multiple facilities of similar types that can be benchmarked comparatively. Some examples would be:

  • Retail branch banks
  • Data Centers
  • Call Centers
  • Healthcare: Hospitals, physician’s offices, etc.
  • Back office facilities
  • Headquarters or Class A office space
  • Malls
  • Retail: grocery, pharmacy, big box, etc.

Most Fortune 500 companies would have facility portfolios containing multiple, similar type facilities that could be benchmarked so the performance may be compared. If you need a little more info to get started, here are some of the reasons large organizations benchmark their portfolio:

  • Good data are needed to show which facilities are operating in an efficient manner. Facility costs are the second largest component of production costs, after labor. This information was recently used by a large aerospace organization to increase production in one location and decrease their production in another. Benchmarking information is a key element of this process.
  • Facilities with low cost operating profiles can share their best practices across the organization so the entire organization may benefit. There are no confidentiality issues in this situation so the information can be freely shared without any concerns about the data and/or “lessons learned” falling into competitive firms. This is also an effective way to break down barriers to communication across the organization.
  • FMs of individual properties or groups of properties in the portfolio are under continuing cost pressure and are always looking to control costs and reduce operating expenses. Benchmarking data can support their cost position. For example, if you are already in the low 1st quartile cost profile and providing good quality services, you can explain this to the management team and mitigate some of the pressure to reduce costs. If your costs are high then you should begin thinking of ways your peers have used to reduce them and still maintain profitability.
  • Many large organizations benchmark their costs across the portfolio but run comparisons on similar types of facilities. For most organizations it is common to benchmark administrative facilities, production facilities, data centers, call centers, and distribution centers as common types of facilities. All large organizations have more than one of these types of facilities so benchmarking comparisons between these facilities are meaningful.

Large organizations have the same issues getting started with benchmarking as CREs, FMs and contractors. Everyone is busy, often doing more than one job, and the press of daily issues and problems often keep the benchmarking initiative from beginning or progressing. Without good benchmarking comparisons, large organizations may not realize which facilities have a high or low cost profile.

Another issue is the complexity of benchmarking. It seems that regardless of what benchmarking program or tool you use the task often looks formidable. Data may be held by different organizations and some information regarding space, headcounts, utility consumption, utility billings, etc. may not be readily available. Finally, many benchmarking forms are frequently not user friendly so no one usually volunteers to “benchmark” unless they can see the benefits.

All of these issues can be overcome easily and the benefits to benchmarking certainly outweigh the negatives. Here is a suggested approach to help you to get started. We have used examples to illustrate how easy the process should be and this approach will allow you obtain the key output reports in the minimum amount of time.

First of all, benchmarking can be an intensive effort so focus on what is most important. For large organizations, what is important are the services included in your scope of work. A quick review of your budget will show that the following four areas usually represent the largest share of your operating expenses:

  • Energy and utilities
  • Maintenance
  • Janitorial services and
  • Security

These four components typically represent, for most facilities, between 95 and 97 percent of your controllable operating expenses. The largest expense of these four is almost always the energy and utilities budget. If it hasn’t been carefully benchmarked in the past year or so it is also one with the highest potential for savings. Maintenance runs a close second.

Utilities can be benchmarked on a cost basis: Utilities cost/Area or on the basis of energy intensity: either the KWH/Area or BTU/Area. In this example we will compare a large manufacturing organization on its cost performance. However, comparing utility costs may give you the wrong perspective on your performance, unless the comparisons are made with a relevant peer group. In this example we will use:

  • Manufacturing facilities
  • Large: Greater than 600,000 SF
  • Operating continuously (24 hours X 7 days per week)

Figure 1 identifies the energy costs using the above criteria.

Figure 1 – Utility Cost per Area Filters: Type of facility (Manufacturing, continuous operation, >600,000 GSF) Provided courtesy of FM BENCHMARKING

Figure 1 – Utility Cost per Area
Filters: Type of facility (Manufacturing, continuous operation, >600,000 GSF)
Provided courtesy of FM BENCHMARKING

 

This allows you to see at a glance how your facilities compare with other manufacturing buildings. There are 315 buildings in this peer group with a median utility cost per square foot of $2.76 and a first quartile performance of $1.88 per square foot.

The yellow bars indicate the manufacturing facilities in the benchmarked organization. Note that most of the facilities are in the first and second quartile, but there are eight facilities in the third quartile with one facility in the fourth quartile.  By looking at, and comparing similar types of facilities, you will be able to make intelligent “data-driven” decisions that can improve the performance for all the benchmarked facilities.

To reach the first quartile or move the high cost facilities into the second quartile, you could begin looking at the best practices that the 1st quartile group has implemented and hold focus meetings about which best practices have the highest return.  Figure 2 shows some of the best practices that have been implemented by the first quartile group. This is only a partial list from FM BENCHMARKING, there are about 30 best practices overall.

Figure 2 – Maintenance Best Practices Filters: Type of facility (Manufacturing, continuous operation, >600,000 GSF) Provided courtesy of FM BENCHMARKING

Figure 2 – Maintenance Best Practices
Filters: Type of facility (Manufacturing, continuous operation, >600,000 GSF)
Provided courtesy of FM BENCHMARKING

Using the results from this table, the facilities group can make proven recommendations for utilities services that would help achieve first quartile performance or move toward first quartile performance. Again, this is win-win for the entire organization. The company will achieve cost savings from the utilities improvements and improved levels of service; the FM will improve their profitability by more effectively utilizing their workforce, and there will be improved occupant satisfaction which benefits everyone.

Articles are based on data from FM BENCHMARKING, the online benchmarking tool for facilities managers and CREs. Data tracked by FM BENCHMARKING includes cost data (utilities, maintenance, custodial, security), sustainability data, and best practices. For more information, go to www.fmbenchmarking.com.

FM BENCHMARKING is a collaboration between Facility Issues and FMLink.