It will present the profits, jobs and environmental improvement opportunities from resource efficiency that UK manufacturers are currently missing, how to access them and the barriers that companies need to overcome to succeed, based on real company case studies for every sub-sector.

Every company can benefit; our research found significant variance amongst peer companies in each manufacturing sub-sector and inconsistent performance across the resource productivity areas examined. Even companies leading in a few areas were found to have opportunities to improve in others.

The study will also lay out a programme of action to assist companies to identify, quantify and build the business case for improving profits through resource productivity – addressing the barriers identified.

*The Next Manufacturing Revolution is a not-for-profit collaboration between Lavery Pennell, the University of Cambridge’s Institute for Manufacturing and 2degrees to accelerate improvement in resource efficiency (including energy, transport, packaging, materials, and supply chain collaboration) within the UK manufacturing sector. You can read more at www.nextmanufacturingrevolution.org

What is this all about?

This paper, written by Lavery Pennell, 2degrees and the University of Cambridge’s Institute for Manufacturing, represents the first step in a programme of activities to accelerate the coming revolution in resource efficiency and the benefits that it will bring.

The paper examines:

• Size of the packaging opportunity – in profits and environmental benefits;
• Best practices;
• Barriers that exist; and
• Compares well-known companies based on their performance.

Once expert inputs are incorporated, the document will be used to engage with decision-makers and others on how to address the barriers and develop a national roadmap for improving the profits, jobs, and environmental impact of UK manufacturing.

Are you experienced in packaging? We would appreciate your help

If you have worked in the packaging field for a number of years, then we would value your input – no matter where you are in the world.

At this stage we are looking for perspectives from industry, NGOs, academia and government; we do not need further input from consultants for the moment. Also, please let us know if you can recommend other experts whose input would be valuable and we will reach out to them.

To receive the paper

Please respond to Greg Lavery, greg.lavery@laverypennell.com, if you would like to review the paper to learn what best practice companies are doing and contribute your thoughts. Your input will be acknowledged in the paper.

You can read more about the Next Manufacturing Revolution at www.nextmanufacturingrevolution.org.

What is this all about?

This paper, written by Lavery Pennell, 2degrees and the University of Cambridge’s Institute for Manufacturing, represents the first step in a program of activities to accelerate the coming revolution in resource efficiency and the benefits that it will bring. The paper examines:

• Size of the closed loop manufacturing opportunity – in profits and environmental benefits
• Best practices
• Barriers that exist
• AND compares well-known companies based on their performance

Once all inputs are incorporated, the document will be used to engage with decision-makers and others on how to address the barriers and develop a national roadmap for improving the profits, jobs, and environmental impact of UK manufacturing.

Are you experienced in freight transport? We would appreciate your help

If you have worked in the logistics/freight transport field for a number of years, then we would value your input – no matter where you are in the world. At this stage we are looking for perspectives from industry, NGOs, academia and the government; we do not need further input from consultants for the moment. Also, please let us know if you can recommend other experts whose input would be valuable and we will reach out to them.

Contact

Please respond to greg.lavery@laverypennell.com if you would like to receive a copy of the draft paper and learn what best practice companies are doing and contribute your thoughts. Your input will be acknowledged in the paper.

You can read more about the Next Manufacturing Revolution at www.nextmanufacturingrevolution.org

Many companies nowadays have successfully created their sustainability agenda – having developed a sustainability vision, identified their most relevant sustainability themes, set ambitious targets, established company policies, set up governance and developed a communications plan. Often companies have developed compelling annual sustainability reports having gathered examples of desired practice from around their companies. But many of these same companies (even those scoring well on sustainability indices) are failing to capture the full value that sustainability offers.

For example, in our Next Manufacturing Revolution research we are finding that most companies think they are doing well, but when compared to actual benchmarks are often found to be seriously lacking. Good practice companies have achieved 70% or better improvements in energy, water, and waste per unit of production over the last 10 years.

When faced with this reality, companies ask:

• Why is our rate of improvement well behind our competitors’?
• Where are the big projects that will transform our cost base and our sustainability?
• How can we embed sustainability to fully harness the ideas and energy of our staff?
• Why is our sustainability spend not generating value?

