logistic management in renewable energy industry

Logistic

Management

in Renewable

Energy Industry

e-Course

Introduction

ELOMPRESLdV Transfer of Innovation

Introduction

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Logistic management means management of all interconnected flows of information, finance and materials from raw resources through energy production to distribution.

Today logistic management skills and competencies are crucial for development of renewable energy sector and especially for cost-effective energy generation as well as power plant management.

This course provides the knowledge to understand the principles of operations and management of energy plants that use almost all known alternative energy sources except nuclear energy.

The students will become familiar with the logistic management of renewable energy sources harnessing, conversion, energy production and distribution and will be able to apply acquired knowledge in management practice.

More information you can find in Study Book – a supplement to this course.

Course is divided into three main Modules:

Module 1 - Energy, Module 2 –Logistics and Transportation, Module 3 - Business.

Each Module consists of learning Units.

Module 1 consists 2 learning Units, Module 2 has five Units and Module 3 consists of 2 learning Units.

Module 2 and Module 3 ends with quizes to test and consolidate acquired knowledge.

NOTE:

If you are familiar with the knowledge presented in Module 1, you may skip Module 1 and go to the Module 2.

Skip to Module 2

Module 1 - Energy

START Skip to Module 2

Module 1 provides general overview about energy market and describes main technologies used today for power generation from renewable sources, that are relevant for an understanding of logistic management issues.

Unit 1: Renewable energy production and consumption – an overview, covers the following issues:

- Energy market structure; - Energy generation trends;- Economics of renewable energy market;- Introduction to energy economics and econometrics.

Unit 2: Renewable energy technologies review, covers the following issues:

- Wind energy;- Biomass and biofuels;- Hydropower;- Geothermal energy;- Solar energy;- Ocean energy: tidal and waves.

MODULE CONTENT

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Module 1

Unit 1: Renewable energy production and consumption – an overviewUnit 1Unit 1Unit 1Unit 111

Energy sourcesEnergy sources

Sustainable energy supply is based on eight basic technologies available in the market: biomass, geothermal energy, hydropower, photovoltaic systems, solar thermal collectors, and wind energy

Modern renewable energy systems rely on local renewable sources and intelligent interchange of energy between regions

Energy market actorsEnergy market actors

(A) Main activity producers- generate power (heat and/or electricity) for sale to third parties. The sale need not take place through the public grid;

(B) Autoproducers- generate power for their own use as an activity which support their main activity

Types of energy producersTypes of energy producers

(A) CHP - (combined heat and power plant) produces both heat and electricity, sometimes it is referred to co-generation although the term often refers to combustion of fossils and renewable sources, coal and biomasses for instance, despite of the kind of energy output;

(B) Heating plants - heat plant generates heat only;

(C) Power stations - electricity plant generates electricity only. This division does not take into account the type of energy sources (fossils or renewable) used for energy production

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Module 1


Energy conversion diagramEnergy conversion diagram

Primary energy

solar, wind, hydropower,

biomass, waste

Energy losses

Conversion lossesDistribution lossesSelf consumption

Energy losses


Secondary energy

Biofuels (solid, liquid), biogas, power, district

heating

Energy losses


Final energy

Biofuels (solid, liquid), biogas, power, district

heating

Consumer losses

Useful energy

Heat, electricity, light, etc.

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Module 1


Demand fluctuationsDemand fluctuations

Electricity supply needs to be adjusted in order to

match demand fluctuation

Usually reserve margins for electricity generation

are 15% - 20% higher than planning demands what

provides appropriate balance between supply

and costs

This condition is crucial for

effective logistic management

across a whole supply chain

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Module 1


Classification of renewables

According to International Energy Agency renewables and wastes are classified into three main groups for market research purposes

Technologies that are used for direct electricity

generation(hydro,

photovoltaic, tidal/wave)

Sources that can be used directly or

indirectly for transformation to electricity and can not be stored freely

(geothermal and solar thermal)

Products that can be stored and used for

transformation or final consumption (wastes, biomasses,

biogas and liquid biofuels)

Group I Group II Group III

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Module 1


Geothermal energy Economics of renewable energy market

MarketMarket

Geothermal energy is applied in four areas: heat pumps, energy storage, direct use and district heating. From a technological point of view in EU the vertical heat pump systems represent about 80% of all installations

