Dan Gilmore, Editor-in-Chief of Supply Chain Digest, recently published some interesting thoughts about upcoming supply chain problems. In essence, he sees trouble, if not disaster, in store for many U.S. manufacturers. His article, The Supply Chain Perfect Storm, is definitely worth reading, but I’ll summarize some (not all) of his key points.
The first set of problems he discusses relate to energy. We all know that the price of oil has skyrocketed – Goldman Sachs is predicting $200 per barrel next year – but I didn’t realize that the price of coal has tripled. And because coal is the number one source of energy for the generation of electricity, this means that all energy costs are going up.
Commodity prices are also rising. Iron ore, for example, is up 70 percent. And it’s not just iron. It’s everything.
What makes these price rises particularly disturbing is that they occur at a time where competition on a global scale is greater than ever. To quote Gilmore, “There is substantial over-capacity in virtually every manufacturing sector.” At the same time, brand loyalty is diminishing. These two factors – more choice and less loyalty – make it harder than ever to pass on increased costs to the end customer.
There’s no doubt that these problems are real, and pose daunting challenges to small manufacturers. But these storm clouds may have some silver linings.
In the specific case of energy, there is some good news. Most companies can find ways to achieve substantial savings just by trying. Here’s an example: Many companies have engine-driven stand-by generators to take over in case of a power failure, and these generators typically have heaters to ensure instant start-up, which would be needed, for example, in a hospital operating room. The heaters are typically set at temperatures as high as 120 degrees. But if start-up in a few minutes is acceptable, then a set point of around 70 degrees is adequate. The result of this simple change delivers a savings of about 80 percent with no decrease in reliability.
I’m not suggesting you drop everything to go check the set point of your stand-by generator. You may not even have one, and if you do it may not have a heater. The point is, when you start looking into the tiny details of your energy use, you’ll find a lot of ways to save.
In addition to changing energy use practices, there are many energy-saving products you can purchase that have quick pay-backs and also qualify for generous government rebates or tax credits. Solar panels are a good example, although of course the availability of rebates, tax credits etc. varies from state to state, and in some states there may be no compensation at all. But it’s worth looking into.
When you instigate energy-saving measures, they pay you back for years and years, not to mention the favor you’re doing for the environment.
Again, energy-saving opportunities are not that hard to find. Many utility companies will help you conduct an energy audit, as will many universities. It’s worth the time. Just do it!