case study: product and process design methodologies for engineering...

Case Study:yProduct and Process Design

Methodologies for Engineering the F Bi fiForest Biorefinery

New Energy SystemsNew Energy Systems19 August 2008

Paul Stuart ([email protected]) NSERC Environmental Design Engineering Chair

Department of Chemical Engineering, Ecole PolytechniqueMontréal, Canada

“Economic Stalement” for Traditional Forest Products Producing Nationsg

The “perfect storm” ofstrengthening dollar, risingg g genergy prices, rising fibre costs, small older mills….costs, small older mills….

Some Forestry Industry Survival Strategies

Go for Survival in Commodities, or Make the Most of Our Existing IndustryBuy/Build Elsewhere In Emerging M k M k th M t f O P lMarkets, or Make the Most of Our Pulp and Paper Competency in Emerging EconomiesEconomiesDiversify Core Business with Marketing & Technological Partners or Make the MostTechnological Partners, or Make the Most of Our Existing Value Chain by Migration to New Business Paradigmsg

Some Forestry Industry Survival Strategies

Go for Survival in Commodities, or Make the Most of Our Existing IndustryBuy/Build Elsewhere In Emerging M k M k th M t f O P lMarkets, or Make the Most of Our Pulp and Paper Competency in Emerging EconomiesEconomiesDiversify Core Business with Marketing & Technological Partners or Make the MostTechnological Partners, or Make the Most of Our Existing Value Chain by Migration to New Business Paradigmsg

The Forest Biorefinery!

Conventional Kraft Millref: Agenda 2020ref: Agenda 2020

5

Kraft Mill Biorefineryref: Agenda 2020ref: Agenda 2020

see background papers by Galbe &

6

see background papers by Galbe & Zacchi (2002) and Larson et al (2006)

The Dilemma

Forest industry strategists are talking about “revenue diversification” via the forest

biorefinery….…do forestry company executives know how to

go about designing and implementing biorefinery?

How should we apply process systems engineering techniques to address this

i d t t f ti ?industry transformation?

Tembec Temiscaming: Forest Biorefinery?Forest Biorefinery?

Forest Biorefinery Definition

One forest biorefinery definition:f ll tili ti f i i d bi f th= full utilization of incoming woody biomass for the

production of:• Wood products• Pulp and paper products• Energy• ChemicalsChemicals

Another (more practical) forest biorefinery definition:

= Maximizing the economic value from trees = Improved business model= Corporate transformation… Corporate transformation…

The Challenge: Mitigating Risks

Objective of this Presentation

To present (certain) critical issues that should b id d b f t i kibe considered by forestry companies seeking

to identify promising biorefinery pathwaysb d bi fi d i ti itibased on biorefinery design activities, consulting activities, and pulp and paper

company strategic planningcompany strategic planningleading to a proposed implementation

strategy and multidisciplinary designstrategy and multidisciplinary design methodology employing process systems

engineering, for exploring theengineering, for exploring the implementation of the forest biorefinery.

Presentation Outline

Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring


Leading companies are implementing the f t bi fiforest biorefinery

See 3 survey papers by Thorp, March-May 2008

Key biorefinery concepts and definitionsKey biorefinery concepts and definitionsBiorefinery implementation strategy for forestry companiesforestry companiesOverall design methodology for the forest biorefinerybiorefinerySome interesting process systems engineering approaches that we are g g ppexploring

2007 UPM-Kymmene CEO Report to Investorsto Investors

Leading Pulp and Paper Companies are Developing Partnershipsare Developing Partnerships

17

Identifying the Right Biorefinery Configuration is Complex…Configuration is Complex…

Volume-Margin Trade-Offs for the Forest Biorefinerythe Forest Biorefinery

Definition: Building Blocks and Derivatives…and Derivatives…

Waste Co-products or wastes?

PulpB ildi D iYield? Yield? Yield?

ChipsBiomass

and PaperMill

Building Block Derivative

Derivative

Yield? Yield? Yield?

P&P Products

$$ Main Biorefinery Products to Market $$$$

Reducing Volumes, Flexible Throughputs…

Increasing Process Complexity

Definition: Petrochemical Value Chains and Product Replacementp

Biorefinery Platform ?

? ??

Example: Product Replacement in Mature Supply Chain…in Mature Supply Chain…

Waste

PulpEth l Eth l PEYield? Yield? Yield?

ChipsBiomass

and PaperMill

Ethanol Ethylene PEYield? Yield? Yield?

