case study: product and process design methodologies for engineering...
TRANSCRIPT
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Case Study:yProduct and Process Design
Methodologies for Engineering the F Bi fiForest Biorefinery
New Energy SystemsNew Energy Systems19 August 2008
Paul Stuart ([email protected]) NSERC Environmental Design Engineering Chair
Department of Chemical Engineering, Ecole PolytechniqueMontréal, Canada
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“Economic Stalement” for Traditional Forest Products Producing Nationsg
The “perfect storm” ofstrengthening dollar, risingg g genergy prices, rising fibre costs, small older mills….costs, small older mills….
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Some Forestry Industry Survival Strategies
Go for Survival in Commodities, or Make the Most of Our Existing IndustryBuy/Build Elsewhere In Emerging M k M k th M t f O P lMarkets, or Make the Most of Our Pulp and Paper Competency in Emerging EconomiesEconomiesDiversify Core Business with Marketing & Technological Partners or Make the MostTechnological Partners, or Make the Most of Our Existing Value Chain by Migration to New Business Paradigmsg
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Some Forestry Industry Survival Strategies
Go for Survival in Commodities, or Make the Most of Our Existing IndustryBuy/Build Elsewhere In Emerging M k M k th M t f O P lMarkets, or Make the Most of Our Pulp and Paper Competency in Emerging EconomiesEconomiesDiversify Core Business with Marketing & Technological Partners or Make the MostTechnological Partners, or Make the Most of Our Existing Value Chain by Migration to New Business Paradigmsg
The Forest Biorefinery!
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Conventional Kraft Millref: Agenda 2020ref: Agenda 2020
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Kraft Mill Biorefineryref: Agenda 2020ref: Agenda 2020
see background papers by Galbe &
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see background papers by Galbe & Zacchi (2002) and Larson et al (2006)
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The Dilemma
Forest industry strategists are talking about “revenue diversification” via the forest
biorefinery….…do forestry company executives know how to
go about designing and implementing biorefinery?
How should we apply process systems engineering techniques to address this
i d t t f ti ?industry transformation?
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Tembec Temiscaming: Forest Biorefinery?Forest Biorefinery?
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Tembec Temiscaming: Forest Biorefinery?Forest Biorefinery?
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Tembec Temiscaming: Forest Biorefinery?Forest Biorefinery?
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Forest Biorefinery Definition
One forest biorefinery definition:f ll tili ti f i i d bi f th= full utilization of incoming woody biomass for the
production of:• Wood products• Pulp and paper products• Energy• ChemicalsChemicals
Another (more practical) forest biorefinery definition:
= Maximizing the economic value from trees = Improved business model= Corporate transformation… Corporate transformation…
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The Challenge: Mitigating Risks
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Objective of this Presentation
To present (certain) critical issues that should b id d b f t i kibe considered by forestry companies seeking
to identify promising biorefinery pathwaysb d bi fi d i ti itibased on biorefinery design activities, consulting activities, and pulp and paper
company strategic planningcompany strategic planningleading to a proposed implementation
strategy and multidisciplinary designstrategy and multidisciplinary design methodology employing process systems
engineering, for exploring theengineering, for exploring the implementation of the forest biorefinery.
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Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
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Presentation Outline
Leading companies are implementing the f t bi fiforest biorefinery
See 3 survey papers by Thorp, March-May 2008
Key biorefinery concepts and definitionsKey biorefinery concepts and definitionsBiorefinery implementation strategy for forestry companiesforestry companiesOverall design methodology for the forest biorefinerybiorefinerySome interesting process systems engineering approaches that we are g g ppexploring
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2007 UPM-Kymmene CEO Report to Investorsto Investors
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Leading Pulp and Paper Companies are Developing Partnershipsare Developing Partnerships
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Leading Pulp and Paper Companies are Developing Partnershipsare Developing Partnerships
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Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
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Identifying the Right Biorefinery Configuration is Complex…Configuration is Complex…
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Volume-Margin Trade-Offs for the Forest Biorefinerythe Forest Biorefinery
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Definition: Building Blocks and Derivatives…and Derivatives…
Waste Co-products or wastes?
