Injecting more means into development programs

A material efficiency center to help SMEs improve their competitiveness

As part of the German government’s sustainability strategy, the Federal Ministry of Economics and Technology is offering small and medium-sized enterprises (SMEs) funding in the medium term to help improve competitiveness. Its criteria for an SME: no more than 250 employees and annual turnover of 50 million euros. This must be documented, although depending on the program the scheme also applies for up to 1000 employees with no turnover ceiling. Federal funds have been earmarked until 2013. A second economic stimulus package is offering funding in 2009 and 2010.

“VerMat” a German acronym for “Improving material efficiency” (“Verbesserung der Materialeffizienz”) is designed to help individual or networks of companies improve their use of manufacturing materials. Given the increasing scarcity of resources and higher raw material prices, the program’s aim is to improve product, process and system efficiency – and thus cut costs. According to the German Material Efficiency Agency in Berlin (“Deutsche Materialeffizienzagentur” or demea), the different options for improving material efficiency include product design, production processes and the overall production setting. Material costs should become the center of attention, along the entire process chain – from initial order to final delivery. To do this, certified consultants will come and analyze material flows and the causes of wastage, also inputting with actions plans, financial advice and implementation support. The fees of the consultants are subsidized by 67 per cent for an assessment of potential costing up to 15,000 euros, and 33 per cent for project support costing up to 70,000 euros.

Since the beginning of the year, in-depth analyses or support during implementation costing up to 15,000 euros are also eligible for a 50 per cent subsidy. The subsidy must not amount to more than 100,000 euros and is restricted to companies adhering to SME criteria that are producing in Germany. Exceptions – for companies with up to 1000 employees and no cap on turnover – are made when particularly high volumes of materials are involved or the overall level of risk is high. The program has been in successful operation since 2006 with more than 300 approved assessments of potential throughout Germany. Of these, 236 resulted in 90 per cent satisfaction, with an average potential saving of 2.5 per cent of annual turnover. Of the improvements made, 50 per cent involved investments of less than 10,000 euros and could be realized straight away. 20 per cent involved investments of up to 50,000 euros with a payback period of less than six months.

The German ZIM (“Zentrales Innovationsprogramm Mittelstand” or “Central innovation program for medium-sized companies”) provides individual and joint sponsorship of R&D activities with the aim of focusing SME-based R&D more on market needs, reducing technological and commercial risk, accelerating time-to-market and expanding technology transfer activities. It is funded by the AiF and VDI-VDE-IT in Berlin. This strategic initiative will improve long-term R&D at SMEs by providing financial incentives. Apart from the SME criteria, the general idea is to focus on reducing the risk of innovation projects, improving the availability of technology, enhancing collaboration between different companies, or between companies and research bodies. The overall aim is to raise competitiveness by improving companies’ ability to innovate, to accelerate innovation and facilitate partnership. Support packages span partnership programs, start-up projects and services. They came into effect in March for individual projects with companies in the former states of East Germany, limited to two years, also sometimes extendable to SMEs with up to 1000 employees. The types of costs covered are direct personnel costs of up to 80,000 euros per person and year and contracts with third parties for up to 25 per cent of personnel costs, plus allin costs for fittings and materials as well as costs of services of the same value of the approved personnel costs. Out of the approved overall costs of up to 350,000 euros depending on the support package and the size of the company, they can receive subsidies of 35 to 45 per cent research grants of up to 175,000 euros with 100 per cent subsidies, and services costing up to 50,000 euros with a 50 per cent subsidy.

The Steinbeis Transfer Center Material Efficiency Center (MEZ) has accreditation for the subsidy scheme. Its senior consultants help customers submit their application, access their approved funds, and carry out assessments of potential. They also provide sup- port planning and monitoring progress as well helping the expert consultant assigned to the SME on detailed issues such as factory planning, material management, machine construction, ERP software, warehousing systems and assembly methods. Based on total turnover, MEZ consultants’ involvement in VerMat potential analyses (for companies such as producers of construction parts, subassemblies, and metal/plastic processing equipment) has helped reduce material wastage (or value-chain losses) between 2 and 6.5 per cent.

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