Have you ever wondered what’s going on inside the mammoth industrial buildings lining the freeways all over the country? What is being produced and how? If you’re old enough, you may remember this famous episode from the I Love Lucy show in which Lucy and her best friend Ethel work the production line.
Obviously, old-fashioned production lines are long gone, and new facilities are more complex than they appear from their unassuming facades. Their operations and processes have evolved rapidly and these buildings house high tech machinery and skilled workers producing an astounding range of goods.
A resurgence of manufacturing in the U.S., particularly in the south, is being fueled by lower energy costs, an abundance of skilled talent, increasing labor costs in low-cost economies, and depreciation of U.S. currency.
But there is a downside as about 40 percent of buildings in use were constructed before 1980, which means there are a huge number of facilities that likely need to be audited to ensure they are performing optimally.
Sustainability is Essential to Profitability
Sustainability is more important now than ever to retrofit older buildings to improve manufacturing profitability, encourage innovation and improve conditions for workers.
At Paladino, we apply what we call an Abundance approach to our work with owners and operators of high performance real estate. In consulting to organizations on sustainability and green buildings, we believe that the necessary resources exist and simply need to be harnessed and allocated toward the desired goals of an organization. Abundance thinking helps drive teams towards the highest possible project outcomes.
There needs to be an upside to sustainability that maximizes plentiful resources to create value. In looking at the industrial real estate market in an Abundance context, we find that there is a lot of opportunity for change.
Currently there is an abundance of industrial facilities within the United States: approximately 11 billion square feet in operation. These manufacturing facilities are producing everything from food to toys to heavy machinery and a variety of products in between.
Globally, manufacturing continues to grow. It now accounts for approximately 16 percent of global GDP and 14 percent of employment.
It is estimated that 150 million square feet of new industrial space was constructed in 2014, and the industry will continue to grow over the next ten years.
The nature of manufacturing has changed—from an assembly line to technologically advanced environments where skilled workers are in charge of automated production equipment.
These new age industrial facilities consume anywhere between $1-$10 million dollars in annual energy use, and large volumes of water per day. In short, the environmental impact of these buildings is HUGE.
How Does Sustainability Play a Part?
So, we have an abundance of facilities, both old and new, using a significant amount of resources, which is leading manufacturers to adopt sustainability strategies to increase efficiency.
The following are other key reasons that facility owners are considering and implementing sustainable initiatives. They recognize that sustainability will make a positive impact on their top line growth, brand differentiation, and operational efficiencies as well as the health of their employees and the environment.
Green Products Supply Chain: Sustainably manufactured products are gaining traction among customers, especially millennials. More and more, consumers care where their products are coming from, how they are processed, and their impact on the environment.
Green Buildings: Owners are investing in sustainably built manufacturing facilities to reduce their costs and differentiate their brands. Energy and water use performance, stormwater impact improvement and indoor health quality are just a few examples of how manufacturers can improve the environmental impact of their facilities.
Efficient Operations: Operational costs are a critical component of the industrial facility business model. Tracking water, energy and waste reduction goals using a “cost per product” key performance indicator (KPI) is essential to meeting operational excellence goals.
Healthy Workplace: As in signature office towers, healthy workplaces are becoming increasingly important in manufacturing. While energy use and carbon reduction are still important drivers in the high-performance building market, a current trend is to place more focus on the wellbeing of occupants inside the building. This strategy can benefit industrial facilities in a number of ways—healthier, happier employees will be more productive and take fewer sick days. In addition, a healthy workplace can support brand differentiation and help companies attract and retain high skilled workers needed for today’s innovation-led manufacturing.
Different Factors Drive Different Strategies
The driving factors for high performance buildings vary based on the type of manufacturing facility. For example:
- Facilities that produce commodity products, chemical industries, and food and beverage industries with high capital and energy operating costs are primarily concerned with utility savings that translates into a dollar per product cost reduction.
- For clothing, accessories and furniture manufacturers that are driven by labor costs, the goal is to create a healthy workspace that improves productivity and enhances their brands as caring companies.
- For semiconductors and electronics, and medical technology industries that require highly skilled workforce the driver is to create a healthy workspace as an incentive to attract and retain skilled workforce.
What to Look Forward To
The goal of Paladino’s Industrial market team is to work with manufacturers so they achieve net+ operating costs while achieving net zero energy, water and waste, and leveraging a facility’s abundance of resources.
We’ll be publishing blog posts throughout the year that highlight three value propositions for creating high performance industrial facilities:
- Utility Savings in Product Line Operation: A discussion of cutting edge energy conservation measures in the process line – what is hot and new in the manufacturing world; a discussion on how to use process equipment commissioning to improve utility performance; and finally, a review of emerging low-cost, easy to retrofit fault detection and diagnostics technologies that are specifically created for industrial applications.
- Employee Health and Productivity: What are the areas and performance metrics that have the most impact on employee well being? This post will look at multiple industrial and warehouse scenarios and discuss strategies that will provide the best ROI.
- Sustainability Messaging from Production to Shelf: This post will discuss strategies and recommendations for using sustainability as a differentiator in product branding, drawing on real life examples. We will examine the target audience that values environmental product branding and the comparative impact of different sustainability KPIs on this audience. What appeals to them and what doesn’t?
We invite you to join in this discussion by leaving a comment below. We also welcome your ideas for topics relating to sustainability in manufacturing.
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