PulpB ildi D iYield? Yield? Yield?
ChipsBiomass
and PaperMill
Building Block Derivative
Derivative
Yield? Yield? Yield?
P&P Products
$$ Main Biorefinery Products to Market $$$$
Reducing Volumes, Flexible Throughputs…
Increasing Process Complexity
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Definition: Petrochemical Value Chains and Product Replacementp
Biorefinery Platform ?
? ??
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Example: Product Replacement in Mature Supply Chain…in Mature Supply Chain…
Waste
PulpEth l Eth l PEYield? Yield? Yield?
ChipsBiomass
and PaperMill
Ethanol Ethylene PEYield? Yield? Yield?
P&P Products
$$ Main Biorefinery Products to Market $$$$
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Definition: Emerging Carbohydrate Platforms and Product SubstitutionS
??
CarbohydratePlatform ?Platform
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Example: Product Substitution in Emerging Supply Chain…in Emerging Supply Chain…
Waste
PulpL ti PLA PLAYield? Yield? Yield?
ChipsBiomass
and PaperMill
Lactic Acid
PLA PLA Polymers
Yield? Yield? Yield?
P&P Products
$$ Main Biorefinery Products to Market $$$$
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Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
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Some Key Competitive Factors
Main competitive advantages for forestry companies:Access to biomass availability and harvesting knowAccess to biomass availability and harvesting know-howExisting infrastructure in close proximity to forest biomassEstablished SC for wood, pulp and paper products
Main competitive disadvantages for forestryMain competitive disadvantages for forestry companies:
Lack of capitalL k f d t d l t ltLack of product development cultureLack of knowledge of product quality requirement, SC practices etc for new bioproductsp p
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Some Lessons Learned from Our Case Studies Thus Far…
Biorefinery technology will be critical for competitive position in the short term the unique
Case Studies Thus Far…
competitive position in the short-term, the unique supply chain will be critical for competitive position in the longer-termI d t b titi i th l tIn order to be competitive in the longer term: product design, before process designMeet profitability targets for varying market
di i b d i i f f iconditions by designing for manufacturing flexibilityThe key to success in the forest biorefinery will be y ythrough implementing “knowledge-based manufacturing” in conjunction with flexible manufacturing and advanced supply chain g pp ymanagement
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Strategic Approach for Implementing the BiorefineryImplementing the BiorefineryImplementation: compete with all capital spending
Phase I Lower Operating Costs:
Phase II Increase Revenues:
Manufacture of derivatives
Phase III Improve Margins:
Knowledge-based manufacturing andReplace fossil fuels
at mill (natural gas, Bunker C), and/orProduce “building block” chemicals
derivativesMarket development for new productsHigher process
l it d
manufacturing and production flexibilityBusiness flow transformation
Lower risk technologies
complexity and technology riskPartners essential
Product development cultureOff-shoring, Outsourcing, etc…g
Compete internally for capital
Select the most sustainable
product platform d t ( )
Company culture transformation
SCM key to
Strategic Vision: Phase III must determine Phase I
and partner(s) success
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Strategic Approach for Implementing the BiorefineryImplementing the BiorefineryImplementation: compete with all capital spending
Phase I Lower Operating Costs:
Phase II Increase Revenues:
Manufacture of derivatives
Phase III Improve Margins:
Knowledge-based manufacturing andReplace fossil fuels
at mill (natural gas, Bunker C), and/orProduce “building block” chemicals
derivativesMarket development for new productsHigher process
l it d
manufacturing and production flexibilityBusiness flow transformation
Lower risk technologies
complexity and technology riskPartners essential
Product development cultureOff-shoring, Outsourcing, etc…g
Margins improvement is the goal
Strategic Vision: Phase III must determine Phase I
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Phase I: Lower Operating Costs
Generate more free cash flow (EBITDA), in competition with all other capital spending proposals
Phase I Lower Operating Costs:
The mill operation remains manufacturing-centric, i.e. produces a commodity and seeks to be a low-cost producer
Operating Costs:Replace fossil fuels at mill (natural gas, Bunker C), and/orProduce “building p
Seek to reduce biorefinery costs by identifying synergies with the existing mill:
Utili ti f i ti i f t t t ff t
block” chemicalMinimum risk technologies
Utilization of existing infrastructure to offset equivalent greenfield biorefinery capital costExploitation of green credits
Possible partnership with technology provider
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Is Cellulosic Ethanol the Right Product?the Right Product?