CostsCosts

Heating & cooling Costs range Average

Deep geothermal 2 - 40 7,2

District heating 40 - 80 50

Shallow geothermal heating

10,8 - 320 1923

Shallow geothermal cooling

7,2 - 270 61

Costs of geothermal heating & cooling (in €/MWh)

Today only marginal part of underground heat reservoir potential is used for electricity generation, district heating or for heating and cooling of individual buildings

Market trendMarket trend

Heating & cooling 2010 2020

Geothermal heat pump (MWth) 11 500 30 000

Geothermal direct use (MWth) 4 500 9 000

Total installed capacity (MWth) 16 000 39 000

Heat & cold production (Mtoe) 2,6 10,5

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Module 1

Unit 2: Renewable energy technologiesUnit 2Unit 2Unit 2Unit 211

The structure of energy systemThe structure of energy system

Applied from: Droege P. (2009) ‘100 per cent renewable : energy autonomy in action’, Earthscan, London UK

Different technologies and diversification of regional production and demands

should balance the fluctuations in energy supply between given

regions

Combination of various technologies and logistic management can assure stability of energy supply

despite of seasonal changes in energy

production

Photovoltaic

Hydroenergy

Wind

Geothermal

Solar power

Biofuels

Collector

Solar houshold

Hydrogenproduction

Cogeneration

Power plants

Storage

Industry

Residential

Commercial

Transport

FurnacesShort term

storage

Medium/long term storage

Electricity Fuel Heat

Back to Module content

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Module 1


Renewable technologies characteristicsRenewable technologies characteristics

Renewable energy technologies are divided into two main groups: CSCM (Complete Supply Chain Management group) and PSCM (Partial Supply Chain Management group)

Group Components of the Supply Chain Energy sources

CSCM

1. Procurement chain (supply of raw materials/resources for energy generation);2. Production chain (processes for energy generation/production);3. Distribution chain in terms of distribution of energy (heat or electricity) or post-processing/secondary materials for energy generation

Biomass (solid and liquid)

PSCM

1. Production chain (processes for energy generation/production);2. Distribution chain in terms of distribution of energy (heat or electricity) only

Procurement chain is very limited to supply spare parts and MRO materials only

SolarGeothermal

HydroelectricWind

Tidal/wave

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Module 1


Geothermal energyGeothermal energy

Thermal energy carriers (steam or vaporization of water) are used for electric power generation by turbines, thermal energy may be used directly in the central (or other) heating systems

Geothermal resourcesGeothermal resources

Dry steam: the water has a temperature ranged from 200 to 280 degrees Celsius, great amount of steam is produced that is carried

through geothermal wells

Hot water: hot liquid water is produced inside the reservoir

wherever temperature is lower than in case of dry steam reservoirs.

Geopressured reservoirs: temperatures are much lower than temperatures in dry steam and hot

water reservoirs and ranged from 120 to 160 degrees Celsius. Only hot

water is directed to a power plant

Geothermal plantsGeothermal plants

Type of geothermal power plants

1. Dry steam geothermal power plant2. Single-flashing geothermal plant3. Dual-flashing geothermal plant4. Binary geothermal plant

Investment costs vary depend on local geological conditions. Total cost of geothermal power plant with electric capacity of 1 000 kW

is about 1,9 million €

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Module 1


Solar energySolar energy

well insulated collector may heat water to temperature 40-45 degrees Celsius but good effective collectors may heat water or other fluids to even 70-85 degrees Celsius

Conversion potentialConversion potential

parameters used to determine the potential to convert solar energy to useful forms of power:

(1) maximum daily average power on a horizontal surface (W/m2);

(2) maximum daily energy received by a horizontal surface (J/m2);

(3) annual average incident power on a horizontal surface (W/m2);

(4) annual energy received by a horizontal surface (W/m2)

TechnologyTechnology

1. Solar-thermal systems include heat storage and indirect production of electricity .

2. Photovoltaic systems for direct electricity generation

Solar-thermal systems used heat accumulated from solar radiation for production of electricity using conventional thermal cycle and for production of heat water for domestic use and industrial processes

Module 2 – Logistics & Supply Chain

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MODULE CONTENT

Module 2 starts from basic issues on supply chain management and planning and then more detailed knowledge about supply chain architecture, procurement, production and distribution chains management and finally logistics and transportation.

