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Logistic Management in Renewable Energy Industry e-Course Introduction ELOMPRES LdV Transfer of Innovation.

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Presentation on theme: "Logistic Management in Renewable Energy Industry e-Course Introduction ELOMPRES LdV Transfer of Innovation."— Presentation transcript:

1 Logistic Management in Renewable Energy Industry e-Course Introduction ELOMPRES LdV Transfer of Innovation

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

3 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 issuesUnit 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 issuesUnit 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

4 Next Back Module 1 Unit 1: Renewable energy production and consumption – an overview Unit 1 1 Energy 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 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 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

5 Next Back Module 1 Unit 1: Renewable energy production and consumption – an overview Unit 1 2 Energy conversion diagram Primary energy solar, wind, hydropower, biomass, waste Energy losses Conversion losses Distribution losses Self consumption Energy losses Conversion losses Distribution losses Self consumption Secondary energy Biofuels (solid, liquid), biogas, power, district heating Energy losses Conversion losses Distribution losses Self consumption Final energy Biofuels (solid, liquid), biogas, power, district heating Consumer losses Useful energy Heat, electricity, light, etc.

6 Next Back Module 1 Unit 1: Renewable energy production and consumption – an overview Unit 1 3 Demand 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

7 Next Back Module 1 Unit 1: Renewable energy production and consumption – an overview Unit 1 5 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 IGroup IIGroup III

8 Next Back Module 1 Unit 1: Renewable energy production and consumption – an overview Unit 1 9 Geothermal energy Economics of renewable energy market Market 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 Costs Heating & coolingCosts rangeAverage Deep geothermal ,2 District heating Shallow geothermal heating 10, Shallow geothermal cooling 7, 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 trend Heating & cooling Geothermal heat pump (MWth) Geothermal direct use (MWth) Total installed capacity (MWth) Heat & cold production (Mtoe)2,610,5

9 Next Module 1 Unit 2: Renewable energy technologies Unit 2 1 The 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 Hydrogen production Cogeneration Power plants Storage Industry Residential Commercial Transport Furnaces Short term storage Medium/long term storage ElectricityFuelHeat Back to Module content

10 Next Back Module 1 Unit 2: Renewable energy technologies Unit 2 2 Renewable technologies characteristics Renewable energy technologies are divided into two main groups: CSCM (Complete Supply Chain Management group) and PSCM (Partial Supply Chain Management group) GroupComponents of the Supply ChainEnergy 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 Solar Geothermal Hydroelectric Wind Tidal/wave

11 Next Back Module 1 Unit 2: Renewable energy technologies Unit 2 6 Geothermal 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 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 plants Type of geothermal power plants 1.Dry steam geothermal power plant 2.Single-flashing geothermal plant 3.Dual-flashing geothermal plant 4.Binary geothermal plant Investment costs vary depend on local geological conditions. Total cost of geothermal power plant with electric capacity of kW is about 1,9 million

12 Next Back Module 1 Unit 2: Renewable energy technologies Unit 2 7 Solar energy well insulated collector may heat water to temperature degrees Celsius but good effective collectors may heat water or other fluids to even degrees Celsius Conversion 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) Technology 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

13 Module 2 – Logistics & Supply Chain Next Back to introduction 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.

14 Module 2 – Logistics & Supply Chain Next Back to Introduction 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.

15 Next Back Module 2 Unit 1: Fundamentals of supply chain management Unit 1 2 Supply 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 i i i

16 Next Back Module 2 Unit 1: Fundamentals of supply chain management Unit 1 3 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) i i i i Supply chain definition

17 Next Back Module 2 Unit 1: Fundamentals of supply chain management Unit 1 5 Supply 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 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 zoneMidstream zoneDownstream zone

18 Next Back Module 2 Unit 1: Fundamentals of supply chain management Unit 1 8 Supply 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 132

19 Next Back Module 2 Unit 1: Fundamentals of supply chain management Unit 1 13 Supply chain management Supply 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 measure Strategic data What must be done? Tactical data How to do it? Operational data What actually must be done?

