Improving

Strategy of
Biomass Sourcing
Supply Chain Innovation

in BOO Scheme
Summit 2021

Briant Silvano, CSCA-Procurement & Strategic Sourcing

Professional
TOPIC DISCUSSION

 Introduction
- BOO Biomass Project in Indonesia
- BOO Biomass Project & Problem Statement
- Five Forces Porter of BOO Biomass Project
- Strategic Sourcing Gemstone of Biomass Project
 Potential Biomass in Indonesia
 Supply Chain Rice Husk
 Strategic Sourcing of Biomass

Supply Chain Innovation Summit 2021

 INTRODUCTION
Supply Chain Innovation Summit 2021
BUILD OWN AND OPERATE (BOO) BIOMASS PROJECT IN INDONESIA

Operational Purpose :
Operate Biomass Boiler
to generate steam for
inhouse production
process and get cost-
saving

Strategic Purpose :
Become Carbon Neutral
Company in 2050 by
reducing carbon
footprint emission by
using biomass fuel

Biomass Fuel :
Source:
From rice husk, corncob,
https://www.solopos.com/pabrik-di-klaten-ini-bangun-fasilitas-
PKS, wood residue, etc.
khusus-untuk-kurangi-dampak-perubahan-iklim-1121358

Supply Chain Innovation Summit 2021

 BUILD OWN OPERATE (BOO) BIOMASS PROJECT

Supply Biomass Fuel

Biomass Fuel 3
Supplier

Supply Biomass Boiler

1
2 MNC’s
Client CLIENT
Biomass Boiler
Boiler Biomass
4 Contractor  Replace Fossil
Steam Heat for Fuel with Biomass
production process Fuel to reduce
Supplier
Supplier  Design & Purchase Biomass Boiler BOO for > 10 years contract
carbon footprint emission
based on Client requirement  Generate Green Energy (steam or electricity)
 Construction Biomass Boiler Facilities for inhouse production process
: Supply at Client’s location  Create PPA / SPA with Contractor to supply
: Demand  Operate Biomass Boiler Facilities Green Energy for 15-20 years contract (BOO)
 Sourcing & Supply Biomass Fuel  Payment based on green energy consumed by
Supply Chain Innovation Summit 2021 Client
 BUILD OWN OPERATE (BOO) BIOMASS PROJECT
Problem Statement
“How to secure biomass supply (price &
qty.) for Client in 15-20 years ?”

Supply Biomass Fuel

Biomass Fuel 3
Supplier

Supply Biomass Boiler

1 Client CLIENT
2 MNC’s
Biomass Boiler
Boiler Biomass
4 Contractor  Replace Fossil
Steam Heat for Fuel with Biomass
production process Fuel to reduce
Supplier
Supplier  Design & Purchase Biomass Boiler carbon
BOOfootprint emission
for > 10 years contract
based on Client requirement  Generate Green Energy (steam or electricity)
 Construction Biomass Boiler Facilities for inhouse production process
: Supply at Client’s location  Create PPA / SPA with Contractor to supply
: Demand  Operate Biomass Boiler Facilities Green Energy for 15-20 years contract (BOO)
 Sourcing & Supply Biomass Fuel  Payment based on green energy consumed by
Client
Supply Chain Innovation Summit 2021
 CHALLENGE OF THE BOO BIOMASS PROJECTS IN INDONESIA
• # of BOO players is low (< 5)
• Competitors are using
similar strategy
• Industry growth is high
• Barriers to exit is high
 # of Rice Mills with rice husk output > 25 tpd
and continuous production are limited
 # of Wood Factories with FSC & SVLK are
limited
 # of boiler suppliers with international stdr.
required by Clients are limited
Supply Chain Innovation Summit 2021
Five Forces Porter of BOO Biomass Projects:
1. Rivalry Among Existing Competitors is Low
• Barriers to entry is high 2. Threat of New Entrants is Low
• Economies of scale is high
3. Threat of Substitute Service is Low
• Cumulative experience is high
4. Bargaining Power of Suppliers is High
• Government and company policies is
support the business 5. Bargaining Power of Buyers is High
• Capital requirements is high
• Boiler Supplier didn’t have knowledge
& experience in Biomass Sourcing
BARGAINING POWER OF BUYERS
• Number of clients that aware with
green energy is high, especially MNC
• Price sensitivity is high
• Buyer’s ability to substitute is high
• Buyer’s information ability is high
Summary:
THREAT OF SUBTITUTE SERVICE
• Direct purchase of Biomass Boiler gives  The BOO Biomass Project in Indonesia is a very
THREAT OF
financial and technological risk for Client attractive business because so many companies
SUBTITUTE • Client need to have a good knowledge and (MNC) have been starting this business to reduce
SERVICE experience in Boiler and Biomass Sourcing carbon footprint and also reduce their production
• Biomass sourcing process is complicated cost by replacing fossil fuel with renewable energy
(biomass, solar, etc.).
 One of the critical factors in this business from the
Five Forces Porter is the Bargaining Power of
Suppliers, especially from Biomass Supplier
STRATEGIC SOURCING GEMSTONE
Kraljic Matrix
High
LEVERAGE MATERIAL STRATEGIC MATERIAL
Direct Material Direct Material
: Packaging material : Raw material
- Best price evaluation - Strategic Partnership

(PROFIT IMPACT)
IMPORTANT
STRATEGIC
ROUTINE MATERIAL BOTTLENECK MATERIAL
Indirect Material Indirect Material
: Stationeries : OEM
- Decrease transaction cost - Ongoing relationship w/
existing suppliers
- Process efficiency by
reducing clerical activities - Process efficiency by
(automation) subtitutes material / suppliers
Low High
DIFFICULTY (SUPPLY RISK)

MADE VS BUY STRATEGY FOR BIOMASS SUPPLY

“When we decided made or buy biomass fuel ?”