Unit 1: Fundamentals of supply chain management, covers the following issues:

- Introduction, definitions;- Supply chain architecture;- Fundamentals of the supply chain management;- Supply chain metrics;- Material flow management;- Supply chain integration;- Supply chain planning.

Unit 2: Procurement chain management, covers the following issues:

- Inventory turnover;- Supplier sourcing strategy;- Cooperation with suppliers;- Stock management;- Spare parts and MRO.

Module 2 – Logistics & Supply Chain

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MODULE CONTENT – cont.

Unit 3: Production chain management, covers the following issues:

- Introduction to production process;- Production chain management;- Production planning;- Operating planning;- Maintenance management;

Unit 4: Distribution chain management, covers the following issues:

- Introduction to distribution chain management;- Matching demand and supply;- Smart grids;- Distribution systems;

Unit 5: Logistics and transportation, covers the following issues:

- Introduction to logistics;- New role of logistics, convergence with marketing;- Logistics processes;- Strategy planning and outsourcing;- Production logisitcs management and transportation.

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Module 2

Unit 1: Fundamentals of supply chain managementUnit 1Unit 1Unit 1Unit 122

Supply chain definitionSupply chain definition

supply chain management is a natural development of the studies on logistics management

modern definition of supply chain management covers all aspects of supply chain integration (procurement, production, distribution)

and supplier-buyer relationships

supply chain is a group of inter-connected participating companies or departments within one organization, that add value to a stream of

transformed inputs from their source of origin to the end products or services that are demanded by the designated end consumers

i

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Module 2


synergy and entropy are two main aspects of supply chains

synergy means that ‘the whole is greater that the sum of the parts that constitute it’. Companies or elements of supply chain working together can

achieve more than the sum of achievements obtained by each of the company/element separately

entropy means that system with poor feedback but sufficient inputs has the tendency to continuous debilitation (‘bullwhip effect’ is a good example of

debilitation)

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i

Supply chain definitionSupply chain definition

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Module 2


Supply chain architectureSupply chain architecture

supply chain is only formed by more than one independent companies or departments (internal supply chain) that they are

interconnected to add value to the stream of material flow running through the supply chain

Supply chain network zonesSupply chain network zones

connects raw materials and MRO items with supply chain. Includes

transformation and preparing raw

materials to more suitable form (drying,

cutting, heating)

includes all manufacturing processes that transform raw materials or

components into final products

(energy or biofuels)

includes fulfillment of orders and connects supply chain with all customers. This zone

is simpler in power plants and it is more complex in case of biofuels producers

Upstream zone Midstream zone Downstream zone

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Module 2


Supply chain complexitySupply chain complexity

in energy sector the complexity of supply chain structure ranged from very simple (as in solar or wind energy plants) through middle degree (as in biofuels producers) to very complex (as in large co-generation plants using various kind of renewable sources or renewables and fossil fuels)

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Complexity of the internal supplier-

customer relationships

material and information flows between departments

Internal organizational

complexity

product, processes, structures,

management, human interactions

Complexity related to dynamic fluctuations

variable market condition, demand

fluctuation, location within supply chain

the supply chain complexity has significant influence on supply chain functionality and managing flows of all processes and their outcomes (operational level) as well as co-operation between all chain nodes at all structural level

11 3322

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Module 2


Supply chain managementSupply chain management

Supply chain metricsSupply chain metrics

supply chain metrics are used for monitoring and control its all operations: material, information, finance, demands flows within supply chain to get best performance level, production capacity and its adjustment to fluctuations in time

tradeoff must exists between stock of raw materials and volume of energy generation or between inventory of final products and customer service (in case of biofuels producers)

Data for performance measureData for performance measure

Strategic data

What must be done?

Tactical data

How to do it?

Operational data

What actually must be done?

