logistic management in renewable energy industry
DESCRIPTION
e-Course. ELOMPRES. LdV Transfer of Innovation. Logistic Management in Renewable Energy Industry. Introduction. Introduction. Course is divided into three main Modules: Module 1 - Energy, Module 2 –Logistics and Transportation, Module 3 - Business. - PowerPoint PPT PresentationTRANSCRIPT
Logistic
Management
in Renewable
Energy Industry
e-Course
Introduction
ELOMPRESLdV Transfer of Innovation
Introduction
NEXT
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
Unit 1: Renewable energy production and consumption – an overviewUnit 1Unit 1Unit 1Unit 122
Energy conversion diagramEnergy conversion diagram
Primary energy
solar, wind, hydropower,
biomass, waste
Energy losses
Conversion lossesDistribution lossesSelf consumption
Energy losses
Conversion lossesDistribution lossesSelf consumption
Secondary energy
Biofuels (solid, liquid), biogas, power, district
heating
Energy losses
Conversion lossesDistribution lossesSelf consumption
Final energy
Biofuels (solid, liquid), biogas, power, district
heating
Consumer losses
Useful energy
Heat, electricity, light, etc.
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Module 1
Unit 1: Renewable energy production and consumption – an overviewUnit 1Unit 1Unit 1Unit 133
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
Unit 1: Renewable energy production and consumption – an overviewUnit 1Unit 1Unit 1Unit 155
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
Unit 1: Renewable energy production and consumption – an overviewUnit 1Unit 1Unit 1Unit 199
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
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Module 1
Unit 2: Renewable energy technologiesUnit 2Unit 2Unit 2Unit 222
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
Unit 2: Renewable energy technologiesUnit 2Unit 2Unit 2Unit 266
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
Unit 2: Renewable energy technologiesUnit 2Unit 2Unit 2Unit 277
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
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Module 2
Unit 1: Fundamentals of supply chain managementUnit 1Unit 1Unit 1Unit 133
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
Unit 1: Fundamentals of supply chain managementUnit 1Unit 1Unit 1Unit 155
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
Unit 1: Fundamentals of supply chain managementUnit 1Unit 1Unit 1Unit 188
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)
i
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
Unit 1: Fundamentals of supply chain managementUnit 1Unit 1Unit 1Unit 11313
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
Unit 1: Fundamentals of supply chain managementUnit 1Unit 1Unit 1Unit 11414
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
Unit 1: Fundamentals of supply chain managementUnit 1Unit 1Unit 1Unit 11717
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
Unit 1: Fundamentals of supply chain management
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Unit 1: Fundamentals of supply chain management
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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
Unit 2: Procurement chain managementUnit 2Unit 2Unit 2Unit 222
Procurement managementProcurement management
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
Unit 2: Procurement chain managementUnit 2Unit 2Unit 2Unit 233
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)
Procurement managementProcurement management
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
i
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Module 2
Unit 2: Procurement chain managementUnit 2Unit 2Unit 2Unit 277
Procurement managementProcurement management
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
Unit 2: Procurement chain managementUnit 2Unit 2Unit 2Unit 21010
Procurement managementProcurement management
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
Unit 2: Procurement chain managementUnit 2Unit 2Unit 2Unit 21111
Procurement managementProcurement management
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 #1Question #1Question #1Question #1
Question: Procurement chain starts fromQuestion: Procurement chain starts from
Options
Select only one answerSelect only one answer
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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Unit 2: Procurement chain management
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Unit 2: Procurement chain management
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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)
i
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
Unit 3: Production chain managementUnit 3Unit 3Unit 3Unit 322
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
i
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
Unit 3: Production chain managementUnit 3Unit 3Unit 3Unit 333
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
Unit 3: Production chain managementUnit 3Unit 3Unit 3Unit 31111
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
Unit 3: Production chain managementUnit 3Unit 3Unit 3Unit 31212
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 #1Question #1Question #1Question #1
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
Select only one answerSelect only one answer
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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Unit 3: Production chain management
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Unit 3: Production chain management
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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
Unit 4: Distribution chain managementUnit 4Unit 4Unit 4Unit 477
Distribution managementDistribution management
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
i
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
Unit 4: Distribution chain managementUnit 4Unit 4Unit 4Unit 499
Distribution managementDistribution management
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
Unit 4: Distribution chain managementUnit 4Unit 4Unit 4Unit 41010
Distribution managementDistribution management
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 #1Question #1Question #1Question #1
Question: Accurate demand forecast is important for:Question: Accurate demand forecast is important for:
Options
Select only one answerSelect only one answer
deliver the right quantities in a cost effective
manner
holding a large stock available
set a much higher prices for energy
A B
C
Module 2 - QUIZ
Unit 4: Distribution chain management
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Unit 4: Distribution chain management
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Module 2
Unit 5: Logistics and transportationUnit 5Unit 5Unit 5Unit 511
LogisticsLogistics
DefinitionsDefinitions
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’
i
supply chain management covers all logistics functions: procurement, distribution, maintenance, inventory management, marketing, finance and customer service management
i
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
Unit 5: Logistics and transportationUnit 5Unit 5Unit 5Unit 533
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
Unit 5: Logistics and transportationUnit 5Unit 5Unit 5Unit 577
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
Unit 5: Logistics and transportationUnit 5Unit 5Unit 5Unit 51010
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 #1Question #1Question #1Question #1
Question: Supply chain management covers:Question: Supply chain management covers:
Options
Select only one answerSelect only one answer
procurement and distribution
all logistics functions
marketing and customer service
A B
C
Module 2 - QUIZ
Unit 5: Logistics and transportation
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Module 2 - QUIZ
Unit 5: Logistics and transportation
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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.
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Module 3
Unit 1: Risk analysis and managementUnit 1Unit 1Unit 1Unit 111
DefinitionsDefinitions
risk management is ‘dealing with uncertainty for the enterprise’ and ‘methodology for managing risks that have impact on strategic objectives of a company’
i
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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Module 3
Unit 1: Risk analysis and managementUnit 1Unit 1Unit 1Unit 122
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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Module 3
Unit 1: Risk analysis and managementUnit 1Unit 1Unit 1Unit 155
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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Module 3
Unit 1: Risk analysis and managementUnit 1Unit 1Unit 1Unit 166
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 #1Question #1Question #1Question #1
Question: Risk management is:Question: Risk management is:
Options
Select only one answerSelect only one answer
dealing with something wrong
dealing with uncertainty
dealing with natural disasters only
A B
C
Module 3 - QUIZ
Unit 1: Risk analysis and management
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Module 3 - QUIZ
Unit 1: Risk analysis and management
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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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Module 3
Unit 2: Business process managementUnit 2Unit 2Unit 2Unit 222
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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Module 3
Unit 2: Business process managementUnit 2Unit 2Unit 2Unit 233
Levels of business processes Levels of business processes
Business strategy Goals
Operational processes
Organizational processes
Implemented business
processesdetermine realize
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Module 3
Unit 2: Business process managementUnit 2Unit 2Unit 2Unit 244
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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Module 3
Unit 2: Business process managementUnit 2Unit 2Unit 2Unit 266
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