These are trying times for UK SMBs, and the manufacturing sector has taken a significant hit as energy prices soar. Some businesses may be looking at unfeasible operating costs, while the cost of not doing business is equally unappealing.
At Workhorse, we can’t see into the future any more than you can. But we have been by our partners’ sides through recession and other setbacks. So, in this guide, we wanted to share our insights into how UK-based SMBs and manufacturers can navigate the energy crisis.
The bad news
Sky-high energy costs are a huge threat to UK-based manufacturing and, in some ways, it couldn’t have come at a worse time.
After all, many businesses have been working with the UK government to reshore their production — investing in a return of the manufacturing sector our country used to be famed for. As energy costs continue to rise, though, other businesses with reshoring plans are watching closely and reassessing whether now is the right time.
According to a study of 200 businesses, around 50% have seen their electricity bills increase over 100% in the last 12 months, and many expect the same thing to happen again in the coming year.
If the situation doesn’t improve, we could see manufacturers across the UK cutting down production, cutting jobs, increasing prices or even shuttering their businesses entirely. In the worst-case scenario, analysts fear that businesses may even be forced to suspend production to ensure hospitals and emergency services have enough energy to operate.
Clearly, something needs to change in order for manufacturing to remain a thriving industry. But for now, manufacturers are on their own trying to stay afloat in such a turbulent time. So, what can they do to survive this crisis?
The better news
For manufacturers, saving on energy isn’t as simple as switching off a plug when it isn’t in use. But that’s not to say there’s nothing that can be done.
Let’s look at some possible ways to reduce energy costs for your manufacturing SMB.
Clean energy is a workable alternative
Sourcing clean energy from a traditional supplier will still be expensive and is often offered a premium rate. That being said, if you have the capacity to do so, you can create your own clean energy.
Solar panels are an incredibly simple way to reduce your reliance on energy companies. Solar energy can power the most energy-hungry processes you have, or even your entire business.
What’s more, if you’re harvesting more solar energy than your business uses, you can sell your excess energy back to the government. So not only can clean energy help save you money, it can become an additional revenue stream.
Just-In-Case manufacturing can help you save resources
Materials costs are still high and the costs for everything else are incredibly volatile as well. But if you see the window of opportunity to do so, then shift to a just-in-case model while resource prices are lower.
The JIC model involves keeping a higher level of resources in stock than you normally would. This allows you to have a sufficient level of backstock available in times when prices are higher, saving you money in the long run.
The Just-in-Time model facilitates leaner operations too
The exact opposite manufacturing approach can save you money as well.
Just-in-Time production involves cutting down on the resources you’re ordering in times when prices are high. While this means you have less stock on hand for bigger projects, it does allow you to save on storage costs as you need less warehouse space.
Read more about Just-in-Time inventory management here.
SMBs can take advantage of off-peak rates
Energy rates are cheaper off-peak (between 10pm and 8am) as the demand on the National Grid is lower. So if running night shifts is a possibility for your SMB, it’s one that you may want to consider.
Keep in mind that employees working a night shift are entitled to a higher rate of pay. However, the extra money you pay your staff can be negated with big energy savings.
Knowledge is power
The energy sector is one of the more volatile industries, especially given the events of the past couple of years. One of the best things you can do to combat the rising prices is to stay on top of any news that comes out.
Energy prices are closely tied to world events and you can often identify when prices are going to increase. This is especially important during the current conflict in Eastern Europe, as it has already had an unimaginable impact on our energy sector.
You’ll also be one of the first to know if any government programs are introduced to help small businesses. The government often steps in to ensure businesses can stay afloat during hard times, but assistance is usually very limited, meaning if you’re too slow you’ll miss out.
Workhorse can help
At Workhorse, we understand how difficult running an SMB can be.
We know how tough it can be to stay afloat when fighting rising costs. And that’s why we want to help as many businesses as we can — introducing technology into their processes, to save them time, money and resources.
Workhorse can help manufacturing SMBs get greater insight into their operations, putting their operational data to use when navigating good days and bad. Not only is our entire platform designed with cost- and time-saving measures in mind, but our module-based structure means you to pay only for what you use.
We can’t control how energy prices rise and fall, but we can offer a better set of inventory management tools for SMBs like yours. Get in touch with us today.