How to combat rising energy prices in your plant
Inflation is a concern for almost everyone, and manufacturers are no exception. With the rising cost of energy and supplies, many face a threat to their profitability and cost management practices.
A recent poll we conducted showed that 100% of respondents are already taking action to cut costs, highlighting the scale of the problem in the industry.
One of the most significant increases in expenditure is energy. The price cap rose in April and will rise again in October, with fears it will considerably impact businesses.
Given the potential ramifications, many plants will wonder what they should do now to minimise the effects. We have listed some top tips for managing costs and improving energy efficiency in your production lines.
What impact will rising energy prices have?
It is impossible to say precisely what impact energy prices will have in the long term. Many plants are already experiencing increasing costs, impacting their overall cost management policies.
Energy is crucial to the manufacturing industry. It is used to power machinery and production lines to generate output. That is before you consider other essential functions, like lighting, computer systems, internet, telephone lines, etc.
Due to how much energy the industry consumes, it is feared to be one of the worst affected, with emphasis on the food sector.
Data also suggests that manufacturers’ gas prices more than doubled since last year, before the October increase even kicks in. The government has announced some support for businesses, but it is likely most will still experience higher prices.
Some side effects we could witness as the issue unfolds include:
- Reduced profit. As your expenses increase, you might find your profit margins falling. This has many repercussions, including failure to meet financial targets, reduced return on investment for shareholders, reduced staff bonuses and less money to reinvest into the business (including funding growth).
- Price increases. Many plants need to adjust their prices to account for the increased costs associated with production. Informing your customers of price increases is never ideal, with a risk that it could damage your relationships or cause them to go elsewhere.
- Reduced economic confidence. With many businesses and individuals facing the ramifications of inflation, people are likely to be more cautious with how they spend their money. As a result, some manufacturers may experience reduced sales and revenue.
- Supply cost increases. Your suppliers will be undergoing the same problems as you, which may cause them to adjust their prices too. You will need to account for the impact on your expenditure which will exacerbate the issue.
With much at stake, manufacturers must take preventative measures to avoid costs overwhelming their operations.
How to reduce your plant’s energy prices
Although rising energy prices are out of most manufacturers’ hands, there are steps to minimise your energy use and counterbalance rising costs. We have listed them below.
Review your energy tariff
The first step to managing energy costs is ensuring your plant is on the best available tariff. Energy prices are rising across providers, so there may be little difference when you shop around, but it is still worth comparing to see if you can find a better deal.
If you have been with one supplier for some time, it is worth talking to them to find out if there is a better deal. Even if the difference is minor, it will add up in the coming months.
Remember to look for deals that offer consistent value, and don’t be tempted by those that give a great price now, only to drastically rise in a few months and leave you in a worse position.
Use low energy consumption systems
Most machinery in your production line requires energy to operate. However, modern technology has led to equipment that conducts tasks efficiently with minimal energy consumption.
Search for systems with reduced energy requirements that have a place in your production line. Remember to check they still offer the same accuracy, speed and reliability you would get from a standard system to maintain your production targets and quality standards.
Energy efficient equipment could also include your lighting and other appliances – everything adds up to reduce your bill!
Think green
If you have green targets in your plant designed to reduce your environmental impact, many of them will focus on reducing energy. Following the same principles will allow you to limit your energy costs too.
Examples of actions you could take include:
- Using alternative energy sources, including solar and wind
- Reducing your energy and water use wherever possible
- Turning off equipment, lights and other appliances where they aren’t being used
- Avoiding standby mode
- Using timers to minimise energy use (such as through heating etc.) when your plant is empty
The exact measures you take will depend on your operations and where there is room for change. However, you will reduce energy use by implementing green objectives while becoming a more conscientious business.
Audit costs elsewhere
If you can’t reduce your energy consumption, it is worth considering other areas to cut costs. Conduct a cost audit across your plant to identify unnecessary expenses that could be eliminated or minimised.
Examples of surplus expenses in your plant include:
- Inefficient processes that create waste or giveaway
- Insufficient stock management
- Excess labour costs
- Business functions that do not contribute to revenue
- Non-energy-related costs, such as supplies
Once you have found areas for cost improvement, act. Shop around providers to find more competitive contracts, utilise automation or outsource tasks if it makes more financial sense.
You should also ensure all your processes are highly efficient, allowing you to get the most for your money. This includes having cost-effective equipment in your production lines.
By reducing your costs elsewhere, you may be able to counterbalance the increases in energy expenses your plant faces.
Improve productivity
Maximising productivity will give you greater financial rewards from the energy you use in your plant. By being highly productive, you will speed up production timeframes which minimises the time lines run for and reduces energy consumption.
Improving productivity includes effective processes (including quality control protocols) that allow you to do the job correctly first time. Doing so prevents you from re-running lines, requiring more energy, and enables you to get more from your supplies.
Have efficient equipment
An effective production line comprises high-functioning machinery with maximised efficiency. Such equipment will enable you to boost productivity and improve timeframes, making your line more energy efficient.
Better yet, having efficient equipment will allow you to get the quality you need from your products, meaning your energy translates to sufficient output that meets demand and attracts sales.
Consider automation
Automation is a helpful solution against rising energy costs. Although it does require some upfront investment, it will lower costs in the long run.
Automated equipment is beneficial as it tends to be highly efficient and faster than non-automated solutions. They only utilise energy as required, preventing you from wasting electricity.
Automation will also help to reduce the labour cost in your plant and improve productivity, especially in the face of a skills shortage.
Communicate with suppliers
There is no escaping the fact that energy price hikes are likely to raise costs elsewhere. However, it is possible to be aware of cost increases, so you plan for them.
Keep the lines of communication open with your suppliers so they give you notice of potential rises in the coming weeks and months. This includes your non-energy suppliers.
With forewarning, you’ll create time to look for potentially better deals or review your accounts to ensure you can handle the cost changes.
Bring staff on board
The mission to tackle rising energy costs needs buy-in from every member of your operations. It is vital to encourage your staff to do their part.
By circulating any policy or process changes and the importance of reducing energy, your employees will be on the same page. They should then take appropriate action in their jobs, including turning off equipment when not in use or being more considerate in their gas and electricity use.
You will then have a combined approach to minimise energy costs, improving your chances of success.
How Yamato helps
With fears about rising energy prices paramount, many manufacturers will be contemplating what they should do to mitigate the risk. While the increases are not ideal and outside of your control, making small steps to reduce energy consumption and manage costs will ease the pressure.
Improving productivity and efficiency across your production while simultaneously reducing unnecessary energy usage is integral to controlling costs.
If you wish to create a production line that delivers results and minimises wasted energy, Yamato has solutions to assist. Our products include systems that operate with reduced consumption, fast and accurate automated weighers and inspection machinery that enables you to ensure maximum quality at minimal cost and effort.
Speak to a team member today to find out how we will support you in navigating energy costs while delivering your best results.