Life cycle thinking in small and medium enterprises: the results of research on the implementation of life cycle tools in Polish SMEs—Part 3: LCC-related aspects

In total, 45 enterprises out of 50 organisations in which an LCC analysis had been carried out responded to the survey. The group of organisations analysed included 32 manufacturers, 5 service providers, 2 service and production companies and 6 trading companies. Almost half of them had a workforce of 10 to 49 employees (22 companies), 31 % were micro enterprises employing up to 9 people (14 companies), and 9 organisations met the criteria for medium enterprises, employing from 50 to 250 people (Table 1). Less than half of the organisations were limited liability companies (22 companies), while 25 % of the enterprises were individual private businesses (self-employment). Approximately 20 % of the organisations were registered partnerships, two were private partnerships, and one was a joint-stock company (Table 1). It is worth noting that limited liability companies with a statutory minimum capital and the obligation to maintain double-entry bookkeeping were predominant among the enterprises responding to the survey. This suggests that such organisations have a potentially more detailed knowledge of the costs incurred, which in turn predisposes them to conduct an LCC analysis. The vast majority, namely 35 organisations, taking part in the study, had no formal management systems. Less than 20 % claimed to have a quality management system according to ISO 9001, and two organisations had an occupational health and safety management system OHSAS 18001 and environmental management system according to the requirements of ISO 14001 (Table 1).

Taking into account the activities in key areas of management (environmental protection/environmental management, design/research and development, quality management, employee cost analysis and product cost analysis), it should be noted that the majority of the organisations surveyed implemented them on their own, creating an independent organisational unit for this purpose (Fig. 1). As for the three areas (design/research and development, employee cost analysis and product cost analysis), the enterprises often declared their own involvement along with outsourcing. Few organisations outsourced the tasks of the key management processes, but most often, it related to employee cost analysis (seven organisations), followed by quality management and environmental management (four organisations in each case).

As shown in Fig. 1, a certain percentage of the companies did not implement any activity in each of the areas of organisational management analysed (grey). In total, 9 out of the 45 companies surveyed claimed that they did not implement any activity relating to environmental management, while no activity was also claimed by 6 of the 45 in relation to quality management, and 5 out of the 45 in relation to product design and development. What is important from the point of view of an LCC analysis, only two respondents did not conduct any employee cost analysis and product cost analysis.

Figure 2 presents the characteristics of the supply chain of the organisations analysed. Among the dominant suppliers of the main resources and products were domestic enterprises (55 %), followed by local (32 %) and foreign companies (10 %). In the case of domestic suppliers, they were generally medium-sized enterprises, as opposed to local suppliers which were dominated by small organisations.

A similar situation applies to suppliers of auxiliary products. The group was clearly dominated by medium-sized domestic enterprises, and then small local organisations. Similarly, foreign suppliers, regardless of size, were a small percentage of stakeholders cooperating with the organisations under study. With regard to suppliers of the main and auxiliary resources and products, the companies analysed defined their position as “equal” in relation to their suppliers (in both cases, slightly over 50 %).

Almost all of the organisations that took part in the survey indicated that their clients were primarily institutional (84 %) and were usually large or medium-sized domestic organisations (Fig. 3).

Among the 45 companies surveyed, the vast majority of LCC analyses focused on products (32 analyses of this type), and only 13 of them focused on services. The two-dimensionality of the life cycle on which the LCC analyses focused required the use of two procedures selected by the enterprise itself. Each analysis focused on the life cycle of an investment project in the area of development, innovation and reconstruction or modernization. In appropriate cases, the procedure was supplemented by the ecological life cycle of a product, as defined in the LCA methodology. The core-product approach involved examination of the profitability of investments aimed at modernisation of the goods produced or services provided (innovative investments), investments that lead to the implementation of a project to produce completely new products or services, (development) or reconstruction and modernisation, involving the replacement of worn or obsolete assets. The second LCC option presented to the companies provided the opportunity to estimate the total cost of the physical life cycle of a product, and this extended procedure was used in ten cases.

Considering the scope of an LCC analysis, it should be noted that it is not the same as the scope of an LCA, since the latter always focuses on the stages of the environmental life cycle and hence the division is as follows: cradle-to-grave (the entire life cycle), cradle-to-gate (production stage), gate-to-gate (stage of use) and gate-to-grave (end-of-life management). In the context of investment, which is the essence of an LCC analysis (Gluch and Baumann 2004; Schmidt 2003), it is appropriate to analyse the entire life cycle of an investment, no matter what stage of the environmental life cycle of a product the investment concerns. Therefore, in each case, the costs of acquisition, ownership and disposal (PN-EN 60300–3–3 2006) were calculated, while for the physical life cycle of a product, the analysis involved the costs of the main stages of a life cycle, namely: production, use and end-of-life management. This two-dimensional approach is particularly important as it allows us to answer the question: to what extent will investments in the alternative solutions increase the profitability of a company and reduce overall costs in terms of the environmental life cycle of a product.

As with an LCA, the study was initiated at an introductory meeting during which the essential purpose and scope of the analysis were discussed. On this basis, a form was developed which allowed the necessary data to be collected. Only eight companies collected data on their own, without the help of LCC experts. More organisations, however, used the support of the researchers, either partially (17 cases) or fully (20 cases). The partial support was mainly focused on maintaining personal, mail or telephone contacts to clarify issues at stake. The full support focused on the deployment of a researcher to collect the necessary primary and secondary data.

Each time an LCC analysis ended up submitting a report on the implementation of the study. The report presented the methodical outline of the LCC, research assumptions, categories and cost structure, calculation of the LCC as well as recommendations and conclusions. The information contained in the reports was considered understandable, though moderately easy.

In nearly all cases, the decisions to undertake LCC studies were made by top management, and only in three organisations was the decision taken by professionals responsible for this area of management. In the vast majority of the organisations (more than 80 %), the conduct of the study was directly supervised by representatives of top management, by chief specialists in six organisations and by accountants in only in two of them.

The analysis of the reasons given by the enterprises for implementing the LCC techniques (Table 2) led to the conclusion that the most important factor for them was that the services being carried out were provided free of charge—the weighted average for this reason is 4.24, while given the opportunity to show a certificate confirming participation in the project and cooperation with a centre supporting entrepreneurship which is well-known in the region produced a result of approximately 4. A relatively high weighted average was also recorded for product improvement plans—about 3.72. The smallest impact on the decision to carry out an LCC was assigned to the preferences of stakeholders: suppliers and clients (respectively, 1.72 and 1.9) (Table 2).