Logistics

 

The strategy of this venture is to become a vertically integrated producer and supplier of biofuels. As previously mentioned, food waste from supermarkets across the country (including Tesco, Sainsbury’s Morrison’s and ASDA) will be processed in into biofuels in UK located refineries. The primary intention is to build our own refinery (at a cost of £90 million), located next to the companies largest national distribution centre in Daventry, Northamptonshire, which is itself already partially run on biofuels [1]. This location was chosen due to its centrality within the UK and the concentration of Tesco related traffic that it receives. Until this refinery is built the company will use the refineries of its partner company Greenergy, and in return will allocate them 40% of the profit generated. We predict that this original plan, which we call stage 1 will last for 2 years, after which we will move to, and begin our operations from our Daventry refinery, stage 2.

 

After debating whether to specialize in either bioethanol or biodiesel, we have decided that Tesco should provisionally produce both forms of fuel. As Figure 7 shows the current production in the UK is 60.5% bioethanol and 39.5% biodiesel, so there is no particular niche market, and both fuels are increasing exponentially [2].

 

The company will use the same process of conversion that British Airways uses in their new biofuel jet plant [3]. The refinery will convert the waste matter into BioSynGas, which will then undergo the Fischer Tropsch (FT) chemical process to convert the gas into biofuel. The FT process is also used commercially by Linc Energy and Shell’s Pearl GTL facility in Qatar [4].

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The above diagram shows the transformation that the food waste, in the form of biomass will take.

 

With the predicted 60,000 tonnes a year of biomass input from Tesco alone, we are working out that in total we will be able to accrue 300,000 tonnes of waste. We come to this figure by times our own tonnage by 4 (representing Figure 3s market share of which we have 28.7% and assuming that smaller stores with less frequent turned around will produce a larger proportion of waste) and adding a further 60,000 to be obtained through customer provisions, which can be obtained by offering them a percentage discount from their weekly shop if they bring their unused food waste.

 

The FT process provides a predicted relative weight conversion of 30% [5], which will give 90,000 tonnes of fuel. Previous information has estimated that 1 ton is the equivalent of 31.75 gallons of US automotive gasoline [6]. This estimates that annually the refinery will be able to produce 2,857,500 gallons of biofuel (which also scales in a similar fashion to the BA plant which aims to convert 500,000 tonnes of waste annually into 16,000,000 gallons of fuel [7]).

 

For retail purposes the refinery will produce 12,990,452.175 litres of biodiesel (where a ton is 4.54609 litres) which for calculation purposes we will round down to 12.88 million due to potential losses, and the fact that this number account for 70% of Greenergy’s current production capacity.

 

With the current retail price of the fuel being £1.09 (Biofuels, 2015) Tesco would be making revenues of £14,039,200 while if we undercut all of the current competition (which we can because of our significantly lower input costs) and sell the fuel at £1.00 we would turnover £12,880,000.

 

 

REFERENCE:

[1] http://www.ipt.org.uk/mp-visits-tescos-largest-distribution-centre.aspx

[2] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/266090/ecofys-uk-biofuel-industry-overview-v1.5.pdf

[3] http://news.bbc.co.uk/1/hi/8515620.stm

[4] http://www.upstreamonline.com/live/article1149671.ece

[5]http://ihome.ust.hk/~keclin/publication_update/2012_Food_waste_as_a_valuable_resource_for_the_production_of_chemicals_materials_and_fuels.pdf

[6] http://www.convertunits.com/from/gallon/to/ton

[7] http://news.bbc.co.uk/1/hi/8515620.stm

[8] http://www.upstreamonline.com/live/article1149671.ece