Manufacturing resource productivity. Stephan Mohr, Ken Somers, Steven Swartz, and Helga Vanthournout – June 2012
“Rapid growth in emerging markets is causing a dramatic increase in demand for resources, and supplies of many raw materials have become more difficult to secure. Commodity prices are likely to continue to rise and will remain volatile. Manufacturers are already feeling the effects in their operations and bottom lines, and these challenges will persist, if not intensify. Consequently, manufacturers variable costs have increased. Between 2000 and 2010, for instance, the variable costs of one Western steel company rose from 50 to 70 percent of its total production expenses, mainly due to jumps in commodity prices. For one Chinese steel company, 90 percent of production costs are now variable. And for a manufacturer of LCD televisions, energy represents 45 percent of the total cost of production. But companies that take steps to increase resource productivity could unlock significant value, minimizing costs while establishing greater operational stability. Our experience suggests that manufacturers could reduce the amount of energy they use in production by 20 to 30 percent. They could also design their products to reduce material use by 30 percent while increasing their potential for recycling and reuse.”
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