The economic downturn of 2008/9 saw many industries streamlining their operations and reassessing their cost and profit centres.
IceTech took the opportunity to conduct a complete review of the dry ice production market to understand if there are significant opportunities to generate improvements to the basic economics of the dry ice industry.
The goal was to deliver solutions that have optimum impact on profit contribution for market leaders in high volume ice production facilities.
IceTech’s benchmark study on the status of the industry revealed a significant gap in three key areas: the equipment procurement process; equipment design, performance, and efficiency; maintenance and support processes.
The common procurement strategy was found to be overly focused on the equipment’s initial capital costs. While investing as little as possible seems to be a no brainer, the facts of IceTech’s finding showed that such a focus is actually misplaced.
“Our evaluation of the true cost driver points to an overwhelming need to shift the evaluation from short term capital cost savings to long-term true costs of ownership over the lifespan of a machine, combined with a view to optimise the profit contribution the acquisition could make to the business,” the company says.
The primary drivers of profit contributions were confirmed as:
**Reduce and/or eliminate waste CO2
**Minimise the production equipment’s impact on the recovery system
**Optimise labour content
Data derived from the study clearly demonstrated that depreciation (and hence CapEx or the capital cost of the ice plant equipment) is among the lowest impacts on the future profit contribution potential of an investment in a high volume ice plant.
Sound asset acquisition decisions must obviously be based on credible facts rather than empty claims or just habitual practices. The pervasive lack of access to credible information and a benchmark process for producing ice at the lowest cost per tonne is hindering companies from making objective purchasing decision.
Recommendation: Shifting to a TCO model
Many companies need to first embrace the concept of the total cost of the ownership (TCO) model and then develop a set of key performance indicators (KPI) which highlight real and practical solutions that will improve their plants’ actual cost structures, flexibility, and consequently profitability and competitiveness.
A case in point is: a significant number of dry ice plants don’t capitalise on the opportunity of recovering waste CO2 simply because they want to avoid investing in the cost of acquiring a recovery system.
This, despite most successful ice plants having ample cash flow and access to low cost investment capital. Our review demonstrates the cost of running a recovery system can be as low as $30 per tonne of CO2 – much less than the cost of buying additional gas.
Recommendation: Align equipment selection criteria to overall company strategy
Establishing a clear industry benchmark on cost structure helped IceTech design production equipment to help lower the true overall production costs per tonne, by attacking the following key parameters:
**Predictable maintenance costs and downtime periods
**Increasing the mean time between maintenance periods
**Flexible production systems
To deliver on the market demands, both overt and latent, requires a production and distribution set-up that is tightly aligned to these strategies. Such a production strategy is centered around a goal of becoming the lowest cost producer by following a logical strategic order.
With the goal of reducing key cost drivers, while at the same time increasing flexibility in the ice plant, IceTech adopted a customer centric innovation approach offering strong value propositions. The outcome of the Customer Centric Innovation project was an array of innovations, industry firsts and patents specifically aligned to the goals of the leading dry ice producers.
Foremost among the innovation process was the effort to reduce waste CO2 by improving the conversion ratio. This was achieved with the use of advanced heat exchanger technology, producing harder ice but more importantly, with a higher conversion ratio the demand on the recovery system is substantially reduced – translating as solid operating cost reductions.
Start-up waste, typical of the cool down cycles on open chamber systems, has also been completely eliminated by utilising a unique closed chamber technology which allows the gas that circulates through the chamber during the start cycle to be fully recovered.
Reduced Energy Consumption was accomplished by employing dynamic hydraulic systems which are responsive to the ever changing pressure/volume demands of production. Coupled with the an array of sensors, this system ensures a highly synchronized machine tuned to optimise power consumption and faster cycle times.
Revert gas back-pressure intolerance is a source of constant issues in most ice plants. The latest innovations mean IceTech’s family of pelletisers functions perfectly up to a full bar of back-pressure, and half a bar on the slice machines.
High back-pressure tolerance eliminates the need for a balloon and more importantly even eliminates the need for a first stage low pressure pump in most recovery systems. Once again, this reduces the overall system costs both at the asset level, and the overall operating cost.
Recommendation: Evaluate maintenance and production support programmes
The industry review yielded numerous cases where quality equipment suppliers and responsible ice plant operators were totally at odds with each other over maintenance and support. Naturally the result was missed deliveries and high maintenance costs for the operators and an acrimonious relationship for the equipment supplier.
Dry ice production equipment, like any other highly engineered machine which runs in extreme conditions, can only run reliably if a Robust Preventive Maintenance Programme is solidly in place.
With staff turnover and the complexity of modern equipment, not to mention a range of priorities that always trump equipment maintenance, a strong system must be in place which supports and reinforces discipline. IceTech’s maintenance programme includes a rigorous preventive maintenance programme, Training And Certification Programmes, Constant Real Time Online Monitoring and Support, On-Site Evaluation and Maintenance Planning. IceTech can continously monitor any machine’s conditions from the central monitoring centre via a real time connection.
IceTech notes that its study ‘strongly suggested that the industry is in need of equipment that better supports profit maximisation goals’.
“But after years of living with the same technology,” the company claims, “the industry has settled on using price as the main benchmark in the procurement process. Herein lies the need for a paradigm shift, companies can start improving their equipment investment decisions by: defining clear strategic goals for the enterprise; aligning the asset acquistions process to those goals; establishing a clear understanding of the true cost drivers; embracing TCO.”
From the knowledge base developed from its case studies, IceTech has developed a thorough cost and profitablity benchmarking process which evaluates an ice plant’s current status and provides a roadmap of best practices where profitability can be increased measureably.