P&P Products


Definition: Emerging Carbohydrate Platforms and Product SubstitutionS

??

CarbohydratePlatform ?Platform

Example: Product Substitution in Emerging Supply Chain…in Emerging Supply Chain…

Waste

PulpL ti PLA PLAYield? Yield? Yield?

ChipsBiomass

and PaperMill

Lactic Acid

PLA PLA Polymers

Yield? Yield? Yield?

P&P Products


Some Key Competitive Factors

Main competitive advantages for forestry companies:Access to biomass availability and harvesting knowAccess to biomass availability and harvesting know-howExisting infrastructure in close proximity to forest biomassEstablished SC for wood, pulp and paper products

Main competitive disadvantages for forestryMain competitive disadvantages for forestry companies:

Lack of capitalL k f d t d l t ltLack of product development cultureLack of knowledge of product quality requirement, SC practices etc for new bioproductsp p

Some Lessons Learned from Our Case Studies Thus Far…

Biorefinery technology will be critical for competitive position in the short term the unique

Case Studies Thus Far…

competitive position in the short-term, the unique supply chain will be critical for competitive position in the longer-termI d t b titi i th l tIn order to be competitive in the longer term: product design, before process designMeet profitability targets for varying market

di i b d i i f f iconditions by designing for manufacturing flexibilityThe key to success in the forest biorefinery will be y ythrough implementing “knowledge-based manufacturing” in conjunction with flexible manufacturing and advanced supply chain g pp ymanagement

Strategic Approach for Implementing the BiorefineryImplementing the BiorefineryImplementation: compete with all capital spending

Phase I Lower Operating Costs:

Phase II Increase Revenues:

Manufacture of derivatives

Phase III Improve Margins:

Knowledge-based manufacturing andReplace fossil fuels

at mill (natural gas, Bunker C), and/orProduce “building block” chemicals

derivativesMarket development for new productsHigher process

l it d

manufacturing and production flexibilityBusiness flow transformation

Lower risk technologies

complexity and technology riskPartners essential

Product development cultureOff-shoring, Outsourcing, etc…g

Compete internally for capital

Select the most sustainable

product platform d t ( )

Company culture transformation

SCM key to

Strategic Vision: Phase III must determine Phase I

and partner(s) success

Strategic Approach for Implementing the BiorefineryImplementing the BiorefineryImplementation: compete with all capital spending


Phase II Increase Revenues:

Manufacture of derivatives


Knowledge-based manufacturing andReplace fossil fuels

at mill (natural gas, Bunker C), and/orProduce “building block” chemicals

derivativesMarket development for new productsHigher process

l it d

manufacturing and production flexibilityBusiness flow transformation

Lower risk technologies

complexity and technology riskPartners essential

Product development cultureOff-shoring, Outsourcing, etc…g

Margins improvement is the goal

Strategic Vision: Phase III must determine Phase I

Phase I: Lower Operating Costs

Generate more free cash flow (EBITDA), in competition with all other capital spending proposals


The mill operation remains manufacturing-centric, i.e. produces a commodity and seeks to be a low-cost producer

Operating Costs:Replace fossil fuels at mill (natural gas, Bunker C), and/orProduce “building p

Seek to reduce biorefinery costs by identifying synergies with the existing mill:

Utili ti f i ti i f t t t ff t

block” chemicalMinimum risk technologies

Utilization of existing infrastructure to offset equivalent greenfield biorefinery capital costExploitation of green credits

Possible partnership with technology provider

Is Cellulosic Ethanol the Right Product?the Right Product?

Today!Today!

Source: NREL - 2006

Ethanol Price Volatility:An Important RiskAn Important Risk

Price volatility due to:Impact of crude oil and natural gas

Peak at ≈3 $/gal

pricesChanging balance between supply and demandDiverse feedstock types and theirDiverse feedstock types and their relative competitivenessEnergy legislation – tax credits and incentives

Source: Gulf Ethanol Corp

In 4 months: Ethanol prices dropped by half…

12 November <1.5 $/gal

pp y

How can companies stabilize margins in the context of volatility and

Source: Gulf Ethanol Corp

yuncertainty?

Biochemical Ethanol Technology Technology

≈4.2$/gal

≈2.2$/galg

Source: NREL - 2006≈0.6$/galSource: NREL - 2006

Should Biochemical Ethanol be Implemented Today?Implemented Today?

How can

July 2007 Scenario @ 3 $/gal

margins be stabilized?

November 2007 Scenario @ 1 5 $/galScenario @ 1.5 $/gal

Source: NREL - 2006

Is Cellulosic Ethanol the Right Product?