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Module 2


Supply chain managementSupply chain management

Supply chain performance measuresSupply chain performance measures

Total supply chain management costs

the costs includes process orders,

purchase materials, energy cost, comply with environmental

regulations, inventory management,

information systems, supply chain finance

management. Companies usually

spend from 5% to 6% of average sales

revenues

Supply chain cash flow cycle time

this is an average number of days between the

execution of payment for raw materials and received money for products sold

CFCT= (IDS + DSO) – APPm

Where CFCT – cash flow cycle time, IDS – inventory days of supply, DSO – days of sales outstanding, APPm – average payment period for material

Supply chain production flexibility

this is average time for achieving 20% increase in production when demand

unexpectedly raised. It may be treated as production flexibility. The maintain

stock of raw materials to quickly respond to demand

increases is common practice. The production flexibility is measured in

units of time

1

2

3

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Module 2


Supply chain planningSupply chain planning

Planning processPlanning process

i planning process includes configuration, integration, strategic outsourcing & capacity planning

Supply chain structure in the form of ‘stable network’

The Nature

Power plant

Supplier Supplier

Supply side

Electricity distributor

Heat distributor

Final consumer

Distribution side

Supply chain configuration determines how partners are

connected within supply chain, from supply side,

through production chain to distribution/delivery side and depends on technology used

and market structure

In most power plants supply chain structure takes the

form called ‘stable network’

In any other supply chain configuration the structure is

referred to as ‘dynamic network’ where energy producer does not have

stable suppliers and distributors

Module 2 - QUIZ

Unit 1: Fundamentals of supply chain management

Question #1Question #1Question #1Question #1

Question: Two main aspects of the supply chain are:Question: Two main aspects of the supply chain are:

Options

Select only one answerSelect only one answer

synergy - entropy logistics - management

transportation – business processes

A B

C

Module 2 - QUIZ


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Module 2 - QUIZ


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Module 2

Unit 2: Procurement chain managementUnit 2Unit 2Unit 2Unit 211

i the main task of procurement management is keeping stocks of raw materials, MRO (Maintenance, Repair, Operation) items and finished products at a cost-effective safe level

by process called inventory management

Procurement managementProcurement management

inventory - materials in stock and often it is called the idle resource of an enterprise: items stocked for sale (in case of biofuels), materials in the process and raw materials that are not utilized yet which will be used, spare parts and MRO items

DefinitionsDefinitions

Raw materials

unprocessed materials (also solar radiation or

wind in case of pure energy plants) used for

energy generation or manufacturing of

biofuels

Finished goods

final products ready to deliver to customers or

directly to consumer (heat, electricity, solid or

fluid biofuels)

MRO supplies

necessary for production processes but they are

not a part of final products (lubricants,

solvents, spare parts and so on)

1 2 3 Work-in-process

partially processed materials used in

production processes such as pellets,

briquettes, partially refined oils, prepared

wastes, and so on. They are often used for energy

generation or biofuels production

4

Inventory categories

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Module 2



Puchasing departmentPuchasing department

Purchasing department is responsible for all the purchasing decisions such

as order quantity, negotiations, contracting, supplier selection and

evaluation and overall pricing policy

All activities are delegated to each individual department that takes all

responsibilities for purchasing process and often procurement

management

Hybrid type of purchasing organization, centralized-

decentralized structure may be useful (centralized purchasing of raw

materials and decentralized purchasing of MRO materials)

Centralized Decentralized

Purchasing department

Centralized structure is much better for power plants because of one or

very few final products offered (heat, electricity, biofuels) and raw materials

used (biomasses, biofuels, fossils)

Purchasing must become supply

management

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Module 2


i procurement chain starts from supplier/vendor of raw materials and ends at the point of starting production process or storage facilities and management of procurement processes is important for energy plants that buy raw materials (biomass or fossil fuels) for power generation or biofuels production (both solid and fluid)


when the Nature is the only one supplier of “raw materials” for power generation as in case of wind farms or solar power plants, the procurement process is limited to purchasing of spare parts and services related to MRO activity (Maintenance Repair Operation) that allows continuous plant operation and capacity maintenance at desired levels

Procurement chainProcurement chain

the procurement function is divided into five activity categories: purchasing, consumption management, vendor/supplier selection, contract negotiation and contract management

