Impulses for Growth and Employment through Profitable Savings in ...

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Hartmut Fischer, Karl Lichtblau, Bernd Meyer, Janina Scheelhaase Impulses for Growth and Employment through Profitable Savings in Material Resources Industry is continually making an effort to reduce both material costs of products and material input of production. What kind of effects on the national economy can be expected from material savings that are profitable on a single-company basis? What are the conditions under which new jobs develop? Material savings on a single-company basis (dematerialization) beyond the presentday trend has strong positive effects on the national economy. It strengthens Germany’s competitive position, provides growth, contributes to the consolidation of public budgets and increases real income of private households. As is the case in any kind of productivity increase, labour market effects of a profitable dematerialization are also dependent upon concomitant wage developments. Unused Single-Company Potentials Because of the high importance of material throughput costs industry continuously reduces material throughput by increasing material efficiency of production and products. Per Euro of gross national product, material input fell by an inflation-adjusted 42% between 1960 and 1990 1 . This trend toward “profitable dematerialization” of industrial value added remains intact and is also evidenced by the 2002 Innovation Prize of the German Economy: the awardwinning products were convincing essentially through their reduced material throughput costs in the product life cycle 2 . This paper evolved from an assignment by the Aachen Foundation Kathy Beys to the authors for the purpose of carrying the issue of dematerialization into professional circles and into the political arena. 1 Hinterberger, F., S. Renn, H. Schütz, Arbeit, Wirtschaft, Umwelt, Wuppertal Paper No. 89, Wuppertal, 1999, p. 12 2 Manager Magazin, Spezial Innovationspreis, 16 January 2003, pp. 64-83. MTU Aero developed an aeroplane turbine with reduced energy consumption, Leica Microsystems extended the useful economic life of expensive optics used in chip production quality assurance, Solvent Innovation devel- Nevertheless, a distinctly greater harvesting of potentials by industry is possible. Using only two instruments, for instance, the consultancy company Arthur D. Little GmbH regularly reduces the material throughput costs of companies by a total of 20%: • Using “Zero Loss Management” material and energy losses in the supply chain are reduced through improved cost transparency, task development by interdisciplinary teams and structured creativity techniques. Material exploitation was improved at three European ice-cream factories of a large food company, for example, by adjusting process parameters, strengthening pre-emptive maintenance and selective machine investments. With Zero Loss Management manufacturing costs are regularly reduced by 5%. • Using “Design to Cost”, functions, costbenefit profiles and design of products are redrafted in collusion between product development, buying department, production, customers and suppliers. Life cycle costs of equipment were reduced at a company producing chemical equipment, for example, by a more intelligent and material-saving construction of equipment components as well as increased energy efficiency during equipment operation. With Design to Cost, life cycle costs regularly contribute to a reduction of manufacturing costs by 15%. Experience shows that these annual savings are achieved with a one-time invest- oped ionic fluids that serve to notably increase material utilisation in the chemical industry. 1
ment with an average payback of twelve months. About a third of the one-time investment consists of internal and external personnel costs for task development and implementation, the other two-thirds consist of equipment expenditures. Other management consultancies have similar experiences with comparable methods. Specific engineering methods and technologies herald further potentials 3 . Barriers With such a potential the question arises: Why isn’t it already being harvested to the greatest possible extent by individual companies within a market economy? General practice shows that “nobody is perfect”, not even industry. No company exists that is and stays fully rationalised. Today, by no means all motivation and performance potentials with respect to personnel have been tapped. Major optimisation surges of the past (quality management, logistics optimisation, outsourcing, business process engineering) could for the most part have been implemented years earlier. But a critical mass of awareness, methods and qualified multipliers was necessary for the potentials to be tapped on a large scale. Having said this it is not quite as astonishing that potentials for profitable dematerialization have not yet been fully tapped. Everyday business practice shows a series of concrete structural barriers standing in the way of profitable dematerialization: • Business decision-makers are often not aware of the full costs that accrue with respect to manufacturing in terms of material losses 4 and with respect to product use in terms of material consumption. This is one reason that common accounting systems either do not display or incompletely display these costs. 3 Cf. for example Fachverband Elektrische Antriebe im Zentralverband Elektrotechnik- und Elektronikindustrie (ZVEI) e.V. (ed.), Energiesparen mit elektrischen Antrieben – Einsparpotenziale in Milliardenhöhe, Frankfurt 1999. 4 In particular for rejects, effluents and waste • Cost reduction is most commonly associated with the reduction of personnel costs and less commonly with a reduction of material throughput costs. In many cases, this is the reason why material costs are not reduced as consistently as personnel costs. In individual cases this goes as far as cutting the budget for personnel so stringently that insufficient capacities remain for other cost reduction measures. • Incentives for a company do not automatically lead to equivalent incentives for company decision-makers. Purchasing departments, for instance, are often controlled in accordance with unit prices rather than the more indicative life cycle costs of equipment and material purchased. In this way, solutions prevail on a supra-company basis that are not always the most economical. The German Electrical and Electronic Manufacturers’ Association (ZVEI) estimates that the introduction of appropriate electric engines with the most economical life cycle within German industry would lead to billions of savings. • Company personnel do not consistently possess the know-how for tapping the full potential for profitable dematerialization. While the required methods are not highly complex they are demanding and do not yet belong to the standard curriculum of university and in-house training. • Business access to know-how and capital for implementing the potentials via contracting or other risk-benefitsharing schemes with third parties is hampered by lacking modularization of production systems as well as missing practicable standards for respective contracts and measuring procedures. However, most of these barriers can be removed by economic policy action in conjunction with single-company measures. By supporting respective media reports the government can foster an awareness for the extent of material throughput costs and ways of influencing them. It can ac- 2
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Page 5 and 6: sults are on hand with respect to a
Page 7 and 8: Besides the level of input-output c
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Page 11: Summary of Results Computations wit

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