Ten things to do (and one thing not to do) about the carbon tax on manufacturers

We have heard a lot in Australia about the dangers of the Government’s Carbon Tax for Manufacturers. Now that it is almost certain to become law, it is time to start planning how to reduce the impact of the carbon tax on your manufacturing business.

The carbon tax will impact manufacturing businesses in three way main ways:

– increased costs for electricity and gas
– increased transport costs (due to the reduced diesel fuel levy)
– increased costs for energy intensive inputs (like metals).

To lean practitioners at TXM, that just sounds like three reasons to renew the attack on waste in your business.

Just with a little thought, I came up with ten ways in which most manufacturing businesses can reduce waste and therefore the impact of a carbon tax on their business:

1) Reduce material waste and defects. By making defects or waste, you are throwing away carbon that you have paid for. Reducing scrap, waste, defects, rework will reduce the single biggest cost in your business and offset price increases from the tax.

2) Reduce wasteful transport. Make sure that products are made and raw materials supplied as close to the point of use as possible. Simplifying and shortening your supply chain will also reduce risk and inventory in your supply chain and mean you can live with a smaller warehouse (see 3 below).

3) Go for a smaller factory/warehouse/office where you can. Reducing your footprint through lean plant layout design and reducing warehouse space through reducing inventory will reduce lighting and heating costs as well as saving you a lot of rent. A smaller, better laid out factory also means fewer forklifts travelling less distance which will save significant energy.

4) Switch it off: Make sure that you switch of lights when employees are not in the work area. Switch of conveyors, ovens and heating elements when they are not in use (if possible). Use timers so that machines can be preheated before the first shift on Monday rather than leaving things switched on over the weekend.

5) Cut out the leaks: Go for a walk around your factory when everything is shut down and listen for air leaks.

Compressors use large amounts of electricity and air leaks mean that compressors will run to maintain line pressure even though air is not in use. Also cut out the use of compressed air for cleaning. It is a highly hazardous practice, wastes heaps of power and heavily loads your compressors for a relatively low value activity.

6) Maintain equipment: Poorly maintained equipment will use more energy than well maintained equipment, so make sure your TPM routines involves regular lubrication checks, greasing, changing oil, cleaning filters etc. 

7) Use natural lighting, heating and cooling: When is the last time the skylights in your factory were cleaned (if they have them). Does your factory allow natural airflow? Can you use fans rather than air conditioning?

8). Use Artificial Heating and Cooling effectively: The flipside of item 7 is to make sure that your air handling systems and air conditioning systems are well tuned. Staff should not need energy hungry portable heaters by their desks and, on the other hand, opening windows in an air conditioned office wastes large amounts of energy.

9) Reduce lot sizes (efficiently) and aim for one piece flow: Smaller lot sizes and, especially, one piece flow work cells mean less space, less inventory and therefore less energy and less carbon cost. Make sure that you reduce startup waste at the same time as you reduce set up time though.

10) Ask your people: Your team will know dozens of ways in which energy can be saved. You can also appeal to a higher purpose – “Saving the Planet” – even though you will be also be saving your profit line.

I am sure that you all will have hundreds of other ideas. The one idea that I don’t want to encourage is to give up or go off shore! This will be a short term strategy and I am sure we all have many more clever ways to offset the cost of the carbon tax.

[Tim McLean is managing director of TXM.]

Leave a Reply