Today!Today!
Source: NREL - 2006
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Ethanol Price Volatility:An Important RiskAn Important Risk
Price volatility due to:Impact of crude oil and natural gas
Peak at ≈3 $/gal
pricesChanging balance between supply and demandDiverse feedstock types and theirDiverse feedstock types and their relative competitivenessEnergy legislation – tax credits and incentives
Source: Gulf Ethanol Corp
In 4 months: Ethanol prices dropped by half…
12 November <1.5 $/gal
pp y
How can companies stabilize margins in the context of volatility and
Source: Gulf Ethanol Corp
yuncertainty?
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Biochemical Ethanol Technology Technology
≈4.2$/gal
≈2.2$/galg
Source: NREL - 2006≈0.6$/galSource: NREL - 2006
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Should Biochemical Ethanol be Implemented Today?Implemented Today?
How can
July 2007 Scenario @ 3 $/gal
margins be stabilized?
November 2007 Scenario @ 1 5 $/galScenario @ 1.5 $/gal
Source: NREL - 2006
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Is Cellulosic Ethanol the Right Product?
Implementing the forest biorefinery is about mitigating risk
g
mitigating risk… …and clearly ethanol represents a great opportunity, but also presents risksThese can be mitigated as part of a forest biorefinery product design strategy, e.g.:
What derivatives can be made from ethanol?What derivatives can be made from ethanol?What opportunities are there with by-product lignin?What manufacturing flexibility between products is
i d i l di h d i th l frequired, including perhaps producing ethanol from cellulose?
Before implementing ethanol production facilities, know what product portfolio your company will ultimately produce…
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Process-centric and Product-centric designProduct centric design
“Towards a Product-Centered Chemical Industry - Rethinking theChemical Industry - Rethinking the Role of R&D and its Interaction with Marketing and Business Strategy” FOCAPD (2004), and AIChE ( ),webcast (2004 – see link in background materials)
George Stephanopoulos,
MIT
Chemical Engineering is moving from being process-centric to product-centricp pProduct centered: market trends product specifications components and subsystems chemicals and materials
38
subsystems chemicals and materials manufacturing systems design
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Start With Phase II: Define your Product PortfolioProduct Portfolio
Product Design first, Process Design second
Increase revenues by producing new “green” organic chemicalsPhase II
Increase Revenues:Manufacture of DerivativesManufacture of derivativesMarket development for New productsHi h l it
Determine promising product portfolios for
Higher complexity and risk technologiesPartners with SC
Determine promising product portfolios for your company using a market perspective
Which are technically feasible?Secure the best partners for securing theSecure the best partners for securing the value chain…Examine the implied company transformation
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Biorefinery Product Portfolio
Wood, Energy, Pulp and Paper Products
Minimum Production Maximum Production
A *** ***
B *** ***
C *** ***
Biorefinery Products
A *** ***
B *** ***B
C *** ***
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Product Portfolio Identification
Innovation
Novelproduct
Substitution
Technology P h
Market P ll
product
The most appropriate
fPush Pull
S b tit ti R l t
choice for your company
Substitution ReplacementProcess-centric
design Product-centric design
Adaptation
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Phase III = Enterprise Transformation
Supply Chain Restructuring, e.g., simplifying supply chains, negotiating just-in-time relationships, developing collaborative information systems
Transformation
Outsourcing & Offshoring, e.g., contracting out manufacturing, information technology support; employing low-wage, high-skill labor from other countries
Phase III Improve Margins: countries
Process Standardization, e.g., enterprise-wide standardization of processes for product and process development R&D finance personnel etc
Knowledge-based manufacturing and production flexibilityBusiness flow development, R&D, finance, personnel, etc.
