Pakistan’s manufacturing faces efficiency crisis

LAHORE: Pakistan’s manufacturing and services sectors continue to struggle with resource productivity -- the efficiency with which natural resources such as raw materials, energy and water are converted into economic output. Typically measured as GDP per unit of resource use, higher resource productivity allows for cost savings, sustainability and a competitive edge.

Even Pakistan’s textile sector, which enjoys a comparative advantage, has failed to capitalise on its potential. The past Multi-Fibre Arrangement (MFA) quota regime, in place until 2005, contributed to inefficiencies by shielding the industry from global competition through export quotas. Instead of investing in high-value-added textiles and modernisation, many manufacturers optimised production to meet quota limits. With assured markets, firms had little incentive to improve productivity. When the quota system was abolished, Pakistan struggled to compete with countries such as Bangladesh and Vietnam, which had focused on efficiency and product diversification. As a result, Pakistan’s textile sector found itself ill-prepared for the increasingly competitive global market.

Manufacturers in Pakistan often neglect energy efficiency, despite energy being a major input cost in many industries. Although the textile sector has recently begun addressing energy wastage, it continues to rely on highly inefficient gas generators to produce power. Rather than investing in energy-efficient solutions, industry players lobby for subsidised gas to sustain outdated practices.

Energy audits offer a crucial tool for improving energy productivity, helping manufacturers identify inefficiencies in machinery, lighting and heating systems. These audits recommend energy-saving technologies such as variable frequency drives and waste heat recovery systems. By optimising production processes, industries can reduce energy consumption per unit of output. Training workers to turn off unused equipment can further enhance energy efficiency. Implementing audit recommendations allows industries to lower energy costs, reduce their carbon footprint and decrease reliance on expensive energy imports.

Manufacturers must also adopt a long-term approach to project lifecycles rather than focusing solely on short-term costs. While energy-efficient machinery may require higher upfront investment, it results in significant long-term savings. Equipment designed for easy maintenance and modular upgrades extends its useful life, while proper disposal, recycling or repurposing of materials minimises waste and enhances sustainability. A lifecycle approach improves cost efficiency, reduces environmental impact and strengthens long-term competitiveness.

To enhance productivity, manufacturers should implement lean manufacturing techniques, which improve both quality and cost efficiency. Waste can be reduced by eliminating unnecessary steps, defects, and waiting time in production. Techniques such as Total Quality Management (TQM) and Six Sigma help minimise defects, while optimised workflows reduce unnecessary movement and overproduction, making labour more productive. Faster production cycles and improved quality control also enable businesses to respond more effectively to market demands.

Lean manufacturing focuses on analysing the value stream of a particular process and eliminating anything that does not add value. This approach seeks to eliminate waste in both energy and materials. The best efficiency improvements often emerge from direct engagement with workers, who feel empowered to suggest and implement changes, fostering a more inclusive and effective system.

However, conflicts can arise when different productivity initiatives within the same industry work against each other. For instance, production managers may focus on increasing output, while energy managers strive to reduce energy consumption. These conflicts can be resolved if companies prioritise per-hour profitability, providing clear visibility into how different productivity measures interact and guiding management in setting organisational priorities.

Despite best efforts, companies often fall short of their resource-productivity goals. This is primarily due to unrealistic targets and a failure to secure employee buy-in. Management must ensure that goals are both meaningful and achievable, while also equipping employees with the necessary skills and management systems to improve overall efficiency.

Toyota’s lean system serves as a classic example of how lean principles can boost efficiency while maintaining world-class product quality. Pakistan’s industries must adopt a similar approach if they hope to enhance productivity and remain competitive in an increasingly demanding global market.