Phil Scholes, SME sales and marketing director at npower, shares his advice on how manufacturers can gain a competitive edge by reducing energy costs.
According to the latest figures from the Office of National Statistics (ONS), UK manufacturing recently rose at its fastest annual pace than at any time in the last three years, indicating that the economic landscape is levelling out.
Manufacturing contributes £6.7tr to the global economy and the UK is currently the 11thlargest manufacturing nation in the world. In order to seize on the current sense of industry optimism and propel the sector into sustained success, manufacturers need to ensure that their energy usage matches their plans.
As the ONS findings highlight, the manufacturing industry is already taking positive steps to remain internationally competitive in a crowded market. By adopting a systematic, strategic approach companies can identify the potential barriers that can hinder some efficiency measures. But for organisations who are facing energy-related challenges, what can be done?
The current state of play
The reward for getting the energy management balance right in the UK manufacturing sector is significant, not simply because of energy efficiency reasons but also due to it delivering competitiveness within a global marketplace.
It’s ironic, but manufacturing which has such a high reliance on energy is also an industry that creates energy efficiency products. Energy suppliers have an important role in advising manufacturers on where savings can be made. By taking a lead in the development of these technologies and services, manufacturers can start expanding into new markets outside of their home territories. However, cost is also a vital consideration when it comes to cutting energy use within a business.
Harnessing a competitive advantage
Nevertheless, we have to remind ourselves that energy efficiency is not new to the manufacturing sector. Any reduction of a business’ cost base will help that business find a competitive edge in its market.
The npower and EEF study, Energy Efficiency and Challenges found energy costs represent a significant proportion of manufacturers’ operational costs, with 96 per cent of companies reporting that increasing productivity and efficiency through reducing energy consumption is critical to their business.
This process has been further incentivised by the introduction of legislation, such as Climate Change Agreements and the EU Emissions Trading System, as well as the increasing need for manufacturers to demonstrate to their stakeholders that they are taking climate change and energy management seriously.
With increasing concern from businesses generally over energy costs in the coming years, UK manufacturers continue to be focused on strategically managing these costs in order to maintain competitive advantage. Improving energy efficiency can not only help to reduce pressure that rising energy prices place on business competitiveness, but can unlock increased productivity and actively improve a business’ position against its competitors.
Looking beyond the financial considerations
But simply focusing on the financial barriers to energy efficiency may not yield the volume of change needed. For example, action on energy competes with other business critical investment priorities, and access to decision makers is often limited. Investments in new plant machinery, products and processes, innovation, people, marketing, skills and branding compete against each other when executive boards assess how and where to invest.
According to the npower and EEF study, any investment is likely to be linked to manufacturers’ strategic priorities. Larger companies are likely to identify developing capacity for new products as the biggest driver for investment, whereas a larger proportion of small and medium-sized businesses are more likely to invest to increased productivity.
The key to unlocking investment in energy efficiency is in understanding the specific barriers that a sector faces. However, this must sit within a wider industrial strategy that drives balanced growth within the UK economy and enhances the overall business environment in which manufacturers operate.
To deliver a step change in energy efficiency in manufacturing, industry and government must work together to develop appropriate policy solutions, drilled down to individual manufacturing outputs.
