Manufacturing generates directly 10% of the UK’s GDP and employs 2.5 million people (9% of the employed labour force). Labour productivity improvements in the sector have reduced labour costs since 2001 at a rate of 3% p.a. to £75bn in 2011, a reduction of 1,000,000 jobs.
Conversely, despite spending £340bn annually on goods, materials and services (i.e. non-labour resources), these costs have been rising for UK manufacturing sector by 0.4% p.a. since 2004, adjusted for inflation and production volumes.
While UK manufacturers have made good progress in some non-labour resource productivity areas, such as recycling and waste to landfill, significant inefficiencies remain. For example:
- Remanufacturing is below 2% for most non-perishable/non-consumable products1
- 27% of freight truck journeys are running empty2
- Despite the logical benefits of optimising along the supply chain, few UK manufacturers have been engaging in collaborative discussions with their suppliers
- Many companies have achieved 10 to 15% efficiency gains over the last decade, however leading companies have achieved over 50% improvements in the same timeframe.
This study presents opportunities to improve non-labour resource productivity which could enable a revolution in manufacturing and are estimated, conservatively, to be worth for the UK:
- £10 billion p.a. in additional profits for manufacturers – a 12% increase in average annual profits.
- 300,000 new manufacturing jobs – a 12% increase in manufacturing employment.
- 27 million tonnes of CO2 equivalent p.a. greenhouse gas emissions reduction – 4.5% of the UK’s total greenhouse gas emissions in 2010.
Additional benefits to the community include indirect employment, improved national resource security (including energy, food and raw materials), reduced pollution, reduced need for landfills, less traffic congestion, reduced load on energy and transport infrastructure (reducing investment and maintenance spend), improved prosperity in the UK agricultural sector, and economic development in developing nations who supply UK manufacturers.
These benefits come from four types of improvement (Incremental Improvement, Process & System Improvement, Structural Change and Core Redesign) within the resource productivity fields of circular resource use, energy efficiency, process waste reduction, packaging optimisation, transport efficiency and supply chain collaboration. While some of the identified opportunities are well established, others such as supply chain collaboration are new or are the result of recent technology development or business model innovation.
Potentially, all manufacturing companies can benefit from the identified opportunities; the benchmark database developed for this study revealed significant variation in non-labour resource performance between companies within each manufacturing sub-sector. Even pioneering companies leading in one or several areas were found to perform inconsistently across the topics examined.
Eight major barriers to non-resource productivity were found. Four of these apply to most opportunities: senior executive leadership, information, skills and resources. The other four barriers relate to specific types of opportunities and also warrant attention: design, infrastructure, legal constraints and collaboration.
A programme to address these barriers has been developed in consultation with a range of multinational manufacturers, relevant government departments, NGOs and experts around the world. It comprises three streams:
- Establishment of an NMR Community, for broad engagement and education. This will provide in-depth information, research, tools and interactive information exchange forums. This is designed to build skills and awareness, while inspiring senior executive action. The NMR Community will be openly accessible to all, using the Next Manufacturing Revolution website and the 2degrees platform currently serving over 31,000 members.
- Tailored support, providing assistance for individual organisations. The Next Manufacturing Revolution founding members will work with established manufacturers to identify opportunities for resource productivity improvements, help to construct the investment case for these, and engage senior executives. This will help develop opportunity awareness and provide access to the necessary skills.
- Barriers resolution and rollout. While the above streams begin to address the key barriers, more concerted action is required to eliminate them. This will require collaboration amongst the various stakeholders who can together overcome the barriers to improving non-labour resource productivity. A series of workshops, consulting widely to understand all of the issues and then focussing within small group of senior experts from business, government, NGOs, and academia, will begin in the second half of 2013. The outcome from each will be a plan of action with agreed milestones and commitment to address the barriers.
Implementation of this programme is now underway; collaboration with government, member organisations, other NGOs and established manufacturers will assist to accelerate this programme. The Next Manufacturing Revolution welcomes such organisations seeking to participate.
This study is based on input from global experts, multinational corporations, an extensive literature review and a limited sample survey of manufacturers. It has also been peer reviewed by over 40 reviewers.
Click here to download the full NMR report or watch a the video summary of the key findings below.
1 Details are contained in the Circular Resource Use chapter of the NMR full report.
2 For details and references, refer to the Transport Efficiency chapter of the NMR full report.