The playbook for outputs

Background

After input and process technology adoption projects are in place, the risk of overspending on end-of-pipe technology is reduced. Most of the items are, however, best management practices (BMPs) that can be adopted concurrent to input and process BMPs. Before you invest in a high capital project like an anaerobic digester or new wastewater treatment technology, make sure your process is optimized. End-of-pipe technologies are generally scale-sensitive. With that scale comes a minimum and maximum capacity. Just as co-generation systems may be forced offline when energy demand falls below its minimum performance capacity, some end-of-pipe technologies fail at their minimum or maximum operating level.

Problem 1: waste generation

Waste is a non-productive output. Its cost is more per disposal than the approximate $100 per tonne it costs to landfill. Noise embedded in waste at packaged food processors costs between $700 and $1,200 per tonne. Noise embedded in waste at primary food processors may be less, ranging between $200 and $700 per tonne. Solid disposal through wastewater exceeds $1,000 per tonne for just biological oxygen demand (BOD) charges. These figures are based on food waste studies by Provision Coalition and estimated costs provided to the Ministry of Agriculture, Food and Rural Affairs (OMAFRA) by food processors.

Solutions

Consider automated BOD metering

Most municipalities have bylaws that link surcharges to wastewater discharge when contaminant levels exceed certain limits.

Food processors’ sewer surcharges often range from 3–20 times the cost of their sewer charges. Across Ontario, most municipalities charge between $1.00 and $1.20/m³ of assessed sewer use, with surcharges in addition to that cost. These surcharges will also drive municipal orders for corrective actions.

The Ontario company ManTech’s PeCOD Analyzer can automatically test potable water and wastewater in 15 minutes. The technology is accredited for wastewater testing. This Canadian-made equipment was tested by the Ministry of Environment, Conservation and Parks (MECP) and the Bloom Centre for Sustainability. The inline technology is as much as 20% more accurate than grab samples which may take a week to be tested. BOD increases in a sample over time. Immediate sampling is accurate. This technology has a 5-year simple payback where sewer surcharges for BOD exceed $50,000 per year.

Separate and recycle materials

Packaging, plastics and metals have a market. The return on these materials may not cover their embedded costs, yet the recycling market is one way to minimize the cost of disposal and divert materials from landfill. Partners in Project Green operates a waste exchange (a market which connects companies to materials recyclers who often pay for a product).

Separate and divert organics from landfill

Currently, about 20% of Ontario’s food residuals are diverted from landfill to bio-digesters (400,000 tonnes). Tipping fees for digestion are a fraction of landfill costs. Cornerstone Renewables, Wessuc and Walker Industries handle packaged (palleted) and bulk (liquid or solid) organics. It is one way to safely manage recalls, damaged returns and condemned goods.

Wessuc and Walker as well as Panda and Perth also provide waste hauling services that are linked to landspreading and composting. Food organics are not ideal for compost inputs as they attract vermin and smell. Similarly, landspreading of food organics is a constant source of complaints.

Problem 2: sanitation practices

Sanitation and food safety are inseparable. For example, COVID‑19 brought added sanitation cycles. Cost control is a challenge, especially during a pandemic. There are proven practices that both limit costs and ensure food safety.

Solutions

Meter sanitation water use

A lesson learned from sanitation cycle analysis in food plants is that water use can vary as much as 300% from day to day. In one case, a 3-person crew used hoses for 1-3 hours. Most days, it took that crew about 1.5 hours to hose down the process facility. The variance in cost for sanitation cycles ranged between $500 and $1,000 for labour, hot water and wastewater. The difference in the variance depended upon whether the crew squeegeed the floor or used hoses to chase material down the drain.

Raise sanitation hoses on overhead reels

Hoses off the floor promote:

• food safety (hoses on the floor are in contact with everything that hits the floor)
• worker safety (hoses on the floor are a tripping hazard and leaky hoses on the floor escape notice until the puddle they create becomes a slipping hazard)
• equipment integrity (tow motors flatten hoses and nozzles)
• leakage control (overhead leaks get noticed quickly)
• behavior management (with hoses out of the way, sanitation crews are more likely to choose squeegees when they are available)

Establish and follow up on sanitation protocols

Things to consider in a sanitation cycle include:

• sanitation achieving food safety requirements
• the cost of inputs such as water and labour being controllable
• avoiding sanitation cycles increasing sewer surcharges

Metering sanitation water provides one measure of management oversight. The greater impact of hose use is the practice of chasing material across the floor and down the drain.