To bridge this gap between vision and reality, we have found that three key enablers are needed:

1.       Resources – both people and funding

People. Profitable sustainability programs require a mix of capabilities to succeed: A Systems perspective is needed to spot improvement opportunities. Engineering know-how is required to develop technical solutions, fit them into business circumstances and de-risk them. Commercial skills are needed to build robust economic cases. Change management skills are needed to implement new opportunities. And finally, successful companies have a sustainability program leader who is passionate about, and has experience developing successful profitable sustainable solutions– to bring all of the relevant parties together and drive the process.

Funding. Sustainability programs need funding – whether it be for suitably skilled staff or more efficient equipment. However, sustainability projects often fail to secure budget allocation when they compete with business-as-usual profit improvement activities such as new product development and plant expansion (which are often much riskier and have a longer payback period).  Sustainability initiatives succeed when they have a separate funding allocation or funding decision process – ideally a rigorous stage gated process. This does not mean that the investment criteria are any lower; instead it avoids making difficult trade-offs between traditional forms of value creation (which are in most executives’ comfort zone) and value through sustainability.

To justify these resources, a rigorous high level business case is often required – showing the size of the profit improvement opportunities based on competitor good practice, as well as an estimate of the costs and payback period to achieve them.

2.       Incentives – KPIs and culture

KPIs drive staff and executive behaviour and are vital in creating change. To enable KPIs, a baseline is needed as well as ongoing monitoring and reporting of performance in the relevant sustainability themes.

The culture of an organisation can also incentivise change. Culture is led by the most senior executives accompanied by engaged staff championing the new direction.

3.       Processes – ideation, collection, development and sharing

Ideation. Profitable sustainability ideas can come from any staff member anywhere in a company, its suppliers, customers and external organisations. With a clearly defined aim, tight transparent selection criteria and engagement processes, the inputs of these groups can be efficiently and effectively harnessed.

Collection. Ideation alone is insufficient. Ideas need to be collected, recorded in a knowledge management system for future reference (and to avoid duplication), assessed and sent to the appropriate part of the company with appropriate feedback to the initiator.

Development of ideas. A stage gated pipeline for developing ideas provides a commonly understood pathway for projects which derisks them and improves their success rates.

Good practice sharing. A “not invented here culture”, internal competition or poor communication between divisions can mean that sustainability performance varies considerably across a company. Processes for sharing of successful ideas magnify the benefits of individual improvement projects.

Consider the following questions, which may reveal a sustainability gap in your organisation:

• Does your company’s sustainability team have all of the key skills identified above?
• Do sustainability projects lose out to business-as-usual profit improvement projects in your company’s capital/budget allocation process?
• Do your KPIs reflect the sustainability aims of your company?
• Is your culture consistent with your sustainability goals?
• Do the above key processes exist for your sustainability efforts?

Henry Ford famously said that “if you always do what you’ve always done, you’ll always get what you’ve always got”. We believe this applies for sustainability too.

If you think that you have a sustainability gap, you can contact us to discuss a different approach to accelerate your sustainability program while improving profits.

Greg Lavery
Greg.lavery@laverypennell.com
+44 (0)79 0016 3409

Dr Greg Lavery is the CEO of Lavery Pennell, strategy consultants assisting clients to improve their sustainability in a way that adds substantial value. For more information see www.laverypennell.com.

What is this all about?

This paper, written by Lavery Pennell, 2degrees and the University of Cambridge’s Institute for Manufacturing, represents the first step in a program of activities to accelerate the next manufacturing revolution and the benefits that it will bring. The paper examines:

• Size of the closed loop manufacturing opportunity – in additional profits, jobs and environmental benefits
• Best practices in each sub-sector
• Barriers that exist
• AND compares well-known companies based on their performance

Once all inputs are incorporated, the document will be used to engage with decision-makers and others on how to address the barriers and develop a national roadmap for improving the profits, jobs, and environmental impact of UK manufacturing.

Are you experienced in circular resource use? We need you!

If you have worked in the circular resource flow/recycling field for a number of years, then we would value your input – no matter where you are in the world. You may work in recycling, purchasing, plant management or sustainability. At this stage we are looking for perspectives from industry, NGOs, academia and the government; we do not need further input from consultants for the moment. Also, please let us know if you can recommend other closed loop/sustainability experts whose input and/or participation would be valuable and we will reach out to them.

