E2E Supply Chain Excellence

Business Transformation

Transforming a Behemoth


At the time of the transformation, the primary differences of biomass vs. coal is summarised below:
·     Unlike coal biomass supply is in its infancy and high volume suppliers does not exist in the market place. The supply chain and trading market is therefore far more constrained than coal which is a mature commodity market.

·     Biomass has tendencies to self-combust particularly when wet, therefore the raw material cannot be stored outside in large stock piles like coal and when in transit.

·     Biomass does not have the same calorific value, (CV) as coal, therefore more volume is required to create the same output.

·     Biomass is only commercially viable with the support of the Renewable Obligation support provided by the UK government which gives Renewable Obligation Certificates (ROCs) for volume of electricity produced with cleaner sustainable fuels.

The Transformation

The impact of converting to biomass changed almost every aspect of the organisation to fuel sourcing and procurement, supply chain infrastructure and management, engineering solutions and operating model and how electricity was traded in the open market.

The programme could be split into 3 major workstreams:
1.       Engineering
2.       Commercial
3.       Reporting & Accounting Systems

The major challenges of the transformation included:
1.       Risk & Mitigation
2.       Governance & Delivery
3.       Business Transformation not engineering projects
4.       Unified working – one plan and organisational culture

The first unit conversion started April 2013 and has successfully shown capability of providing 640MW output. The second unit was converted Q1 quarter 2014.

Engineering

The engineering scope was split into 3 main streams:
1.       Material handling and storage including on site rail capacity. This included 4 storage domes that were capable of storing a total of 300,000 tonnes of biomass on site and associated safety systems. Value ~£150 million.

2.       Materials handling and delivery into combustion, including conveyors rated up to 1200 tonnes per hour, intermediate storage and metered feeding systems capable of supplying ~7250 tonnes per day. Value ~£85 million.

3.       Combustion systems to improve the combustion and heat transfer differential due to material CV difference from coal and to minimise corrosion due to material composition. Value ~£50 million.

Commercial Workstreams

The commercial workstream was by far the most complex and challenging area where existing processes and protocols no longer remained. The impact of the supply chain constraints and policy changes meant that the business operation from raw material supply to electricity trading changed dramatically.

Materials Procurement, both a mixture of internal supply via 2 new biomass pellet plants in the US and moreso for initial unit supply external delivery of pelletised biomass supply from a market that didn’t exist in high volumes. This required new supplier being set-up and high risk delivery and contractual agreements.

Supply Chain, included improving the planning process to ensure that material was delivered to site in a far more controlled and measured method, use of strategic offsite storage to level volume requirements between unit conversions, infrastructure capacity increase at port, rail and road both nationally and globally, new rail wagon design and manufacture specific to biomass requirements maximising wagon capacity. Value ~£450 million.

Policy deployment, the changes in the constraints of the material and the supply chain meant numerous ways of working were no longer fit for purpose, policies to control the level of materials procured, planning constraints, inventory management, trading constraints all meant new policies to be implemented during the transformation.

Reporting & Accounting

The Reporting & Accounting workstream was responsible for accurate tracking of stocks, sustainability tracking of all raw material back to fibre source and the ability to accurately track materials that were burnt that could be associated with Renewable Obligation support.

 

Energy – Business Transformation

Background

This case study summarises the hugely complex and high value transformation of the largest and most efficient coal power plant in the UK, supply ~8% of the total UK power requirement. The organisation had decided to convert its generation plant from coal fueled to predominantly biomass. Due to the nature of biomass and the infancy of the material supply chain with the added regulatory requirements associated with burning biomass almost every aspect of the business would be impacted.