Implementing the forest biorefinery is about mitigating risk

g

mitigating risk… …and clearly ethanol represents a great opportunity, but also presents risksThese can be mitigated as part of a forest biorefinery product design strategy, e.g.:

What derivatives can be made from ethanol?What derivatives can be made from ethanol?What opportunities are there with by-product lignin?What manufacturing flexibility between products is

i d i l di h d i th l frequired, including perhaps producing ethanol from cellulose?

Before implementing ethanol production facilities, know what product portfolio your company will ultimately produce…

Process-centric and Product-centric designProduct centric design

“Towards a Product-Centered Chemical Industry - Rethinking theChemical Industry - Rethinking the Role of R&D and its Interaction with Marketing and Business Strategy” FOCAPD (2004), and AIChE ( ),webcast (2004 – see link in background materials)

George Stephanopoulos,

MIT

Chemical Engineering is moving from being process-centric to product-centricp pProduct centered: market trends product specifications components and subsystems chemicals and materials

38

subsystems chemicals and materials manufacturing systems design

Start With Phase II: Define your Product PortfolioProduct Portfolio

Product Design first, Process Design second

Increase revenues by producing new “green” organic chemicalsPhase II

Increase Revenues:Manufacture of DerivativesManufacture of derivativesMarket development for New productsHi h l it

Determine promising product portfolios for

Higher complexity and risk technologiesPartners with SC

Determine promising product portfolios for your company using a market perspective

Which are technically feasible?Secure the best partners for securing theSecure the best partners for securing the value chain…Examine the implied company transformation

Biorefinery Product Portfolio

Wood, Energy, Pulp and Paper Products

Minimum Production Maximum Production

A *** ***

B *** ***

C *** ***

Biorefinery Products

A *** ***

B *** ***B

C *** ***

Product Portfolio Identification

Innovation

Novelproduct

Substitution

Technology P h

Market P ll

product

The most appropriate

fPush Pull

S b tit ti R l t

choice for your company

Substitution ReplacementProcess-centric

design Product-centric design

Adaptation

Phase III = Enterprise Transformation

Supply Chain Restructuring, e.g., simplifying supply chains, negotiating just-in-time relationships, developing collaborative information systems

Transformation

Outsourcing & Offshoring, e.g., contracting out manufacturing, information technology support; employing low-wage, high-skill labor from other countries

Phase III Improve Margins: countries

Process Standardization, e.g., enterprise-wide standardization of processes for product and process development R&D finance personnel etc

Knowledge-based manufacturing and production flexibilityBusiness flow development, R&D, finance, personnel, etc.

Process Reengineering, e.g., identification, design, and deployment of value-driven processes; identification and elimination of no value creating

transformationProduct development cultureOff shoring g

activities

Web-Enabled Processes, e.g., online, self-support systems for customer relationship management, in entor management etc

Off-shoring, Outsourcing, etc…

inventory management, etc.

Market-driven culture to be established through a phased transformation

Supply Chain DesignExisting Supply Chain

Supply Chain DesignThe Biorefinery Network

Overall Biorefinery Design Framework

Promising Biorefinery Products

Technology Strategy

Framework

Products Strategy

Product Design

ReconciledAdvanced

LCA Supply ChainManagementProcess

SimulationReconciled

Process andEconomic Data

Thermal PinchAnalysis

L Bl k

Set of PreferredBiorefinery

ConfigurationsLarge Block Analysis of Processes

Configurations

MCDMProcess Design

Preliminary Engineering

Product Design Considerations for the Forest Biorefinery…for the Forest Biorefinery…

Product opportunities:Which products should be considered as opportunities for

replacement/substitution on the market?Which economically attractive product families can be built

around them?Are technologies available for the product families, are they

emerging?

Product family:Which ones create the

highest value along the value chain?

Which perturbing events on the market pose risk?What are the competitive factors associated with each product family? Company detailed

analysis and business plan

Product Portfolio:What will be the impact of

business plan definitionRisks?

Risks?What will be the impact of product family integration to the existing company portfolio?Is this a unique strategy? Partnership Selection:

Who are the most promising partners for the

Risks?

Who are the most promising partners for the candidate new product portfolios?Which partnerships will ensure the value creation

while mitigating most of the risks?Risks?

How Does this Approach Influence Biorefinery Design?

Large block analysis of biorefinery technologies

Influence Biorefinery Design?