Contact

Please respond to greg.lavery@laverypennell.com if you would like to learn what best practice companies are doing and contribute your thoughts. Your input will be acknowledged in the paper.

You can read more about the Next Manufacturing Revolution at www.nextmanufacturingrevolution.org.

1. Resource productivity. Labour productivity has been a focus of most companies for decades – resulting in decreasing headcount. However, since the mid-2000’s, input materials and energy have been rapidly increasing in price, overshadowing labour cost savings. In 2013, we see leading companies beginning to turn their attention to resource productivity through a broad approach including energy efficiency, waste reduction, packaging reduction, product lightweighting, transport efficiency, recycling and remanufacturing. Unlike labour productivity, which decreases employment, resource productivity increases profits and jobs while reducing environmental impacts.

2. Revolving funds. We all like “quick wins”, but equally recognize that some improvement projects have a longer payback period. We are seeing leading organisations starting to calculate their overall cash flows with projects timed such that quick win savings are reinvested in longer return projects. The result of this “revolving fund” approach is a very high return which is attractive to most CFOs (this article reports ROIs of up to 57%). We expect investment banks and private equity firms to start to capitalize on this in 2013.

3. Supply chain collaboration. Leading companies (including Tesco and Asda) are finding that purchasing goods on a £ per unit basis leaves untapped value in such areas as transport synergies, energy savings, and packaging reduction. Attacking these areas also reduces the environmental footprint of products and encourages local producers – enhancing company brands. Until now most companies have pushed their requirements onto their suppliers, using their buying power to drive compliance; this tactic is giving way to collaborative discussions to find win-win opportunities.

4. Factory of the future. 2013 will see companies reviewing their production model. With Chinese labour costs increasing rapidly, demand volatility requiring shorter supply chains, supply security concerns and an increasing focus on working capital, local production is becoming attractive for some manufacturing sub-sectors.  This thinking is also starting to include reverse logistics and reprocessing – how a company can minimize the cost of taking its products back, post-consumer, to capture the inherent value through recycling and remanufacturing.

5. Not “Sustainability” but “Value” and “Innovation”. The term “sustainability” has a confusing number of definitions (all of which are very general) and un-business-like connotations. Leading companies have realized that sustainability is really all about capturing non-traditional areas of value – financial, social and environmental – which all add to the success of a company. In these tight economic times, companies have little appetite for feel-good projects. Now it is about ROI and many of the topics traditionally discussed under the heading “sustainability” are being reframed as cost reduction, revenue growth, risk reduction, and innovation for growth programs.

We welcome your thoughts on these and wish you a prosperous 2013.

Greg Lavery, Nick Pennell and the Lavery Pennell team

http://www.laverypennell.com/

Entitled ‘Distributed Generation: From Cinderella to Centre Stage’ the report provides an overview of distributed generation in the UK and the barriers that it faces. Authored by the Carbon Connect division of Policy Connect, the study recommends a number of policy actions to assist distributed generation projects and thereby unlock the efficiency, emissions, security and risk reduction benefits that distributed generation offers.

You can access the report here.

What is this all about?

This paper represents the first step in a program of activities to accelerate the next manufacturing revolution and the benefits that it will bring. The paper examines:

• the size of the opportunities in process waste reduction
• best practice in each sub-sector
• barriers that exist
• AND compares well-known companies based on their waste performance

Once all inputs are incorporated, the document will be used to engage with decision-makers and others on how to address the barriers and develop a national roadmap for improving the profits, jobs, and environmental impact of UK manufacturing.

Are you experienced in process waste reduction? We need you!

If you have worked in the waste field for a number of years, then we would value your input. You may work in waste, plant management or sustainability. At this stage we are looking for perspectives from industry, NGOs, academia and the government. Let us know if you can recommend other waste/sustainability experts whose input and/or participation would be valuable and we will reach out to them.

Contact

Please respond to greg.lavery@laverypennell.com if you would like to learn what best practice companies are doing and contribute your thoughts. Your input will be acknowledged in the paper.

The Next Manufacturing Revolution study encompasses a broad range of topics including process waste, packaging, transport efficiency, recycling, supply chain collaboration and growth – all identifying untapped value (and all of which have sustainability benefits). This Energy Efficiency paper is the first of several that will appear over the coming months, for review.