Supply Chain Innovation Summit 2021

POTENTIAL BIOMASS IN INDONESIA
Supply Chain Innovation Summit 2021
BIOMASS IN INDONESIA

Rice Husk Specification

• Caloric Value : 3000-3100 Kcal/kg
• Moisture Content : < 20%
• Ash Content : 20-25%
• Density : 0,123

Supply Chain Innovation Summit 2021

 PADDY HARVEST SEASON IN INDONESIA

Panen Raya (National Harvest)

 In March
 High MC
 Planting from Early Rainy Season (Nov-Dec)

Panen Gadu (Gadu Harvest)

 In July
 Low MC
 Planting from End of Rainy Season and
Early Dry Season (April-May)

Source: https://bps.go.id/
Panen Kecil (Small Harvest)
 In October
 Low MC
 Planting from Dry Season (Aug.-Sept.)

Dried Paddy (GKG) Husker Process Rice Husk

MC max. 15% (20% of GKG)
RICE HUSK IN INDONESIA
Rice Husk Year 2020
(in million Ton)
Region Husk % 2,3
Java 6,2 56%
0,5
Sumatera 2,3 21%
Sulawesi 1,4 12%
Kalimantan 0,5 5% 1,4 0,0 0,0

Nusa Tenggara 0,4 4%

Bali 0,1 1%
Papua 0,0 0% 6,2
Maluku 0,0 0% 0,1 0,4
Total 11,0 100%
Source: https://bps.go.id/

Rice Husk in Java

• Paddy production (GKG) in Java estimated around 31 million ton and can generate rice husk 6,2 million ton per year
• East Java is the biggest paddy production in Java with paddy production 10 million ton and it can generate rice husk 2
million ton per year. Mostly big Rice Mills are located in East Java because more closer with the paddy source
• Paddy production in Central Java is in the second position (9,5 million ton) and followed by West Java (9,2 million ton) in
the third position. Rice Husk output in Central Java 1,9 million ton and Rice husk output in West Java 1,8 million ton

Supply Chain Innovation Summit 2021

SUPPLY CHAIN RICE HUSK
Supply Chain Innovation Summit 2021
SUPPLY CHAIN RICE HUSK IN INDONESIA

Client
Rice Mills

Supply Biomass Fuel

Loading and Delivery Process

 Small trucks arrive at rice mills location
 Rice Mills generate rice husk in daily production
 Manual loading rice husk using bags or loose form in the small truck by
labors
 Small truck (22-24 CBM) loading capacity for rice husk 3-4 ton
 Bagging and loading process of rice husk into small trucks by labors
need 5-6 hours
 Small truck will cover with tarpaulin to protect rice husk from water
contamination during the delivery
 Small truck deliver rice husk to the Client Site directly
Unloading and Storage Process
 Small trucks arrive at Client’s location
 Manual unloading rice husk from the small truck by labors
 Labors open the bags and put out the rice husk
 Unloading process of rice husk in small trucks by labors need 2-
3 hours
 Dozer will tidy up the rice husk in the storage room
 Rice husk stock will maintain for few days as a buffer stock
depend on the actual rice husk demand in the Client’s site

Supply Chain Innovation Summit 2021

SUPPLY CHAIN RICE HUSK CONCERN

ADVANTAGEOUS
• Supply is abundant, especially in Java (56% of total RH in Indonesia)
• Available in rice mills every day
• Suitable biomass with Caloric Value is 3000 – 3100 Kcal/kg, Ash
content 20%, and MC < 20% VS
• Rice husk average price is cheaper (USD 7-10 /ton, ex-works)
compare with another biomass. Increase stock quantity at buffer
stock storage

DISADVANTAGEOUS
• Manual bagging, loading, and unloading rice husk on truk (3-4 ton)
need more time
• Labor cost for bagging, loading and unloading using are expensive and
not standard VS
• Transportation not efficient => High volume, but light
a. Small truck 3-4 tpd @ IDR 500K (USD 11-12/ton). Distance 20-30 km Reduced number of trucks and
b. Big truck 12 tpd @ IDR 2 mio. (USD 11-12/ton). Distance 20-30 km increased loading capacity of truck

• Mostly Rice Mills in Indonesia are small scale and spread out
a. Not centralized in one location
b. Rice husk supply from small and medium rice mills < 24 tpd
b. Difficult to access with big truck