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Module 2



Sourcing strategy matrixSourcing strategy matrix

sourcing matrix helps to set different strategies to manage risk

Applied from: Kraljic, P. (1983). ‘Purchasing must become supply management’. Harvard Business Review, 61(5)

Low

High

So

urc

ing

ris

k

HighSpend

Bottleneck Critical

Routine Leverage

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Module 2



Inventory managementInventory management

i cycle stock: One of the important measures is an average stock size based on the order quantity. The average stockholding is expressed by the simple equation:

A = Q/2

A – average stockholding Q – order quantity

i safety stock: protect against uncertainty, unexpected events from the side of supplier or unexpected demand fluctuations. Safety stock may be calculated using a simple formula:

SS = DD x SD

SS – Safety Stock (in tons)DD – Daily Demand (in tons)SD – Supplier Delay (in days)

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Module 2



Inventory managementInventory management

i economic order quantity (EOQ): method for calculating order quantities that enable to hold stock volume of raw material as well as finished goods at most cost-effective level and it is used most commonly by many companies. This method can be useful for power plants using biomass or fossil fuels for energy generation and in case of biofuels producers for inventory of finished products

EOQ =

C – cost per orderR – annual demand in units (quantity of raw materials necessary for generation of one unit of energy)P – purchase cost of one unitF – annual holding cost (fraction of unit cost) [PF = holding cost per unit per year]

PF2CR

the economic order quantity is useful when demand rate is known, constant and continuous, supplier lead time is known and constant, there are no stock out, replenishment is instantaneous, cost structure is fixed, there is sufficient space, capacity and capital to procure the desired quantity

Module 2 - QUIZ

Unit 2: Procurement chain management


Question: Procurement chain starts fromQuestion: Procurement chain starts from

Options


supplier of raw materials and

ends at the point of starting production

supplier of raw materials and

ends at customer side

supplier of raw materials and ends at the storehouse

A B

C

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Module 2

Unit 3: Production chain managementUnit 3Unit 3Unit 3Unit 311

Energy producersEnergy producers

renewable energy manufacture sector may be divided into three main groups of producers depends on raw materials and technology used (regardless of the type of energy generated, heat and/or electricity)

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Pure energy producers Energy producers Biofuels producers

pure energy producers – energy is generated from renewable clean

sources such as solar, wind or hydro-energy

energy producers – energy is generated by

the combustion process using biofuels (solid or liquid), fossil

fuels or mixed combustion of fossils and biofuels (usually

solid biomasses)

biofuels producers – production of secondary

energy carriers in the form of solid (palettes, for example) or liquid (biodiesel, bioethanol,

for example) fuels, utilizing various solid biomasses or wastes


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Module 2


Production processProduction process

production process - all activities that transform raw materials into finished goods. The character of production system has a significant effect on the whole supply chain organizational and functional structures and management

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Applied from: Kumar S.A., Suresh N. (2008) ‘Production and Operations Management’, NewAge International New Delhi, India

Inputs Transformation process Outputs

Continuous

Environment Feedback information

MenMaterialsMachines

InformationCapital

Product designProcess planningProduction controlMaintenance

ProductsServices

InventoryQualityCosts

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Module 2


Continuous production systemContinuous production system Production processProduction process

production lines - sequence of production operations from raw materials to finished product (heat, electricity or biofuels) and often use conveyors and other transfer devices for facilitation of the flow of materials

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ConditionsAdvantages

Limitations

- often very high investment in plant facilities

- product differentiation is extremely limited

- dedicated plant design and equipment with zero or near zero flexibility

- material handling is often fully automated

- predetermined sequence of process operations

- planning and scheduling is often treated as a routine action

- standarized final product or by-products- standarized production process sequence- higher rate of production with reduced cycle time- material handling is automatic or semi-automatic- unit cost is lower because of high volume of production

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Module 2


ManagementManagement

‘maintenance’ means ‘the activities of keeping something in good condition’, actions that should be taken to prevent devices/equipment from failing and keeping them at the best operating condition

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Reactive maintenance Preventive maintenancePredictive maintenance