WaterTreatmentRiver_Water

R8

Chemicals

technologies

WoodRoom FiberLineWood

Bark

BL

WL

Pulp

OPERATIONS-DRIVEN COST MODELLING• Manufacturing costs for new forest biorefinery

products, e.g. for bioethanolN h d ll ti l l

OPERATIONS-DRIVEN COST MODELLING• Manufacturing costs for new forest biorefinery

products, e.g. for bioethanolN h d ll ti l l

CAPITAL SPENDING EVALUATION• Capital investment in the longer termCAPITAL SPENDING EVALUATION• Capital investment in the longer termSUPPLY CHAIN DESIGNSUPPLY CHAIN DESIGN

PowerIsland Caustisizing

Bark WL

Coal Natural_gas

WQCChips VPP

• New overhead allocation → lower pulp production costs

• Techno-economic risk assessment and uncertainties of technologies & markets

• New overhead allocation → lower pulp production costs

• Techno-economic risk assessment and uncertainties of technologies & markets

• Competitive manufacturing costs• Capital spending strategy• Competitive manufacturing costs• Capital spending strategy

• Company-specific SC is critical• Risks and uncertainties must be evaluated• Manufacturing flexibility must be exploited

• Company-specific SC is critical• Risks and uncertainties must be evaluated• Manufacturing flexibility must be exploited

DECISION MAKING• Choosing a company-specific profitable

biorefinery strategy

DECISION MAKING• Choosing a company-specific profitable

biorefinery strategyWQC

GasificationWoody_biomass

GTLFT_Liquid

PreTreatment

Chips_VPP

Chips_to_Cooking

Purified_waste_Water

uncertainties of technologies & marketsuncertainties of technologies & marketsg y pg y p• Risks and uncertainties systematically

considered in decision-making• Risks and uncertainties systematically

considered in decision-making

CornEtOH EtOHCorn

Data Processing and Data ReconciliationData Reconciliation

Activity-Based Cost Accounting

Clean_TMP_steam

TMP Heat Recovery

5

4

Steamer

Inlet_wtr_preheater_2

Chimney

Inlet_wtr_preheater_1

CW

Circulation_water_to_heating_2

Circulation_water_out

Condensate_to_steamer

Water_heating_out

Water_to_heating_1

Chip_silo

Chip_wash

Chip_screw

Wash_reject

Chips

Preheating

2nd stage refiners

Went_from_pulper

M

1st_stage_refiners

Latency_chest

Main line refinersWashing of chips Mill wide data reconciliation

3

21

Process-

Wash_reject_out

M

_stage_Pulper_main_line

C

MILLForest biorefinery

INPUTS VALUE

Raw material

Driven Cost Modelling

1

25

INPUTS VALUE

Raw materialRaw material

…

Chem cons. Technology Strategy

3

4

5Raw material

…

Chem cons.

…

Process Analysis

How Does this Approach Influence Biorefinery Design?y g

Energy Planning for the BiorefineryBiorefinery

Market product process Mass and energy balances Preferred energy profiles Mill energy planning


Integration of

Actual P&Pill

Integration of biorefinery

mill

Biorefinery

Thermal pinchmethods

Energyefficiencyefficiencyprojects

Integrated Forest Biorefinery: Identifying SC SynergiesIdentifying SC Synergies

Extending the Supply Chain to the Forest Biorefinery…

Existing Pulp & Paper Supply ChainDistribution

Forest Biorefinery…

P&P DemandOpportunities

Raw Material Handling

Pulp & PaperMill

Convert.& Finish.

Merchants, customers

SupplyOpportunities Design of Biorefinery Supply Chain The FBR SC will be

SC Research for the FBR

Chemical DemandOpportunities

B

A and/or

and/or...

B

A and/or

and/or...

B

A and/or

and/or...

B

A and/or

and/or...

The FBR SC will be unique, to the

Company implementing it.

Procurement Cycle

Manufacturing Cycle

Distribution Cycle

Customer Cycle

? ?

? ?

SC Research Related to Existing Pulp and Paper Mills…Pulp and Paper Mills…

Sup.

Logs

Sup.

hips

Logs

Chi

ps

hips

les

Pulp

Mill

Su Ch Ch

Pil

This approach has been shown to yield significant benefits, even for relatively

Sup.