The paper, co-authored by Lavery Pennell, the University of Cambridge’s Institute for Manufacturing and 2degrees, examines the size of the opportunities in energy efficiency, best practice in each sub-sector and the barriers that exist. For the first time it also compares well-known companies based on their Energy Efficiency performance.

The paper demonstrates that while most companies think they are doing a good job at energy efficiency, substantial profit improvement opportunities still exist. For example, Toyota UK has reduced its manufacturing energy use per vehicle by 70% in the last 10 years – whereas most companies have only achieved a 10% to 15% saving.

Once all inputs are incorporated, the document will be used to engage with decision-makers and others on how to address the barriers and develop a national roadmap for improving the profits, jobs, and environmental impact of UK manufacturing.

What makes an Energy Efficiency expert? If you have worked in the field for a number of years, then we would value your input. You may work in energy, plant management or sustainability. At this stage we are looking for perspectives from industry, NGOs, academia and the government.

Also, please let us know if you can recommend other EE/sustainability experts whose input and/or participation would be valuable and we will reach out to them.

Please respond to Greg Lavery at greg.lavery@laverypennell.com if you would like to learn what best practice companies are doing and contribute your thoughts towards improving the manufacturing sector and UK economy. Your input will be acknowledged in the paper.

You can read more about the Next Manufacturing Revolution at www.nextmanufacturingrevolution.org

On the input side, capital is scarce, resource prices are increasing and becoming more volatile, externalities (such as carbon dioxide) are beginning to be priced into the economy, new technologies are emerging with increasing rapidity and talent is becoming increasingly discerning – motivated by a ‘higher purpose’ that most companies did not provide before the financial crisis (befic).

The output side of the equation is changing as well, with volatile and uncertain orders, increasingly demanding customer mandates (e.g. Wal-Mart, P&G), and consumer and community pressure to improve corporate responsibility.

The business context is changing as well, with increasing shareholder activism, greater corporate transparency demanded by the community and regulators in the light of recent events such as phone hacking and LIBOR fixing, emerging new business models, and expectations that business drive the reduction of the world’s footprint to within the carrying capacity of the planet now that the Conference of the Parties and Rio +20 have demonstrated the inability of global politics to develop workable solutions.

The most thoughtful – and usually most profitable – companies and a range of clever start-ups have already begun to develop new approaches to the afic world. They use six themes for success:

1. Low cash. Afic leaders recognise that cash is scarce and use a range of approaches to minimise their need for cash to improve their businesses, including revolving funds, leasing, vendor financing, PACE funding, asset sharing and virtualisation.
2. Resource efficiency. Many companies are not even aware of the cost savings available from more efficient resource use and even those that are working on it have low satisfaction thresholds. e.g. most companies settle for 10% energy use and waste reduction, when Toyota in the UK is at 70% reduction and still finding economically attractive opportunities.
3. Local production. There is a trend towards re-onshoring manufacturing due to increasing transport costs and in-transit inventory draining cash and risking obsolete products in a world of rapidly changing and volatile demand.
4. Partnering with suppliers and customers. Fighting a win-lose battle over pence per unit misses much larger value opportunities for both suppliers and buyers. e.g. some agricultural buyers are helping their farmer suppliers to improve their productivity and harvests – and share this prosperity through reduced prices and lower risk.
5. Servicising. Most customers want light and paper copies, not light bulbs or photocopiers. Afic companies realise this and are providing services not products – and recognise that this reduces the cash requirements for their customers as well as enabling them to manage the products through their (prolonged) lifetime and, via remanufacturing and recycling, into new products, saving commodity costs.
6. Non-consumption. Some of the more radical afic companies are vigorously encouraging customers not to buy products. For example, Patagonia is encouraging repair and recycling, while car sharing clubs such as the E-Car Club encourage communities to adopt a shared vehicle between them avoiding private car purchase.

The financial crisis, and these new business parameters that have resulted, create the stage for the reinvention of existing firms and the growth of new ones. Consider the companies that began and flourished in economic downturns thanks to their innovation in a time of change, including GE (1890), General Motors (1908), FedEx (1973), and Microsoft (1975).

In 20 years’ time, we will look back and see a profound change in how business is done – and admire the rapid growth of new companies who grasped the afic opportunities. We may not remember those household names from 2012 that fell by the wayside.