Small to medium size companies are not able to achieve some of the same economic advantages that large companies enjoy. But that may change under a program being developed by the Illinois Waste Management and Research Center (WMRC), Illinois State University, and the Illinois Manufacturing Extension Center.
This pilot program helps small and medium enterprises (SMEs) improve materials and energy efficiency in their manufacturing process. Large businesses have taken advantage of innovative supply-chain relationships to save money. Innovative supply-chain programs like Chemical Management Services (CMS) and Energy Performance Contracting (EPC) reward suppliers for finding ways to improve materials and energy efficiency. Typically, such programs have not worked with SMEs because the annual spending on any one material or energy source is not large enough to cover the supplier’s research and implementations costs.
This new project's research has explored the possibility of making such programs available to SMEs by combining several materials and energy sources into a single program. This would allow SMEs to achieve the same cost savings enjoyed by large companies. Specifically, the project has examined opportunities in the metalworking industry in areas generally considered to be outside the area of expertise of metalworking SMEs: chemicals, tooling, paint, energy, and waste management. The research suggests that the combined annual spending in these areas exceeds $1 million for many metalworking SMEs.
In one successful pilot program, an SME combined tooling and metalworking fluids in a program that used incentives to involve suppliers in improving plant efficiency and reducing costs. The company is currently exploring the addition of electricity to the program. Other plants participating in this research are exploring similar programs, or programs combining paint, cleaning chemicals, and natural gas.
The research suggests that sufficient economies of scale are available in metalworking SMEs to make incentive-based supply chain programs successful. The most significant barrier appears to be a lack of suppliers capable of taking advantage of this opportunity. Since a single supplier does not possess expertise in all the critical areas (such as tooling, metalworking fluids, and electricity management), suppliers with different expertise must establish cooperative relationships. Ongoing research is needed to support pilot projects that demonstrate not only the financial and environmental benefit to SMEs, but also the profitable returns available to suppliers who find ways of combining their expertise through innovative partnerships.
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