John Biogreen: Supply Chain Improvement

Abstract

In April 2016, Pratchya Sae-Ngo, director of logistics of NK Energy (NKE), faced a challenge regarding the supply chain of the company’s newly-acquired biomass power plant, John Biogreen (JB), which was in a dire situation since the total supply chain cost accounted for more than 90% of its revenue, significantly higher compared to their first plant. NKE was a small power producer (SPP) located in Nakhon Pathom province. The company operates an 8MW biomass power plant with rice husks as the main fuel. In 2016, they decided to acquire JB, which is a biomass power plant located in Suphanburi and that has similar technical specifications, yet the performance of JB is relatively lower. They discovered that the failure of JB was a result of its poorly-designed supply chain. On average, JB has higher material costs than NKE and a lower than average inventory level. Thus, Somchai arranged for Pratchaya to redesign the supply chain of JB. His objective was to reduce the supply chain cost and to ensure continuous feedstock. After analyzing the supply chain of JB, Pratchaya found that the problem lay in its small supplier base, insufficient inventory, and low flexibility in transportation. There were several alternatives in solving those issues and Pratchaya had to analyze and combine them in order to create a new supply chain for JB. He only had 2 months to finalize his new supply chain design before the quarterly meeting of the company, which was to be held on June 1, for approval since the implementation of the redesigned supply chain had to be completed before the next harvesting season.