Supply Chain Innovation Summit 2021

RICE HUSK COMPETITION

Rice Mill BOO Client

Contractor

Rice Husk Other

Rice Mill
Trader Business

RICE HUSK TRADER / COLLECTOR

• Local people who will buy rice husk from rice mills and sell rice husk directly to the other business (chicken farm, traditional
brickmaker, flower farm, feed mill, cement factory, etc. )
• Rice husk trader usually has a family relationship with rice mills owner
• Purchase rice husk by cash advance from rice mills based on rice husk price on the market or even higher
• Manage rice husk supply from labor, truck and bags
• Profit margin earned around USD 1-6/MT. Higher margin can be earn by Rice Husk Trader in paddy harvest season (RH over
supply)
STRATEGIC SOURCING OF BIOMASS
Supply Chain Innovation Summit 2021
STRATEGIC SOURCING OF BIOMASS

Site Visit Selection Contract Supply & Evaluation

Desk Study Partnership
• Visit Rice Mill location • Create List of Potential • Periodic evaluation in
Collecting and Analysis • Collecting Rice Mills Rice Mills • Preparation Contract Monthly and Yearly
External data, literature data • Select Potential Rice • Negotiation Contract • Create continuous
& maps to get potential Mills for supply RH improvement
rice husk data and also • Offering RH • Finalized Contract
Partnership only
Rice Mill location
• Record Rice Mills data • Select Potential Rice
Mills for strategic
partnership

Supply Chain Innovation Summit 2021

STRATEGIC SOURCING OF BIOMASS

Input:
01. DESK STUDY OF BIOMASS 1. External data
2. Literature Review
3. Maps

Result:
1. If potential rice husk available at near
Client’s location is sufficient, we shall use
rice husk as a main biomass fuel
2. If potential rice husk available at near
Client’s location is not sufficient, we shall
looking for an alternative biomass fuel in
that location as a mixed fuel with rice husk
3. If Client’s demand for biomass fuel more
than 30% from total available biomass in 50-
100 km distance, we shall consider to build
energy farm to secure biomass supply for
long term (Made Strategy)
4. Biomass fuel composition will impact to
Rice Mill location and estimated rice husk available at near Client’s location
boiler design
5. Record all data in the Desk Study
Information
Supply Chain Innovation Summit 2021
STRATEGIC SOURCING OF BIOMASS

02. SITE VISIT 03. SELECTION

Input:
1. Desk Study Information
2. Observation in the field
Result:
1. Meeting with rice mills owner or biomass suppliers
2. Production process (yearly and daily)
3. Production capacities of paddy or another biomass (tpa, tpd)
4. Rice husk or alternative biomass output (tpa, tpd)
5. Rice husk alternative biomass price (Rp/ton)
6. Rice mill or biomass supplier facilities condition (machine,
access road, storage, etc.)
7. Identified competitors of rice husk or alternative biomass
buyer near that location
8. Distance to Client’s site
9. Openness for the cooperation of rice husk or alternative
biomass supply
10. Record all data in the Site Visit Information
Input:
1. Site Visit Information
2. Biomass partnership strategy (one strategy can’t
fit all)
Result:
1. Calculate Biomass Cost from each rice mills
(include transport and unloading at Client’s Site)
2. Create list of biomass supplier into two categories
: Strategic Partner and Biomass Supplier
3. Strategic Partner. Develop partnership to secure
rice husk supply for long term (15-20 years)
4. Biomass Supplier for purchase biomass fuel for
short term (< 1 year)
5. Record all data

Supply Chain Innovation Summit 2021

STRATEGIC SOURCING OF BIOMASS

04. CONTRACT SUPPLY & PARTNERSHIP 05. EVALUATION

Input:
1. List of Strategic Partner Biomass
2. List of Biomass Supplier
Result:
1. Draft contract supply biomass for strategic partners, include
development plan for strategic partnership
2. Draft contract supply biomass for Biomass Supplier
3. Negotiate the contract with strategic partners and biomass
supplier (commercial and technical)
4. Finalized the contract
Input:
1. Contract Supply & Partnership
Result:
1. Periodic evaluation based on actual performance
and contract (Monthly and Yearly)
2. Create Continuous Improvement based on periodic
evaluation :
a. Process efficiency by technology implementation
b. Avoid plastic waste during the process
c. Reduce, Reuse, and Recycle waste from Biomass

Supply Chain Innovation Summit 2021

Summary 0 Strategic Sourcing of Biomass will secure biomass
supply for long term
1

0 Energy Farm shall prepare if biomass demand from Client’s

is more than 30% from biomass available at distance 50-
2 100 km (Made Strategy)

Supply Chain Innovation Summit 2021

BRIANT SILVANO, SE., MM, CSCA

Mobile : +6281291052868
Email : briantsilvano@gmail.com
LinkedIn : linkedin.com/in/briantsilvano

 Biomass Business Development consultant in Indonesia

 Procurement consultant, trainer & speaker in Indonesia and Asia
 Procurement and strategic sourcing professional with extensive years of experience in
managerial level at renewable energy company in SE Asia and food manufacturing
company in Indonesia