Process Reengineering, e.g., identification, design, and deployment of value-driven processes; identification and elimination of no value creating
transformationProduct development cultureOff shoring g
activities
Web-Enabled Processes, e.g., online, self-support systems for customer relationship management, in entor management etc
Off-shoring, Outsourcing, etc…
inventory management, etc.
Market-driven culture to be established through a phased transformation
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Phase III = Enterprise Transformation
Supply Chain Restructuring, e.g., simplifying supply chains, negotiating just-in-time relationships, developing collaborative information systems
Transformation
Outsourcing & Offshoring, e.g., contracting out manufacturing, information technology support; employing low-wage, high-skill labor from other countries
Phase III Improve Margins: countries
Process Standardization, e.g., enterprise-wide standardization of processes for product and process development R&D finance personnel etc
Knowledge-based manufacturing and production flexibilityBusiness flow development, R&D, finance, personnel, etc.
Process Reengineering, e.g., identification, design, and deployment of value-driven processes; identification and elimination of no value creating
transformationProduct development cultureOff shoring g
activities
Web-Enabled Processes, e.g., online, self-support systems for customer relationship management, in entor management etc
Off-shoring, Outsourcing, etc…
inventory management, etc.
Market-driven culture to be established through a phased transformation
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Supply Chain DesignExisting Supply Chain
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Supply Chain DesignThe Biorefinery Network
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Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
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Overall Biorefinery Design Framework
Promising Biorefinery Products
Technology Strategy
Framework
Products Strategy
Product Design
ReconciledAdvanced
LCA Supply ChainManagementProcess
SimulationReconciled
Process andEconomic Data
Thermal PinchAnalysis
L Bl k
Set of PreferredBiorefinery
ConfigurationsLarge Block Analysis of Processes
Configurations
MCDMProcess Design
Preliminary Engineering
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Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
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Product Design Considerations for the Forest Biorefinery…for the Forest Biorefinery…
Product opportunities:Which products should be considered as opportunities for
replacement/substitution on the market?Which economically attractive product families can be built
around them?Are technologies available for the product families, are they
emerging?
Product family:Which ones create the
highest value along the value chain?
Which perturbing events on the market pose risk?What are the competitive factors associated with each product family? Company detailed
analysis and business plan
Product Portfolio:What will be the impact of
business plan definitionRisks?
Risks?What will be the impact of product family integration to the existing company portfolio?Is this a unique strategy? Partnership Selection:
Who are the most promising partners for the
Risks?
Who are the most promising partners for the candidate new product portfolios?Which partnerships will ensure the value creation
while mitigating most of the risks?Risks?
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How Does this Approach Influence Biorefinery Design?
Large block analysis of biorefinery technologies
Influence Biorefinery Design?
WaterTreatmentRiver_Water
R8
Chemicals
technologies
WoodRoom FiberLineWood
Bark
BL
WL
Pulp
OPERATIONS-DRIVEN COST MODELLING• Manufacturing costs for new forest biorefinery
products, e.g. for bioethanolN h d ll ti l l
OPERATIONS-DRIVEN COST MODELLING• Manufacturing costs for new forest biorefinery
products, e.g. for bioethanolN h d ll ti l l
CAPITAL SPENDING EVALUATION• Capital investment in the longer termCAPITAL SPENDING EVALUATION• Capital investment in the longer termSUPPLY CHAIN DESIGNSUPPLY CHAIN DESIGN
PowerIsland Caustisizing
Bark WL
Coal Natural_gas
WQCChips VPP
• New overhead allocation → lower pulp production costs
• Techno-economic risk assessment and uncertainties of technologies & markets