The use of a sewer outlet for floor debris results in a cost of up to $870 per tonne ($0.87 per kg). Municipal sampling is often timed to the surge associated with sanitation cycles. Organic debris in sanitation wastewater generally exceeds average organic levels in wastewater. Sewer surcharges are based on a standard organic load of 300 ppm measured in BOD or chemical oxygen demand (COD).

Organic loads may rise above 3000 ppm BOD in sanitation cycles. At 10 times the allowable limit, the surcharge is raised 9 times the basic sewer charge. This can trigger a sewer surcharge of up to $26 per cubic meter on every cubic meter of wastewater.

At 3000 ppm BOD, the actual volume of organics in a cubic meter of water is 0.0333% (10 kg of organic waste per m³). Some confectionery plants have had BOD levels as high as 50,000 ppm (nearly 170 kg of organic waste costing $150/m³). Some craft breweries have had levels as high as BOD 20,000 (nearly 70 kg of organic waste costing $61/m³). Much of this load is from the water used in sanitation. Sanitation water can be up to 20% of overall water use in a food plant.

Ensuring that sanitation crews squeegee the floor and scoop materials into solid waste costs 10% of sewer surcharges. Weighing that collected waste at the end of a shift provides a running indicator of potential line problems.

Problem 3: considerations for carbon management

Cost-effective management of carbon and carbon-equivalent emissions begin with avoidance. Avoidable process-related emissions may account for half of the direct carbon dioxide (CO₂) and CO₂-equivalent emissions which a food processing facility can produce. Some process-related carbon reduction solutions require special equipment. Some solutions are the result of leaks, loss and efficiency upgrades. Some solutions use more costly energy sources, where cost becomes competitive when carbon taxes or the cost of carbon offsets are factors.

CO₂ emissions are directly produced by the combustion of fossil fuels. CO₂-equivalent emissions come directly from refrigerant leaks, volatile organic compounds (VOCs) released in baking, frying and fermentation or alcoholic beverage aging and from the methane released by organic waste and wastewater.

At present, carbon tax on fossil fuels (diesel, gasoline, natural gas and propane) drives the search for alternative and/or efficient technologies. Consumer demand, driven by retailers’ supplier expectations, favor competitively priced products with a documented lower carbon footprint. Federal environmental policy is also moving toward net-zero goals (the achievement of zero-carbon emissions by 2050.)

Provincially, Ontario has embraced the concept of circular manufacturing which is described as a sustainable carbon reduction path.

For Ontario’s food processors, there are concurrent and emerging streams that are linked to carbon and carbon-equivalent emissions reporting.

Ontario’s greenhouse gas reporting requirements

Ontario’s greenhouse gas reporting requirements apply to emitters of more than 10,000 tonnes per year of direct greenhouse gas emissions. Facilities that emit more than 50,000 tonnes of CO₂ from combustion or CO₂-equivalants from other greenhouse gases are defined as regulated emitters. Regulated emitters must reduce their emissions by 30% by 2030. Facilities which emit 10,000 tonnes of greenhouse gases per year may voluntarily participate in this program.

Canadian Net-Zero Emissions Accountability Act

In April 2021, the federal government proposed the Canadian Net-Zero Emissions Accountability Act. The proposed act has 5-year increments for emissions that would lead to a net-zero emissions target for the country by 2050. A subsequent announcement regarding a voluntary initiative for large emitters includes both an expectation for emissions reductions and offsets from sequestration (such as tree-planting) or carbon capture.

This regulation targets large (and regulated) emitters to start, meaning individual facilities that emit 50,000 tonnes or more of greenhouse gases.

Lifecycle accounting

Some retailers are interested in the lifecycle footprint of products which they offer for sale. Lifecycle accounting is more complex than emissions reporting for a facility. A lifecycle accounting is, in this case, based upon a product or product line. It includes the carbon footprint from processing and all input supplies, as well as the footprint to the retailer and end-of-life measures for things like packaging waste. In the European Union, cradle-to-cradle legislation for consumer products follows this same concept.

International Energy Management Systems Standard

Another related standard is the ISO-50001 International Energy Management Systems Standard. This is a standard for industry, commerce and institutional emitters related to the improvement of their energy performance. Natural Resources Canada has a program to support the adoption of this standard.

