This is the first part of our new series on facility planning. While the current crisis has waylaid the timelines of many projects across the country and the world, one of the tangible and extremely impactful processes your team can go through now when starting or scaling an industrial scale extraction business is facility design. We hope this series is informative, interesting, and above all, helpful. If you are interested in learning more after the the piece, contact us here. Have facility planning questions? Our next Webinar on Thursday the 23rd is the place to ask them.
By Emmett McGregor, SciPhy Systems CEO
The Hemp Processing industry is reaching a fever pitch of competition, as hemp ingredient prices have fallen substantially while the number of competitors has risen. Yet, as the major brands of the world still wait on the sidelines we can be sure that there is still a huge opportunity to get into the business with both strong upfront revenue and powerful growth potential. As the founder of a new hemp processing startup, division, or even an operator charged with scaling their business, the challenge of choosing priorities and especially budgeting a new facility is daunting to say the least.
While it may be tempting to build a tidy spreadsheet with Capital Expenditure in the front, and a simple cost model buried in the back, gone are the blue sky days of fat enough profit margins to ignore year 3 4 and 5 of your business. Winners and losers in the hemp industry will be decided by marginal cost of manufacturing, with your ability to control prices and adapt to market forces determined fundamentally by your Operating Expenditures.
Crushing down Op Ex should be the single greatest priority of any hemp industry business. If your cost per kilo of ingredient produced is the lowest in the business, your chances of success are orders of magnitude higher than your competition. But, you might ask, out of the many factors contributing to Op Ex, which ones should I focus on most? And what are the hidden costs that might catch me if I’m not careful?
First and foremost it is essential to recognize and embrace a simple truism: when your equipment isn’t running, you are losing revenue. Downtime is the single greatest “cost” your business will face, and so planning your processing facility to be both efficient and resilient is a must. The many details and nuances of routine maintenance planning, parts inventory, and built-in redundancy are challenging to grab ahold of if you aren’t intimately familiar with the equipment at hand, so we recommend that you employ experienced maintenance engineers or technicians with in-the-field knowhow on motor assemblies, vacuum systems, industrial controls, and cGMP protocols from day 1 of your facilities planning. Having an experienced voice in the room as you work with your equipment partners to build your custom fit processing plant will be invaluable, as every hour of downtime you prevent up front could save you thousands of dollars.
Now that you have a voice of experience in the room, what should you review? From a facilities and process design perspective it is essential to recognize that every seal, gasket, motor coupling, flange face, and any moving component in your system will eventually need to be disassembled and serviced. In each case, a decision must be made on whether or not that service will necessarily stop the operation of your system, or whether you will have built-in redundancy allowing for the bypass of that system. For example, you might choose to have a single process chiller to cool a given heat exchanger and shut down your entire plant while it is being serviced, or you could install two chillers with a built in bypass to allow one to take over when the other is being serviced or repaired. The same applies to pumps, compressors, filter housings, and even actuated valves. Each moving component in your system should be assessed for how likely it is to fail, how frequently it should be serviced to avoid failure, and whether it will need frequent changeout of parts as part of routine operation (such as filtration media). Combine this with the speed with which that component can be swapped out, and you can generate an order of priority for redundancy on your system. The more frequent downtime is expected on a given component, the more benefit built-in redundancy can give you.
What about those components that aren’t judged to be worth built-in redundancy? Well, you need to plan for on-the-shelf redundancy instead. Many specialty components such as pumps, and even some sensors, can take several weeks from time of order until delivery. You do not want to face a multi-week plant shutdown just because you didn’t buy a replacement ahead of time. Your components inventory could easily make or break your business, and it is almost certainly less expensive to purchase replacement components up front for your inventory rather than suffering downtime while you wait on expedited delivery. When building your budget for your facility startup, you should always account for a parts and components inventory as an up-front cost AND an ongoing Operating Expenditure. Spending more up-front on a higher quality component that will have less chance of failure, and need less frequent service, will often save you on both labor and equipment cost over the lifetime of your facility.
As the hemp processing industry matures, and demand for hemp derived ingredients stabilizes, the ROI tolerance of savvy businesses is sure to expand. More mature industries with narrow margins have been putting heavy investment into a new maintenance paradigm: Predictive Maintenance. While your standard production facility relies on maintenance schedules which replace components once wear becomes apparent upon regular maintenance checks, or on a regular replacement schedule, new technology is emerging applying cutting edge computation to monitoring the performance of equipment. The use of low cost sensors including microphones and vibration sensors, computer vision, and heat monitors are deployed throughout a facility so that minute changes in the sound of motors, the temperature of mechanical seals, and other indicators can feed Machine Learning and AI systems. These algorithms can now reliably predict mechanical failure at these points so that your maintenance team can be deployed to replace or service specific components when, and only when, they need to be serviced. This is a huge leap forward in downtime reduction, and can also lead to reduce costs of materials and labor for the operator. We at SciPhy Systems are closely monitoring these developments and look forward to the opportunity to deploy them into forward looking Hemp Processing facilities in the near future.
Next time in our series on Facility Planning with Operating Expenditures in mind we will take a look at Labor Cost and the potential savings of Process Automation.
WEBINAR: "Processing Facility Planning for Professionals"
April 23rd: 1PM - 2:15PM Pacific Time