Maintenance managementMaintenance management

‘do not do anything until it breaks’. Worst type of maintenance strategy. This approach leads to

shorter life time of equipment and is

associated with the risk of temporarily disrupt or

even stop a production process

activities that detect the onset of a degradation

mechanism what allow to take preventive action that

eliminates harmful stressors. Predictive

maintenance is based on actual condition of the machine. Reduction in

maintenance costs (by 25% - 30%), elimination of

breakdowns (by 70% - 75%), reduction in downtime (by

35% - 45%), production increase (by 20% - 25%)

actions performed on time or run-based schedule that detect, preclude or mitigate degradation of machine or its parts for maintaining its proper

operating and useful life time. Cost effective,

increasing machine life cycle, energy savings,

reduced process failure incidents

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Module 2


ManagementManagement

it is important to rank the plant units by failure consequence using four levels of their impact on production and safety

iMaintenance managementMaintenance management

Level Production consequences Safety consequences

Level 1

Failure causes an immediate and significant

production loss

Failure causes an immediate and high risk

safety hazard

Level 2Failure causes an immediate but low

production loss

Failure causes an environmental pollution

hazard

Level 3Failure causes a potential

production lossFailure causes a

potential safety hazard

Level 4Failure causes no

immediate or potential production loss

Failure causes no safety hazard

Module 2 - QUIZ

Unit 3: Production chain management


Question: From the production chain management point of view, renewable energy manufacture sector is divided into:Question: From the production chain management point of view, renewable energy manufacture sector is divided into:

Options


pure energy producers, energy

producers and biofuels

producers

energy producers, biomass

producers, solar energy plants

biomass and fossils combustion plants, renewable energy

producers

A B

C

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Module 2

Unit 4: Distribution chain managementUnit 4Unit 4Unit 4Unit 411

Distribution managementDistribution management

Distribution and demandDistribution and demand

distribution management is an integrated part of supply chain and in energy sector two different approaches are used depend on the type of business: (1) energy producers and (2) manufacturers of energetic products such as a secondary energy carriers such as solid and liquid biofuels

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Total energy demand

Internal demand

External demand

the volume of energy used by power plant for

maintain its operation

volume of energy that is sold to

customer or final consumer via the electric grids or

pipelines, in case of hot water or

steam

5% to 7% of electric energy produced in steam power plants (fossils, biomass, biogas) is used on-site to maintain plants in operation state (enable electricity generation). Hydro power, solar and wind as well as combustion turbine power plants use relatively less electricity to maintain their operation

biofuels producers distribution networks are more complex and

may include warehouses,

distributors, retailers so distribution chain

management is more complex


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Module 2



Matching supply & demandMatching supply & demand

forecast demand is important for supply chain integration. Accurate forecast demand allows to produce and deliver the right quantities in a cost-effective manner, what means achieving of optimal levels of cost and customer service quality. Lower inventory, reduced stockouts, better production plan, reduced costs and improved customer service are the benefits of better forecast

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Large stock Flexible pricing

Price is higher during peak demand periods (for reduction of high demand)

and then price is lowered (certain discount rate is used) beyond that period when

demand decreases. This approach can still lead to lower sales volume (stockouts). Some companies move their production capacity outside the period of daily peak demand for energy when they have such

possibility

Biofuels producers. Holding large stock available at any time

regardless of fluctuations in demand level. This strategy allows to

maximize sales but it is expensive – the cost of holding inventory is high.There is a risk of inventory

obsolescence. Power plants - fixed price and

constant volume of energy generation resembles that approach

in some extent

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Module 2



Distributed energy generationDistributed energy generation

distributed energy technologies include solar photovoltaic modules, combustion turbines, microturbines, fuel cells and batteries, wind turbines, reciprocating and stirling engines and others. Dynamic energy management system is a demand side energy resource that integrates energy efficiency and load management. The key challenges include balancing customer demand for electricity with cost, environment protection and stakeholder requirements

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new energy services became more demand responsive which enable load and distributed energy resources to provide capacity into the bulk power system in response to grid contingencies and market pricing signals

distributed energy - convergence of energy consumption with energy production, combined heat and electricity, energy storage, power quality and

demand response and demand side management

Definition

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Module 2



Distributed energy generationDistributed energy generation

Central power plant

IndustryCommercial

buildings

Household

Household

Household

Household Household

Household

Renewable source plant

Renewable source plant

Grid National / Regional

Module 2 - QUIZ

Unit 4: Distribution chain management


Question: Accurate demand forecast is important for:Question: Accurate demand forecast is important for:

Options


deliver the right quantities in a cost effective

manner

holding a large stock available

set a much higher prices for energy

A B

C

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Module 2

Unit 5: Logistics and transportationUnit 5Unit 5Unit 5Unit 511

LogisticsLogistics


logistics - ‘part of supply chain management that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements’

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supply chain management covers all logistics functions: procurement, distribution, maintenance, inventory management, marketing, finance and customer service management

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Council of Supply Chain Management Professionals

today logistics is seen as relationships between three main elements:

Logistics = Supply + Materials Management + Distribution

logistics is concerned with physical and information flows and storage from raw materials, production process to distribution of finished product


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Module 2


LogisticsLogistics

Logistics & marketingLogistics & marketing

Marketing and logistics convergence

Applied from: New S., Westbrook R. (2004) ‘Understanding Supply Chain’, OUP Oxford, UK

Consumer franchise Brand values Innovation Benefit focused

Customer valueCost of ownershipValue adding relationshipsService quality

Supply chain effectivenessLow cost supplierReduced asset baseNetwork management

Marketing advantage

logistics has an ability to influence on the benefit to

costs ratio, both in terms of positive or negative impacts

i

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Module 2


LogisticsLogistics

Functional structureFunctional structure

Managing director

Distribution manager

Planning & control Operations Inventory management

Depot network

Customer service

Budgetary control

Information systems

Warehouse management

Transport management

Depot management

Delivery operations

Order processing

Demand forecasting

Stock control

Materials management

Unit loads

Packing (biofuels)

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Module 2


TransportationTransportation

Transportation costsTransportation costs

transportation cost depends mainly on the distance between power plant and energy resource as well as power plants (or biofuel manufacturer) and final customer/consumer. Primary energy sources and large power plants usually are placed relatively far away from the population centers and require bulk transmission lines or transportation of raw materials used for energy generation over a long distance (often over 100 km)

Operating costs of energy transportationOperating costs of energy transportation

Fixed costs Variable costs

depend on the amount of transported energy and include cost that covers

energy losses in transmission lines, lost of primary energy resources during

loading and unloading, maintenance of rolling-stock as well as maintenance cost of the fixed transport infrastructure and cost of land occupied by transmission

line corridors

as function of the energy transport distance and include cost of generating additional energy required to cover the

losses in transmission lines, production of additional primary energy resources to

cover the losses during transportation and maintenance costs of the variable

transport infrastructure

Module 2 - QUIZ

Unit 5: Logistics and transportation


Question: Supply chain management covers:Question: Supply chain management covers:

Options


procurement and distribution

all logistics functions

marketing and customer service

A B

C

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Module 3 - Business

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MODULE CONTENT

Module 3 provides knowledge on risk analysis and management and business process management in two consecutive learning Units.

Unit 1: Risk analysis and management, covers the following issues:

- Introduction, definitions;- Risk management, SOAR method;- Risk management in the supply chain;- Relationships between risk and performance;- Regaining stability.

Unit 2: Business process management, covers the following issues:

- Business process definition and process complexity;- Categories of business processes;- Process management cycle;- Performance management;- Business process lifecycle.

Back to Introduction

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Module 3

Unit 1: Risk analysis and managementUnit 1Unit 1Unit 1Unit 111


risk management is ‘dealing with uncertainty for the enterprise’ and ‘methodology for managing risks that have impact on strategic objectives of a company’

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risk - someone or something that creates or suggests a hazard and manifests itself in events

that have consequences, usually dangerous or hazardous for

business

1 risk is the potential for loss caused by an event (or series of events) that can adversely affect the achievement of a company’s

objectives

2

SOAR (Strategic Objectives At Risk; and from the process point of view: Set Observe Analyze React) methodology is often used for analysis and risk treatment and defines a process that allows to identify and determine whether to take a risk and prepares organization for the consequence of an event and taking appropriate countermeasures for elimination of risk and eliminate or mitigation of its effects

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SOAR processSOAR process

Objectives & Plan

Cause-effect

Analysis

Set metrics – drivers, controls

Observe Metric values

Analyze Metric values

React

Need to reset

strategy?

