Tracking material losses in manufacturing is hardly a new concept, but of late the consultants at McKinsey have been saying better resource efficiency will be critical for operational and financial success (even if for the time being most input prices have fallen dramatically).
McKinsey recently published an article discussing the use of value stream mapping to identify material and energy losses in supply chain processes, using the example of baking an apple cake for a school fund raiser - as illustrated in the graphic below.
In this simple example, 14.5% of total inputs are lost in the process. The obvious question of course is how could changes in process, technology or re-use claw some or most of those losses back?
"The vast majority of the world's manufacturers have a wealth of opportunities to make more money and increase returns to shareholders by using fewer resources," McKinsey says. "Their full range of options includes maximizing the use of raw materials, minimizing harmful emissions, cutting water loss, and reducing or avoiding waste streams through recycling and energy recovery."
For any process, McKinsey adds, the baseline should be the theoretical limit, or the level of
resource efficiency that the process could achieve under perfect
conditions, such as a hypothetical state in which it produces zero
emissions or if all the heat it generates can be recovered.
The difference between the theoretical limit and actual consumption should be considered what it really is, McKinsey says - an input loss.
"Most people, and most
organizations, are far more motivated to avoid losses than to reduce
consumption." McKinsey observes. "Reframing the problem in this way is therefore more likely
to produce major improvement opportunities."
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