Supply Chain Assurance Presentation
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SUPPLY CHAIN ASSURANCE
Transcript of Supply Chain Assurance Presentation
SUPPLY CHAIN ASSURANCE
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Supply Chain Responsiveness is Critical
• In 2012, CEH/SRI Consulting estimated that there were approximately 140 million pounds of annual excess domestic virgin activated carbon capacity in the U.S. and Canada.
• That same study projected demand growth to be over 600 million pounds by 2017 with 500 million pounds of the growth driven by developing demand for mercury capture.
• ADA Carbon Solutions estimates that demand growth by 2017 will be more moderate driven by further coal fired power retirements, advanced PAC products and alternative control technologies.
• However, even based upon conservative assumptions on demand growth, supply and demand balances are expected to be tight on an annual basis.
• The greater concern is associated with the seasonal and unpredictable nature of the demand along with a proliferating product mix. Source: CEH
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Seasonality and Product Mix Create Complexity
• Coal dispatch seasonality suggests a bi-modal peak where summer months could be more than 20% above the average. The implication is that even if on average the supply/demand balance is close, there will be periods where demand exceeds supply.
• Specialized carbon products are being developed in an effort to achieve optimal performance in specific flue gas conditions.
• Greater diversity of products creates more complexity in the supply chain. We are focused on mercury capture. This focus allows us to deploy a specialized manufacturing and supply chain approach that offers greater responsiveness/
• Some coal fired power plants will make most if not all of their profits in very finite period of time when electricity prices peak.
• It is critical that those plants can respond reliably at that critical time and they need suppliers who have the capability and commitment to deliver.
Responsiveness = Profitability
Jan Feb Mar April May Jun Jul Aug Sept Oct Nov Dec405060708090
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EIA Coal Consumption Data 2011 - 2016Est(Million Short Tons)
2011 2012 2013 2014 2015 2016
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Typically, On Site Storage Capacity is Not Sufficient
• The factors that will influence the actual timing and location of these peak demand periods are highly uncertain (weather, gas prices etc.) and anomalies can be geographically biased (polar vortex, e.g.).
• Even if your plant is a base-load plant and will not operate with seasonal variation and even if the product mix across your fleet is simple, these challenges will impact each supplier and therefore could impact you.
Due to the low density of activated carbon and the need to store it in an enclosed environment, many plants will have less than 2 weeks of on-site storage during peak demand periods.
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Other Supply Chain Strategies and Associated Limitations
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Strategy LimitationsDevelop Accurate Demand Forecasts Demand will be impacted by many uncertain and uncontrollable factors. In our interviews
with multiple EGU plants, demand is highly uncertain and will remain so until these plants gain a few years of operating experience.
Excess Reserve PAC Production Capacity PAC production capacity is very expensive. Since capacity payments are not standard in this industry, PAC Producers will be economically motivated to sell available capacity.
Multi Vendor Sourcing In a short or tight market, everyone will have limited available capacity which means that if one supplier is short, it is unlikely that the other will be able to respond to additional demand. Furthermore, we believe that the best solution is an integrated and collaborative supply chain strategy. Multi-vendor sourcing makes these strategies harder to execute and it diminishes the leverage you have with your preferred vendor.
Carry Excess Finished Goods Inventory This seems like the obvious strategy and although we would also advocate for it as an element of any supply chain strategy, it is highly vulnerable to demand forecast accuracy. If the forecast on what plant and therefore what product will peak and when and also where is not accurate, you may find that there is plenty of total inventory in the network, but it is the wrong product or is in the wrong place. If the inventory storage capacity is dependent on trailers or railcars, this can exacerbate the problem creating a shortage of transportation assets.
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Our reputation in the EGU industry is ALL that matters to us
EXPERTISE
We are keenly aware of your service expectations and have built the capability to meet them
RELIABILITY
There is no confusion about where our priorities lie when things get tight. For some… the mercury capture market is one of several competing priorities… for us is our core strategic focus
COMPLIANCE
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RELIABILITY IS OUR MIDDLE NAME
Expertise. Reliability. Compliance.
We Are 100% Focused On The EGU Industry
Why Should That Matter?
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RELIABILITY IS OUR MIDDLE NAME
Expertise. Reliability. Compliance.
Our Strategy is Multi Faceted and Involves
Assets, Processes and People• We are vertically integrated into our core raw materials.
• We control our own transportation assets.
• We only produce mercury carbons which aggregates inventory and reduces priority conflict.
• We operate two separate facilities and have developed a variety of redundant systems, lift capacity and contingency plans to assure supply reliability.
• We have a focused Customer Relations group that engages the customer proactively in a contemporary S&OP process.
• We forward deploy inventory through transload stations which positions inventory close to the customer providing greater security and responsiveness.
• We have developed a proprietary manufacturing and supply chain strategy that enables unparalleled RESPONSIVENESS. WE CAN GO FROM ZERO FINISHED GOODS INVENTORY TO SHIPPING MATERIAL TO YOUR PLANT WITHIN 48 HOURS!!!
RECOMMENDATIONS
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Take Time to Inspect the Capability to Deliver What you Expect
Although it is tempting
to assume supply
security is a “given”,
recognize that the
most significant
distinctions between
vendors may be in
their commitment and
ability to execute
reliably.
Develop a thorough due diligence process and checklist that includes a full assessment of the supply chain strategy. Assess exposure to 3rd party raw material or
technology providers. Assess transportation asset control. Is the
finished goods inventory strategy highly dependent on transportation assets? If it is, what are the potential implications?
Assess operational continuity effort including investments in preventive maintenance. Ask for on stream time and assess redundancy/contingency plans.
Visit the plants, meet the people and assess first hand the capability of considered vendors
Recognize that your supply could be impacted by other customers or industries. Ask what percentage of total revenue will be represented by the EGU industry. Assess the product mix and portfolio of prospective vendors and how this could affect supply chain responsiveness.
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SUMMARY
• The supply demand balance combined with anticipated demand volatility and product mix imply likely supply challenges.
• Supply assurance should become a significant part of the supplier evaluation and PAC procurement strategy.
• ADA Carbon Solutions welcomes the opportunity to describe our approach in greater detail and would like to invite you to our facility in Coushatta, LA to assess first hand our commitment to reliability.
Supply Chain Assurance
