The following example is adapted from a real-life case study developed by ENGIE Insight, a technology- enabled energy consulting company that helps companies identify opportunities to reduce energy consumption/spending and manage its energy resources. When the recession hit in 2009, restaurants like California Pizza Kitchen that rely heavily on consumer discretionary spending were among the first to take a hit. As consumers tightened their wallets and stopped eating out as often, CPK saw its sales drop and growth rate come to a halt. When company expenses didn’t drop at the same rate, managers at CPK were forced to look closely at their expenses to identify opportunities for savings. One big ticket item that stuck out like a sore thumb was a $21 million dollar line item for energy expense. Restaurants are a big consumers of energy due to the demand for heating, cooling, and lighting, as well as utilities to run cooking equipment and sanitation devices.

According to a CPK Senior Vice President: “Once we realized how much we were spending on that one operating expense, it was clear that this was where we had the opportunity to make the biggest impact in terms of cost-cutting.”

To achieve this goal, CPK engaged ENGIE Insight to analyze its energy consumption data and identify opportunities to reduce consumption/spending and manage its energy resources. ENGIE Insight was already processing and auditing the company’s energy expenses and had developed a vast database of energy consumption and trends for more than 250 CPK locations.

Consultants at ENGIE developed integrated performance reports that allowed CPK managers to compare energy consumption across locations that were similar in terms of climate, size, and hours of operation, as well as benchmark against industry averages provided by the Department of Energy. This allowed CPK managers to identify the restaurant chain’s worst performing locations, analyze what made them outliers in terms of energy use, and put solutions in place that would get them in line with the portfolio average.

“These reports made it possible for our company to understand where we are and navigate where we can go,” said a CPK executive. “We were able to establish a performance benchmark, set goals, and report very specifically on our progress.”

Armed with this data, CPK managers were able to quickly identify and prioritize areas for improvement, such as

• Requesting that all HVAC service providers conduct free HVAC inspections and tune-ups.
• Switching to compact fluorescent light bulbs.
• Adjusting temperature set points to maintain consistent results.
• Closing window shades.
• Running dishwashers only when dish trays are full, which reduces water, chemical, and energy usage.
• Installing low-flow aerators on hand sinks.
• Performing monthly reviews of restaurant results to identify the worst performers.

These relatively small changes had an immediate impact on the company’s energy consumption and spending, with electricity usage decreasing by 4.3 percent and natural gas usage decreasing by 2.82 percent in the first year alone.

According to ENGIE’s experts, California Pizza Kitchen’s energy problems were not uncommon. While CPK managers were experts in managing the basic costs associated with running their business, they lacked a fundamental understanding of energy’s impact on the bottom line and were unaware of the best actions to take to reduce energy costs. Once equipped with the right data, they were able to translate what was once a big unknown into big savings.

Required:

1. Explain whether utility expenses are considered a variable, fixed, or mixed cost.

2. Describe how managers at CPK used the energy performance reports for the functions of planning, implementing, and controlling.

3. Describe how the energy initiative at CPK impacted its sustainability goals. What elements of the triple bottom line were affected and how?

4. Explain how CPK’s energy initiative relied on descriptive analytics, predictive analytics, and prescriptive analytics. What type of analytic expertise do consultant firms such as ENGIE provide?