20 Next Back Module 2 Unit 1: Fundamentals of supply chain management Unit 1 14 Supply chain management Supply 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

21 Next Back Module 2 Unit 1: Fundamentals of supply chain management Unit 1 17 Supply chain planning Planning 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 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

22 Module 2 - QUIZ Unit 1: Fundamentals of supply chain management Question #1 Question: Two main aspects of the supply chain are: Options Select only one answer synergy - entropy logistics - management transportation – business processes AB C

23 Module 2 - QUIZ Unit 1: Fundamentals of supply chain management Sorry, Your answer is incorrect! Please try again

24 Module 2 - QUIZ Unit 1: Fundamentals of supply chain management Congratulations Your answer is correct! Go to next question

25 Next Back to Module content Module 2 Unit 2: Procurement chain management Unit 2 1 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 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 Definitions 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) 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

26 Next Back Module 2 Unit 2: Procurement chain management Unit 2 2 Procurement management Puchasing 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

27 Next Back Module 2 Unit 2: Procurement chain management Unit 2 3 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 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 chain the procurement function is divided into five activity categories: purchasing, consumption management, vendor/supplier selection, contract negotiation and contract management i

28 Next Back Module 2 Unit 2: Procurement chain management Unit 2 7 Procurement management Sourcing 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 Sourcing risk High Spend BottleneckCritical RoutineLeverage

29 Next Back Module 2 Unit 2: Procurement chain management Unit 2 10 Procurement management Inventory 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)

30 Next Back Module 2 Unit 2: Procurement chain management Unit 2 11 Procurement management Inventory 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 order R – annual demand in units (quantity of raw materials necessary for generation of one unit of energy) P – purchase cost of one unit F – annual holding cost (fraction of unit cost) [PF = holding cost per unit per year] t he 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

31 Module 2 - QUIZ Unit 2: Procurement chain management Question #1 Question: Procurement chain starts from Options Select 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 AB C

32 Module 2 - QUIZ Unit 2: Procurement chain management Sorry, Your answer is incorrect! Please try again

33 Module 2 - QUIZ Unit 2: Procurement chain management Congratulations Your answer is correct! Go to next question

34 Next Module 2 Unit 3: Production chain management Unit 3 1 Energy 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 producersEnergy producersBiofuels 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 Back to Module content

35 Next Back Module 2 Unit 3: Production chain management Unit 3 2 Production 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 InputsTransformation process Outputs Continuous EnvironmentFeedback information Men Materials Machines Information Capital Product design Process planning Production control Maintenance Products Services Inventory Quality Costs

36 Next Back Module 2 Unit 3: Production chain management Unit 3 3 Continuous production system Production 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 i Conditions Advantages 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

37 Next Back Module 2 Unit 3: Production chain management Unit 3 11 Management 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 i Reactive maintenance Preventive maintenancePredictive maintenance Maintenance 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

38 Next Back Module 2 Unit 3: Production chain management Unit 3 12 Management it is important to rank the plant units by failure consequence using four levels of their impact on production and safety i Maintenance management LevelProduction consequencesSafety consequences Level 1 Failure causes an immediate and significant production loss Failure causes an immediate and high risk safety hazard Level 2 Failure causes an immediate but low production loss Failure causes an environmental pollution hazard Level 3 Failure causes a potential production loss Failure causes a potential safety hazard Level 4 Failure causes no immediate or potential production loss Failure causes no safety hazard

39 Module 2 - QUIZ Unit 3: Production chain management Question #1 Question: From the production chain management point of view, renewable energy manufacture sector is divided into: Options Select 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 AB C

40 Module 2 - QUIZ Unit 3: Production chain management Sorry, Your answer is incorrect! Please try again

41 Module 2 - QUIZ Unit 3: Production chain management Congratulations Your answer is correct! Go to next question

42 Next Module 2 Unit 4: Distribution chain management Unit 4 1 Distribution management Distribution 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 i 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 Back to Module content

