2013 lean and green factory atlanta
LEAN & GREEN FACTORY
@ McKinsey Capability Center Atlanta
Turning resource productivity and continuous operations into competitive advantage
The efficiency imperative
Energy is already the single largest indirect cost in many industries. And its price is only going up. To deliver the next step in energy and resource productivity, companies will need to make broad and deep changes across their operations.
Does your organization have the capabilities to make that happen?
LEAN & GREEN FACTORY
1
The resource productivity revolution is already overdue
Over the past 50 years, manufacturing companies have transformed their labor productivity. The widespread adoption of lean techniques, coupled with greater automation, means that today’s manufacturers produce more than three times as much value per unit of labor input as their counterparts did in the 1960s. By contrast, gains in energy efficiency and material yields have been modest. That will have to change, as companies learn to operate in a world of rising, and increasingly volatile, energy and resource prices.
Historical productivity improvements
Factor input per unit of value added, indexed
400
Labor productivity 350
300
250
Material productivity 200
Energy productivity 150
100
50
0
1960
1970
1980
1990
2000
2010
Source: U.S. Energy Information Administration; Federal Bureau for the Environment
2
LEAN & GREEN FACTORY
U.S. energy costs have nearly doubled in the last decade. Energy accounts for around one-third of all costs in energyintensive industries such as aluminum, steel and cement production. Even in less intensive sectors, such as food and beverage manufacturing, energy can be the largest non-cost of goods sold expense, a fact that frequently surprises executives. Absolute energy costs for the ten hungriest industries are $1.8 trillion per year, more than the
GDP of India.
Across industries,
@ McKinsey Capability Center Atlanta
Turning resource productivity and continuous operations into competitive advantage
The efficiency imperative
Energy is already the single largest indirect cost in many industries. And its price is only going up. To deliver the next step in energy and resource productivity, companies will need to make broad and deep changes across their operations.
Does your organization have the capabilities to make that happen?
LEAN & GREEN FACTORY
1
The resource productivity revolution is already overdue
Over the past 50 years, manufacturing companies have transformed their labor productivity. The widespread adoption of lean techniques, coupled with greater automation, means that today’s manufacturers produce more than three times as much value per unit of labor input as their counterparts did in the 1960s. By contrast, gains in energy efficiency and material yields have been modest. That will have to change, as companies learn to operate in a world of rising, and increasingly volatile, energy and resource prices.
Historical productivity improvements
Factor input per unit of value added, indexed
400
Labor productivity 350
300
250
Material productivity 200
Energy productivity 150
100
50
0
1960
1970
1980
1990
2000
2010
Source: U.S. Energy Information Administration; Federal Bureau for the Environment
2
LEAN & GREEN FACTORY
U.S. energy costs have nearly doubled in the last decade. Energy accounts for around one-third of all costs in energyintensive industries such as aluminum, steel and cement production. Even in less intensive sectors, such as food and beverage manufacturing, energy can be the largest non-cost of goods sold expense, a fact that frequently surprises executives. Absolute energy costs for the ten hungriest industries are $1.8 trillion per year, more than the
GDP of India.
Across industries,