Resource Efficiency: the Convenient Truth for Manufacturers
A focus on non-labour resource efficiency can cut significant costs and environmental impacts, with little or no capital investment. A message that sparked real interest at The Manufacturing Leaders’ Summit and the Smart Factory Expo.
By Martin Chilcott, Founder, Manufacture 2030
Just a few weeks ago, the UN’s Intergovernmental Panel on Climate Change (IPCC) laid bare the challenge facing humanity. We have 12 years to limit global warming to 1.5 degrees and prevent catastrophe. To achieve this, all sectors – regardless of their size - need to make a concerted effort to use all their resources better: energy, waste, water and materials.
Given that the manufacturing sector is responsible for 36% of all CO2e emitted, this message rang loud and clear, last week, at the UK’s premier manufacturing event, The Manufacturing Leaders’ Summit and the Smart Factory Expo.
We were there to launch our Research paper ‘Resource Efficiency: a missed opportunity’ and share the the good news, from the stage and our stand, that improving resource efficiency (energy, materials, waste and water) is a massive (and currently missed) opportunity for cutting costs and improving competitiveness and productivity – as well as being essential for tackling climate change. And the accompanying highly convenient truth is that it doesn’t require significant capital expenditure.
Even more powerful, however, was the evidence we presented from our friends at the Institute of Manufacturing (Cambridge University), which showed that on average, UK factories are only improving the efficiency of their resource use at 1% per annum. Considering that non-labour resources can represent 50% plus of a factory’s production costs, most UK manufacturers are woefully inefficient. With energy costs set to rise markedly between now and 2020, manufacturers could see a 2% increase in production costs from energy alone. Add to this fluctuating materials prices and the rising costs of water and waste management, and many manufacturing businesses could be in real difficulty.
The good news is this situation can change. According to our friends, best in class manufacturers improve their resource efficiency at around 7% year on year, giving them a 26% resource efficiency advantage over their average peers every five years. Over 10 years, manufacturers could cut their resource intensity in half. If the average UK manufacturer achieved this, they could boost their profitability by 12% per annum – and the country as a whole could save £10bn.
Resource efficiency initiatives are low-hanging fruit that can boost profits, competitiveness and productivity with little to no capital expenditure – yet they remain challenging for the majority of manufacturers. So why?
Answering that question was the focus of the research we carried out with The Manufacturer and the paper we launched at the Summit. ‘Resource Efficiency: a missed opportunity’ highlights that despite recognition by senior management of the opportunity to cut costs through resource efficiency, insufficient numbers of companies make it a priority to even set and share targets. The research identifies shortages of time, knowledge and tools as key barriers to progress, making it clear that if manufacturers are to tap into the benefits of resource efficiency there must be a shift in culture that highlights resource efficiency as being complementary to, rather than competitive with, production output.
This change in approach, which we are calling a ‘Revolution in Resource Efficiency’, could help manufacturers to improve profits, productivity and competitiveness and go a long way towards solving the planet’s biggest long-term challenge: climate change. Manufacturers need to join the revolution or be left behind - and judging by the numbers who came to our stand, this sector is ready for change and recognises the convenient truth of resource efficiency.
Martin Chilcott recently spoke at The Manufacturer’s Smart Factory Expo Summit.
Download your copy of the white paper here