YES

NO

Monitoring right

metrics?

YES

NORight

objectives& risks?

YES

NO

Applied from: Monahan G. (2008) ‘Enterprise Risk Management’, John Wiley & Sons Hoboken, USA

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Risk management in supply chainRisk management in supply chain

supply chain system may be vulnerable with respect to as diverse harmful or dangerous events such as technical failures, human errors, environmental impacts, loss of key staff, variation in raw materials prices, interruptions in supply of raw materials and so on. The adverse environmental conditions could have tremendous impact on the short or long term vulnerability of supply chain systems (pure energy plants, for example)

i

Supply chain vulnerability analysis

Understand the nature and types of factors that have an

impact on the achievement of the supply chain short

and long term objectives

Identify and understand core processes and

mechanisms through which risks and

vulnerabilities may evolve

Determine and understand how the

probability and consequences of such

risky events and threats could be reduced and

managed in cost-effective manner to achieve an

acceptable vulnerability levels

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Types of risk Types of risk

Delays in material flows

Disruption to material flows

Normal risk

often occur, can be predictable

are usually managed as a part

of supply chain management

rare and unpredictable, more harmful in their consequences, caused by serious events

such as disasters, fires, labor strike and can temporarily stop the flow of material

is usually managed as a part of supply chain

management

fluctuations of process yields, materials costs,

demands

Abnormal risk

system failure, is hard to assess and risk management

in such cases is part of business continuity efforts but some experts believe that such risks should be

treated as a tasks belong to supply chain risk

management process

Module 3 - QUIZ

Unit 1: Risk analysis and management


Question: Risk management is:Question: Risk management is:

Options


dealing with something wrong

dealing with uncertainty

dealing with natural disasters only

A B

C

Module 3 - QUIZ



Please try again

Module 3 - QUIZ


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Your answer is correct!

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Module 3

Unit 2: Business process managementUnit 2Unit 2Unit 2Unit 211

Definitions Definitions

almost all supply chain and logistics processes are directly or indirectly integrated with one or more business processes and should use principles and rules for their own process design

i

business process can be simple or very complex depend on nature of business, production and services. Production processes are relatively easy to analyze because they refer to what people do while service processes are more complex

business process is ‘a structured, measured set of activities to produce a specific output for a particular customer market. It implies a strong emphasis on how work is

done within an organization, in contrast to a product focus’s emphasis on what. A process is thus a specific ordering of work activities across time and space, with a

beginning and an end, and clearly defined inputs and outputs: a structure for action’

Business processBusiness process


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Business process classification Business process classification

OrganizationalOperational

organizational business processes are characterized by their inputs, outputs, expected results and their dependencies

on other organizational business processes existed

within company structure, for example, business process

used to manage incoming raw materials

operational business processes contribute to one organizational business process and they are

basis for developing implemented business processes that contain information on execution of the process activities and technical and organizational conditions.

Each operational business process includes detailed specifications for all activities and their relationships

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Levels of business processes Levels of business processes

Business strategy Goals

Operational processes

Organizational processes

Implemented business

processesdetermine realize

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Business process management Business process management DefinitionDefinition

business process management can be treated as an organizational capability and it is not the simple execution of the tasks along a process lifecycle (i.e. identify, model, analyze, improve, implement, execute, monitor and change)

i

modern business process management is an integrated system used for managing business performance by managing end-to-end business processes (business process means all activities that add value to the final product)

business process management is a comprehensive system for managing and transforming organizational operations. It means the achievement of on company’s objectives through the improvement, management and control

of crucial business processes

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Business process management Business process management Business process lifecycleBusiness process lifecycle

Business process lifecycle consists of phases that are related to each other and are organized in a cyclical structure with logical dependencies

Evaluation: process mining and activity

monitoring

Enactment: operation, monitoring,

maintenance

Configuration: system selection &

implementation

Design & analysis: process identification, modeling, validation

Administration and stakeholders

logistic management in renewable energy industry

Documents

energy economics

nuclear energy

renewable energy production

management of energy

alternative energy sources

wind energy biomass

module content

power plant management