A smaller waste line for a better bottom line


The old expression “waste not want not” has even greater relevance today.

The UK food & drink manufacturing industry accounts for 3% of UK carbon emissions, 3.9M tonnes of food waste, and uses a whopping 0.2 Bm3 of water, which is equivalent to 3% of the entire public water supply.

The sector is experiencing increasing pressure on profit margins from higher costs of raw materials and price increases in the supply chain. This is compounded by the necessity to deliver competitively priced products to retailers and ultimately to cost conscious consumers. Reduction in waste cost is therefore fundamental to maintaining or even increasing ongoing profitability.

Carbon Architecture was commissioned to produce the membership survey of the British Dairy Industry and the British Brewing Industry in 2012 and 2014. This was undertaken primarily to formulate an industry wide position on Climate Change legislation and ultimately reduce the fiscal impact of this legislation on the sector. The survey included the largest 45 Brewers and 90 Dairies. The survey was comprehensive and wide ranging with respect to resource efficiency. The data when collated and analysed provides a unique and authoritative view of cross organisational practices and comparative metrics.

InMetriks KPIsIt will come as no surprise that one of the consistent outputs from the survey confirmed that waste represents a significant cost to food and drink manufacturers. However what became clear from the responses to the survey is that there are a number of opportunities for this cost to be readily reduced, providing very worthwhile profitability improvements. As a direct result of these findings, Carbon Architecture developed a series of highly successful methodologies and processes to identify and reduce waste in the manufacturing environment.

The Carbon Architecture waste reduction program has been demonstrably effective and successful. It has been adopted by a number of high profile dairy and brewing clients with the result that over a 2 year period the delivered savings generally equate to 5 times the expenditure incurred on introducing efficiencies.

Waste is a very widely used term which perhaps needs to be better defined and understood in order to consider the true scale of the problem. Whilst waste consists of more than just the contents of the skip or tank sitting at the end of a production line, simplicity in quantifying the value at stake is critical. Identifying the most significant value item(s) and using these for tracking, reduces the complexity required in analysis.

So what legitimately makes up the cost of waste or scrap?

The tangible elements that make up the cost of waste include the raw materials lost, cost of manufacture in terms of labour, utilities (including energy, water and effluent) and disposal costs and taxes.

In addition intangible elements also have to be considered. They will include the opportunity for additional production capacity, improvements in quality and repeatability, reduced inventory holdings and waiting time.

Typical sources of waste range from over-production, destructive testing, defective production, customer returns and excess to specification. However often overlooked are in-process losses which can be the main contributor to the overall total.

It was interesting to note that the surveys identified the typical resource savings that can be achieved through waste reduction as a percentage of total purchase costs are as follows:

  • Raw Materials 1% – 5% of overall material costs
  • Energy 5% – 15% of expenditure
  • Water 5% – 30% of expenditure

 

CA Waste TriangleMaintaining effective waste control is by definition an ongoing process. The successful approach is to identify and prioritise cost saving opportunities.

This involves the segmentation of the supply chain to create a loss map which formulates the areas of risk and opportunity.
Once created the data provides a rich picture of variance and control, enabling prioritisation of actions.

The prioritisation can be by any number of factors including for instance; risk, return on investment, scarcity of resources, compliance and / or statutory requirements.

The opportunities for cost reduction typically have three characteristics:

  1. Immediate and proven interventions. These are of course the lowest risk and generally have higher return on investment.
  2. The adoption of advanced or leading edge technology and processes. These may offer significant improvement opportunities but will involve a higher level of risk, requiring increased management intervention or the use of external resource skills to bridge the skills gap.
  3. Future Horizon projects. Generally these will require a strategic adoption within an organisation and significant budgeting of a Capex or Opex nature. The planning for these projects should quantify and mitigate the skills gap that has to be addressed in order to be able to successfully implement change.

The adoption of change offers manufacturers the opportunity for differentiation in a saturated market. However change may be forced upon an organisation due to external forces such as regulatory matters or customer expectations, or by internal events such as mergers, acquisitions or disposals.

The results of the surveys beg the question “If these savings are available from waste reduction why has there not been more attention paid to it?”

Communication up, down and across an organisation is difficult without an agreed format, particularly involving readily understandable and prioritised data. Data is also often complex to interpret and comparison of performance within sectors has also been difficult without having access to anonymised data and industry wide metrics.

The availability and use of these metrics now provides greater opportunities to identify and quantify the value of waste reduction in a structured and prioritised manner. Furthermore, cloud technology delivers a low cost means of gaining access to disparate data. This is aided by ever increasingly useful and user friendly dashboards for operational and Board level staff to view timely data, and most importantly understand it and the actions required. Meaningful insight enables action.

In house expertise continues to juggle the demands of customer service, quality and performance which can leave detailed analysis of operational waste as a low priority. External skills should be considered in order to complement existing skills, accelerate delivery and to enable capability gaps to be identified and bridged over time.

The benefits to stakeholders for reducing the cost of waste are significant wins in financial and sustainability terms, as well as meeting increasing expectations for social responsibility.

Don’t waste the opportunity; implement business improvement through product waste management. The bottom line really will benefit.

Will Todd, Managing Director