• New overhead allocation → lower pulp production costs
• Techno-economic risk assessment and uncertainties of technologies & markets
• Competitive manufacturing costs• Capital spending strategy• Competitive manufacturing costs• Capital spending strategy
• Company-specific SC is critical• Risks and uncertainties must be evaluated• Manufacturing flexibility must be exploited
• Company-specific SC is critical• Risks and uncertainties must be evaluated• Manufacturing flexibility must be exploited
DECISION MAKING• Choosing a company-specific profitable
biorefinery strategy
DECISION MAKING• Choosing a company-specific profitable
biorefinery strategyWQC
GasificationWoody_biomass
GTLFT_Liquid
PreTreatment
Chips_VPP
Chips_to_Cooking
Purified_waste_Water
uncertainties of technologies & marketsuncertainties of technologies & marketsg y pg y p• Risks and uncertainties systematically
considered in decision-making• Risks and uncertainties systematically
considered in decision-making
CornEtOH EtOHCorn
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Data Processing and Data ReconciliationData Reconciliation
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Activity-Based Cost Accounting
Clean_TMP_steam
TMP Heat Recovery
5
4
Steamer
Inlet_wtr_preheater_2
Chimney
Inlet_wtr_preheater_1
CW
Circulation_water_to_heating_2
Circulation_water_out
Condensate_to_steamer
Water_heating_out
Water_to_heating_1
Chip_silo
Chip_wash
Chip_screw
Wash_reject
Chips
Preheating
2nd stage refiners
Went_from_pulper
M
1st_stage_refiners
Latency_chest
Main line refinersWashing of chips Mill wide data reconciliation
3
21
Process-
Wash_reject_out
M
_stage_Pulper_main_line
C
MILLForest biorefinery
INPUTS VALUE
Raw material
Driven Cost Modelling
1
25
INPUTS VALUE
Raw materialRaw material
…
Chem cons. Technology Strategy
3
4
5Raw material
…
Chem cons.
…
Process Analysis
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How Does this Approach Influence Biorefinery Design?y g
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Energy Planning for the BiorefineryBiorefinery
Market product process Mass and energy balances Preferred energy profiles Mill energy planning
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Energy Planning for the BiorefineryBiorefinery
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Energy Planning for the BiorefineryBiorefinery
Integration of
Actual P&Pill
Integration of biorefinery
mill
Biorefinery
Thermal pinchmethods
Energyefficiencyefficiencyprojects
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Integrated Forest Biorefinery: Identifying SC SynergiesIdentifying SC Synergies
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Extending the Supply Chain to the Forest Biorefinery…
Existing Pulp & Paper Supply ChainDistribution
Forest Biorefinery…
P&P DemandOpportunities
Raw Material Handling
Pulp & PaperMill
Convert.& Finish.
Merchants, customers
SupplyOpportunities Design of Biorefinery Supply Chain The FBR SC will be
SC Research for the FBR
Chemical DemandOpportunities
B
A and/or
and/or...
B
A and/or
and/or...
B
A and/or
and/or...
B
A and/or
and/or...
The FBR SC will be unique, to the
Company implementing it.
Procurement Cycle
Manufacturing Cycle
Distribution Cycle
Customer Cycle
? ?
? ?
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SC Research Related to Existing Pulp and Paper Mills…Pulp and Paper Mills…
Sup.
Logs
Sup.
hips
Logs
Chi
ps
hips
les
Pulp
Mill
Su Ch Ch
Pil
This approach has been shown to yield significant benefits, even for relatively
Sup.
Logs
p. ps
Logs
Chi
ps
ps s
Pulp
Mill
benefits, even for relatively simple product portfolios
Sup
Chi
ps
Chi
pPi
les
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AggregationAggregation – lower level of detail
Aggregation –higher level of
detail
Process Work Center - n
Local Factors
SpecificCalculation
Routings
Process Cost Script
Process Work Center - 1Local Factors
SpecificCalculation
Routings
Process Cost Script
Process-Based Business Model
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Supply Chain Considerations for Pulp and Paper Mills…
Existing Pulp & Paper Supply ChainDistribution
Pulp and Paper Mills…
P&P DemandOpportunities
Raw Material Handling
Pulp & PaperMill
Convert.& Finish.
Merchants, customers
SupplyOpportunities Design of Biorefinery Supply ChainSC Research in the P&P Industry
Chemical DemandOpportunities
B
A and/or
and/or...