43 Next Back Module 2 Unit 4: Distribution chain management Unit 4 7 Distribution management Matching 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 stockFlexible 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

44 Next Back Module 2 Unit 4: Distribution chain management Unit 4 9 Distribution management Distributed 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 i 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

45 Next Back Module 2 Unit 4: Distribution chain management Unit 4 10 Distribution management Distributed energy generation Central power plant Industry Commercial buildings Household Renewable source plant Grid National / Regional

46 Module 2 - QUIZ Unit 4: Distribution chain management Question #1 Question: Accurate demand forecast is important for: Options Select only one answer deliver the right quantities in a cost effective manner holding a large stock available set a much higher prices for energy AB C

47 Module 2 - QUIZ Unit 4: Distribution chain management Sorry, Your answer is incorrect! Please try again

48 Module 2 - QUIZ Unit 4: Distribution chain management Congratulations Your answer is correct! Go to next question

49 Next Module 2 Unit 5: Logistics and transportation Unit 5 1 Logistics Definitions 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 Back to Module content

50 Next Back Module 2 Unit 5: Logistics and transportation Unit 5 3 Logistics Logistics & 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 value Cost of ownership Value adding relationships Service quality Supply chain effectiveness Low cost supplier Reduced asset base Network management Marketing advantage logistics has an ability to influence on the benefit to costs ratio, both in terms of positive or negative impacts i

51 Next Back Module 2 Unit 5: Logistics and transportation Unit 5 7 Logistics Functional 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)

52 Next Back Module 2 Unit 5: Logistics and transportation Unit 5 10 Transportation Transportation 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 transportation Fixed costsVariable 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

53 Module 2 - QUIZ Unit 5: Logistics and transportation Question #1 Question: Supply chain management covers: Options Select only one answer procurement and distribution all logistics functions marketing and customer service AB C

54 Module 2 - QUIZ Unit 5: Logistics and transportation Sorry, Your answer is incorrect! Please try again

55 Module 2 - QUIZ Unit 5: Logistics and transportation Congratulations Your answer is correct! Go to next question

56 Module 3 - Business Next 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

57 Next Back Module 3 Unit 1: Risk analysis and management Unit 1 1 Definitions 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 companys 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

58 Next Back Module 3 Unit 1: Risk analysis and management Unit 1 2 SOAR 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 NO Right objectives & risks? YES NO Applied from: Monahan G. (2008) Enterprise Risk Management, John Wiley & Sons Hoboken, USA

59 Next Back Module 3 Unit 1: Risk analysis and management Unit 1 5 Risk 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

60 Next Back Module 3 Unit 1: Risk analysis and management Unit 1 6 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

61 Module 3 - QUIZ Unit 1: Risk analysis and management Question #1 Question: Risk management is: Options Select only one answer dealing with something wrong dealing with uncertainty dealing with natural disasters only AB C

62 Module 3 - QUIZ Unit 1: Risk analysis and management Sorry, Your answer is incorrect! Please try again

63 Module 3 - QUIZ Unit 1: Risk analysis and management Congratulations Your answer is correct! Go to next question

64 Next Module 3 Unit 2: Business process management Unit 2 1 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 focuss 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 process Back to Module content

65 Next Back Module 3 Unit 2: Business process management Unit 2 2 Business process classification Organizational Operational 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

66 Next Back Module 3 Unit 2: Business process management Unit 2 3 Levels of business processes Business strategyGoals Operational processes Organizational processes Implemented business processes determinerealize

67 Next Back Module 3 Unit 2: Business process management Unit 2 4 Business process managementDefinition 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 companys objectives through the improvement, management and control of crucial business processes

68 Back Module 3 Unit 2: Business process management Unit 2 6 Business process managementBusiness 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


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