Logs

p. ps

Logs

Chi

ps

ps s

Pulp

Mill

benefits, even for relatively simple product portfolios

Sup

Chi

ps

Chi

pPi

les

AggregationAggregation – lower level of detail

Aggregation –higher level of

detail

Process Work Center - n

Local Factors

SpecificCalculation

Routings

Process Cost Script

Process Work Center - 1Local Factors

SpecificCalculation

Routings

Process Cost Script

Process-Based Business Model

Supply Chain Considerations for Pulp and Paper Mills…

Existing Pulp & Paper Supply ChainDistribution

Pulp and Paper Mills…

P&P DemandOpportunities

Raw Material Handling

Pulp & PaperMill

Convert.& Finish.

Merchants, customers

SupplyOpportunities Design of Biorefinery Supply ChainSC Research in the P&P Industry

Chemical DemandOpportunities

B

A and/or

and/or...

B

A and/or

and/or...

B

A and/or

and/or...

B

A and/or

and/or...

Help mills to become a low cost producer by applying advanced analytical approaches

Procurement Cycle

Manufacturing Cycle

Distribution Cycle

Customer Cycle

? ?

Help mills to better characterize the utilization of resources, and the cost implications of various operating regimes at the mill

? ?

Help mills to better manage the complexity of the supply chain

Phase III = Enterprise TransformationTransformation


Can we minimize the impact of price olatilit

Improve Margins:Knowledge-based manufacturing and production flexibilityprice volatility

through flexible manufacturing and better SCM?

flexibilityBusiness flow transformationProduct development

Outsourcing, etc…

cultureOff-shoring, Outsourcing, etc…


Expand the JV in order to have better fl ibilit ?

63

flexibility?

Manufacturing Flexibility

…is critical to the success f th f t bi fi

To be flexible we need to: Must be addressed in SC design:

of the forest biorefinery…

To be flexible, we need to:Have different raw material resourcesH fl ibl d i

Must be addressed in SC design:Managing the feedstock procurement processCh i iHave flexible production

linesBe responsive to demand

Choosing appropriate technologyBeing close to raw material

d j k tresources and major markets and having an efficient distribution and transportation networknetwork

Key Issues Related to the Biorefinery Supply ChainBiorefinery Supply Chain

Product Strategyo What are the SC synergies for different product scenarios?o How to enter an existing value chain, at which point?

Supply Chain Designo What are the implications of the SC design for different

biorefinery product opportunities?o What are the impact of strategic SC design on

tactical/operational planning

Supply Chain Planningpp y go How can we best manage the complexity of this new SC?o How can manufacturing flexibility be best exploited at the SC

level so the product portfolio can be used to mitigate price volatility?volatility?

Product Design Level Analysis

Competitive Strategy SC StrategyCompetitive Strategy SC Strategy

Strategic fit?Understanding the market

Type of productProduct variety

SC responsivenessWide rangeHigh q antit

g

Product varietyQuantity neededDesired response timeMarket volatility

High quantityShort lead time

SC efficiencyMarket volatility Minimizing costs

arke

t SuppC

hain

M

ly n

Knowledge-Based Manufacturing: Critical IssuesCritical Issues

s or

Cos

t N

et S

ales

Applying LCA to the Biorefinery ContextBiorefinery Context

Boundaries

Allocation

Indicators

Normalization

Weighting

Applying LCA to the Biorefinery ContextBiorefinery Context

Mill 1 Process pathway 1 Product 1

FBR projects involve:Many possible productsMany possible process pathways

Pulp and paperCompany

Mill 2 Process pathway 2 Product 2

Mill N Process pathwayN Product N

pathwaysMany mill options

Potentially very different environmental profile for all possible combinations

What products will be manufactured - what do they substitute/replace?

N

substitute/replace? What is an appropriate allocation method between pulp and paper, energy and biorefinery products?How does the environmental profile of the biorefinery products compare to the products they replace?

Conclusions

Implementing the forest biorefinery is more than a capital spending project…p p g p jRisk mitigation associated with the implementation of the biorefinery can be achieved through careful strategic planningachieved through careful strategic planning, and by employing systematic product and process design methodologies:

Start with market-based product portfolio designPartner selection and partnership model are critical and determining the company’s uniquecritical, and determining the company s unique biorefinery supply chainEnterprise transformation is implicated, including designing for production flexibility and deliveringdesigning for production flexibility and delivering product with knowledge-based manufacturing

Case Study:yProduct and Process System Design

Methodologies for Engineering the F Bi fiForest Biorefinery

New Energy SystemsNew Energy Systems19 August 2008

Paul Stuart ([email protected]) NSERC Environmental Design Engineering Chair

Department of Chemical Engineering, Ecole PolytechniqueMontréal, Canada

case study: product and process design methodologies for engineering...

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