Executive Briefings

Manufacturers Can No Longer Ignore Focusing on Resource Productivity

A decade or so ago, companies in industrial manufacturing and other process industries did not need to focus on resource productivity. If they gave any attention to the topic, it was to undertake small, incremental measures with the hope of generating marginal improvements. That period is over. Today, there is no debate: resource productivity must be among the top priorities - if not the top priority - of industrial manufacturers around the world.

Recent shifts in both supply and demand are squeezing these companies from both sides. On the supply side, raw materials are increasingly scarce, making them more difficult and more expensive to procure. At the same time, demographic changes—primarily in emerging markets—are increasing the demand for finished goods. These trends have been building over the past several years, and they will continue to gain momentum. As a result, industrial manufacturers will need to do more with less.

Compounding this problem is the fact that the easy gains have already been captured. Most organizations have already taken the obvious steps—for example, upgrading their lighting and automating their heating, ventilation and air-conditioning controls. Yet they are now bumping up against the limits of what they can accomplish using a traditional approach. Why? The fundamental premise of that approach—in which resource productivity is subordinate to other operational priorities—is no longer valid.

For example, many managers still assume that these measures will only serve as a hindrance to plant operations—that they will be an opposing force that makes their daily work more difficult. Others assume that they simply don’t need these measures. (This is a line we hear frequently when meeting with companies: “Our plant is already as efficient as it can be.”) Yet there are always opportunities to transform a process or facility, improving efficiency and yield and also generating clear financial benefits, often with little or no capital expenditure.

To capture these gains, however, organizations need a better approach to resource productivity. They need to embed new ways of thinking—core beliefs—in their management teams, workforces and organizational cultures. We use the word “belief” deliberately, because it underscores the way that change comes from thinking about productivity in a whole new way.

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Recent shifts in both supply and demand are squeezing these companies from both sides. On the supply side, raw materials are increasingly scarce, making them more difficult and more expensive to procure. At the same time, demographic changes—primarily in emerging markets—are increasing the demand for finished goods. These trends have been building over the past several years, and they will continue to gain momentum. As a result, industrial manufacturers will need to do more with less.

Compounding this problem is the fact that the easy gains have already been captured. Most organizations have already taken the obvious steps—for example, upgrading their lighting and automating their heating, ventilation and air-conditioning controls. Yet they are now bumping up against the limits of what they can accomplish using a traditional approach. Why? The fundamental premise of that approach—in which resource productivity is subordinate to other operational priorities—is no longer valid.

For example, many managers still assume that these measures will only serve as a hindrance to plant operations—that they will be an opposing force that makes their daily work more difficult. Others assume that they simply don’t need these measures. (This is a line we hear frequently when meeting with companies: “Our plant is already as efficient as it can be.”) Yet there are always opportunities to transform a process or facility, improving efficiency and yield and also generating clear financial benefits, often with little or no capital expenditure.

To capture these gains, however, organizations need a better approach to resource productivity. They need to embed new ways of thinking—core beliefs—in their management teams, workforces and organizational cultures. We use the word “belief” deliberately, because it underscores the way that change comes from thinking about productivity in a whole new way.

Read Full Article