MHI Solutions Improving Supply Chain Performance
BY JASON SCHENKER, PRESIDENT OF PRESTIGE ECONOMICS®, CHAIRMAN OF THE FUTURIST INSTITUTE®
Sustainability mandates are gaining steam against a backdrop of high interest rates, high labor costs and elevated costs. For many businesses, this push to embrace sustainability may appear like another cost center adding to the cost pile-on that threatens corporate profitability. While that can be true, it does not need to be the case. In the current environment, prioritizing cash flow is critical.
Fortunately, several sustainability strategies can potentially help you reduce your environmental footprint while also improving your cash flow.
Strategy 1: Recycling
One of the easiest, high-value sustainability activities that a company can implement is recycling. Metals recycling in particular can be a valuable source of revenue for a manufacturer. If you do not have a recycling program in place, it may be worth contacting several recyclers in your area. If you do have an industrial recycling program in place, you may be able to improve its profitability.
To evaluate the effectiveness of your recycling program, you may wish to consider several key questions:
- Do you weigh your recycling collection containers and reconcile that weight against the estimated weight of materials used in production? Reconciling physical weights can help with loss reduction and prevention.
- Are you maximizing the level of material that you can recycle? Increasing the volume of metal you recycle can add value and reduce your environmental footprint.
- When was the last time you competitively sought pricing for the sale of your industrial scrap? Your scrap has value, and prices can change significantly, which may make it worth evaluating pricing in the marketplace.
Strategy 2: Reverse Supply Chain Options
Looking further into potential sustainable and profitable strategies that go beyond selling scrap to a recycler, it may be worthwhile for manufacturers to evaluate reverse supply chain options. This is a process whereby used or inoperable goods are returned to the manufacturer and refurbished, reused, repaired and ultimately resold. Implementing a reverse supply chain can reduce a manufacturer’s environmental footprint significantly. Plus, the less virgin material you use in manufacturing, the lower your costs are likely to be.
Strategy 3: Waste Reduction
Maximizing the utilization of your fixed real estate assets can reduce a company’s consumption, costs and environmental footprint. For example, maximizing the utilization of warehouse space, office space and other real estate can lead to more efficient and reduced power, water, paper and other consumption. Remote work has been hotly debated in the material handling industry, as in many sectors. For some companies and divisions, remote work is not a viable strategy. But for many companies, divisions or offices, moving current or future staff remotely can allow companies to downsize their office space, reduce their environmental footprint and mitigate the potential for their future footprint.
Strategy 4: Renewable Energy
Another strategy worthy of consideration for sustainability and cost leadership is installing renewable power generation capacity. Adding renewable power, like solar or wind, to a manufacturing facility can reduce power costs in the long run, especially in markets where the price of power can fluctuate significantly. While upfront costs can be significant to pay outright, some companies that specialize in power generation will install renewable solar, wind or other power production capacity and offer financing, take-or-pay or other agreements for this power. Renewable power generation can be installed behind the meter, and there may even be options to sell excess power back into the grid, offering financial optionality that can unlock value similar to a power interruptibility agreement. To evaluate the viability of any of these or related options, companies should speak with multiple power generation installers.
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