B
A and/or
and/or...
B
A and/or
and/or...
B
A and/or
and/or...
Help mills to become a low cost producer by applying advanced analytical approaches
Procurement Cycle
Manufacturing Cycle
Distribution Cycle
Customer Cycle
? ?
Help mills to better characterize the utilization of resources, and the cost implications of various operating regimes at the mill
? ?
Help mills to better manage the complexity of the supply chain
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Phase III = Enterprise TransformationTransformation
Phase III Improve Margins:
Can we minimize the impact of price olatilit
Improve Margins:Knowledge-based manufacturing and production flexibilityprice volatility
through flexible manufacturing and better SCM?
flexibilityBusiness flow transformationProduct development
Outsourcing, etc…
cultureOff-shoring, Outsourcing, etc…
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Leading Pulp and Paper Companies are Developing Partnershipsare Developing Partnerships
Expand the JV in order to have better fl ibilit ?
63
flexibility?
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Manufacturing Flexibility
…is critical to the success f th f t bi fi
To be flexible we need to: Must be addressed in SC design:
of the forest biorefinery…
To be flexible, we need to:Have different raw material resourcesH fl ibl d i
Must be addressed in SC design:Managing the feedstock procurement processCh i iHave flexible production
linesBe responsive to demand
Choosing appropriate technologyBeing close to raw material
d j k tresources and major markets and having an efficient distribution and transportation networknetwork
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Key Issues Related to the Biorefinery Supply ChainBiorefinery Supply Chain
Product Strategyo What are the SC synergies for different product scenarios?o How to enter an existing value chain, at which point?
Supply Chain Designo What are the implications of the SC design for different
biorefinery product opportunities?o What are the impact of strategic SC design on
tactical/operational planning
Supply Chain Planningpp y go How can we best manage the complexity of this new SC?o How can manufacturing flexibility be best exploited at the SC
level so the product portfolio can be used to mitigate price volatility?volatility?
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Product Design Level Analysis
Competitive Strategy SC StrategyCompetitive Strategy SC Strategy
Strategic fit?Understanding the market
Type of productProduct variety
SC responsivenessWide rangeHigh q antit
g
Product varietyQuantity neededDesired response timeMarket volatility
High quantityShort lead time
SC efficiencyMarket volatility Minimizing costs
arke
t SuppC
hain
M
ly n
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Knowledge-Based Manufacturing: Critical IssuesCritical Issues
s or
Cos
t N
et S
ales
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Applying LCA to the Biorefinery ContextBiorefinery Context
Boundaries
Allocation
Indicators
Normalization
Weighting
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Applying LCA to the Biorefinery ContextBiorefinery Context
Mill 1 Process pathway 1 Product 1
FBR projects involve:Many possible productsMany possible process pathways
Pulp and paperCompany
Mill 2 Process pathway 2 Product 2
Mill N Process pathwayN Product N
pathwaysMany mill options
Potentially very different environmental profile for all possible combinations
What products will be manufactured - what do they substitute/replace?
N
substitute/replace? What is an appropriate allocation method between pulp and paper, energy and biorefinery products?How does the environmental profile of the biorefinery products compare to the products they replace?
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Conclusions
Implementing the forest biorefinery is more than a capital spending project…p p g p jRisk mitigation associated with the implementation of the biorefinery can be achieved through careful strategic planningachieved through careful strategic planning, and by employing systematic product and process design methodologies:
Start with market-based product portfolio designPartner selection and partnership model are critical and determining the company’s uniquecritical, and determining the company s unique biorefinery supply chainEnterprise transformation is implicated, including designing for production flexibility and deliveringdesigning for production flexibility and delivering product with knowledge-based manufacturing
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Case Study:yProduct and Process System Design
Methodologies for Engineering the F Bi fiForest Biorefinery
New Energy SystemsNew Energy Systems19 August 2008
Paul Stuart ([email protected]) NSERC Environmental Design Engineering Chair
Department of Chemical Engineering, Ecole PolytechniqueMontréal, Canada