While manufacturers have long had their eye on process improvements to increase productivity, many are missing out on a significant way to decrease costs. It’s all about energy and sustainability.
For the past seven years, the Lombard team has worked with manufacturers to identify and implement proven ways to reduce the energy use of their sites and even generate additional income from generating more power than they use.
Here are three examples of how manufacturers can think differently about energy improvements with short ROIs that can make a company more competitive and future fit:
1. Energy audit + new equipment
A few years ago, I met a manufacturer who was proud of his manufacturing facility and the fact that many of his machines were two decades old, but still seemed to be chugging along fine. However, a digitised energy audit looked at every plug load in the building and determined that the old machines were using double the energy compared with newer models.
He realised that by replacing the machines, the energy savings would pay for 50% of the finance payments for the new machines in the first year. Just as you’ll realise savings in your petrol costs when you trade in a 20 year old car for a newer version with a better miles per gallon design, strategically upgrading machines for more efficient models is a win.
The manufacturer not only replaced the inefficient machines, but he used the opportunity to find new options that could do several new processes that he previously outsourced (at a cost to his profit margin). Now he offers those services as turnkey solutions to his customers, leading to a larger return to his business and ensuring quicker service that doesn’t rely on third parties.
To find out more about energy audits, see a blog I recently wrote on ‘going green’.
2. Renewable heat
A woodworking company specialising in retail shop fit outs attended a Lombard seminar on energy savings. Their business obviously created a significant amount of wood waste, which required them to pay for hiring a skip, transporting the skip to the landfill, and leaving the waste there. At the seminar they heard about renewable energy technologies that work for manufacturers.
We worked with them to select a biomass boiler to heat their premises and generate hot water, while also mitigating the cost of dealing with wood waste. This positively impacted their cost margin, while also receiving a Renewable Heat Incentive from the government. The payback for their biomass system was just three years and they were able to pass savings onto their customers to keep competitive.
Additionally, the owner was so happy with this improvement, he worked with Lombard to identify other energy opportunities, including retrofitting their facility with LED lighting and rooftop solar panels as well as installing a building management system to identify energy wastage going forward.
See our full infogaphic on sustainability in manufacturing here.
3. Think small
Some manufacturers don’t even consider potential energy solutions because they are worried about the capital investment required. Part of my job at Lombard is to not only bring energy savings to life for my customers by showing them real life examples of what’s possible, but to show them how easy it can be.
One of these simple solutions is replacing lighting with LEDs. We have customers who have reduced their lighting bill by 85% and achieved a two year payback from this change alone.
The government also provides enhanced capital allowances where companies can offset 100% of the costs of their LED lights in taxable profits in the first year. Why spend your profit on taxes when you can invest for efficiency?
Another no-brainer is utilising manufacturers’ flat roofs and open spaces to install solar panels. Why buy energy at 10 pence/unit when you can generate your own power and even sell it back to the grid?
At Lombard, we don’t just want to be known as an asset funder for plants and machinery, but as an impartial expert resource for our clients across a range of sectors, including energy. When productivity and margins are so important to manufacturers today, they can’t risk falling behind by not making simple improvements that prevent energy costs from eating into their bottom line.
The EEF National Manufacturing Conference is on 20 February 2018 in London. In addition to the four themed workshops (which are booked first come, first served when purchasing a conference ticket), political and industry heavyweights will be speaking, including Labour Leader Jeremy Corbyn. Book your early bird discount for tickets today.