To offset the cost of carbon reduction, the process to create the paper trail and documentation for a salable carbon credit requires specific skill sets and services. The scientific rigor to create a credit is demanding. The creation process must include:

• a qualified third party must validate the proposed claim based upon actual measurements
• a different qualified third party must verify the measurement

Prior to 2018, validation and verification found an economy of scale where experts documented 10,000 tonnes of carbon emission reductions from a single source. The cost of this service ranged between $5 and $10 per tonne. Small and medium-sized food processors generally emit less than 10,000 tonnes of carbon from fossil fuel combustion. Even the total carbon and carbon-equivalent emissions from all sources in many food plants may not be more than 10,000 tonnes (from fuel combustion, refrigerant and VOC leakage and methane emissions from wastes).

Higher costs, consumer and retailer expectations and environmental regulations all point to gaps and the need for a competitive solution. Some of these gaps can be filled by:

• the development of easy-to-use national protocols for industry
• awareness of the steps to carbon reduction validation and verification
• cost-effective validation and verification service providers
• cost-effective offset aggregation services to extract value from smaller manufacturing companies
• markets that will purchase offsets at a price that warrants their creation

There is a path forward for manufacturers that does not involve the carbon market. How these regulations and standards affect a small and medium-sized enterprise (SME) food processor is a good question. The connection is in the common threads that link them.

Carbon accounting looks at:

• scope 1 emissions: Emissions created directly by a facility. This includes combustion emissions, fugitive emissions from refrigerants and VOCs and methane
• scope 2 emissions: Emissions embedded in inputs
• scope 3 emissions: Emissions that occur related to products and/or services directly from the transportation of goods and end-of-life emissions from products

As mentioned earlier, a carbon accounting process must be independently validated and then verified. The data needs to be gathered to be analyzed. This can be time consuming and expensive, unless a facility has systems in place to gather and organize that data as required. This is where best management practices that include sub-metering, Energy Management Information Systems (EMIS) and digital integration (DI) play a role. With these tools in place, SME staff and managers can drive cost and waste out of production. Those same skills are the building block for tracking the lifecycle impact of a facility.

Established volumes of energy, refrigerant, water, wastewater, ingredients, packaging, organic and packaging waste have coefficients for calculating greenhouse gas emissions. Provincial, federal and global standards may use different coefficients which can vary by the source of supply, year and the protocol. The key is to start at your facility level.

While there is no typical food processing facility, emissions are directly related to the equipment, processes and practices in use. This can be complicated when a business grows. Increasing output can quickly increase emissions where input, process and output efficiency control is absent.

Food processors can generally expect their carbon and carbon-equivalent emissions to come from the sources outlined in Table 9.

Proven solutions are based upon published case study evidence where actions have cost-effectively achieved.

Suggested solutions are based on the sequence of input, process and output variable control. When process or output actions precede input actions, the noise from input variables will affect the efficient performance of process and output actions.

HVAC may use both natural gas and electricity. Some projects may overlap.

PQ controls reduce unplanned downtime and the continuous noise related to systems running while production is interrupted.

Hydroxyl destruction technology does not work where oils are suspended in the atmosphere. In that case, VOC combustion systems might be considered which have far higher capital and operating costs.

Refrigeration and humidity as well as air balance projects reduce the refrigeration load and electricity required to run refrigeration systems. Projects of this type generally result in the reduction of refrigeration capacity and compressor requirements as well as lower electricity use.

Problem 4: inventory cycles

Physical inventory has a cost to maintain and can be leveraged for operating capital. You need inventory for inputs, it is part of work-in-progress (WIP) and is what you ship to customers. Conventional wisdom suggests that you can free up operating cash flow when you minimize the volume of inventory which you keep in stock. This makes sense where sales are predicable, procurement never gets disrupted and accounts receivable get paid on time.

Determining an ideal inventory level uses:

• The resilience of your supply chain (how quickly you can bring new inventory into your facility when demand is increased).
• Your cash-to-cash cycle — the amount of time it takes between paying for inputs and being paid for product. This tells you how long inventory is tying up operating capital. The shorter your cash-to-cash cycle, the less money you will have tied up in inventory.
• How fast your inventory turns from when it lands on your dock until you ship it is another consideration. At the rate of 18 turns per year, your cash-to-cash cycle may be as little as 30 days. Increase that cycle to 36 times per year and it is possible to achieve a positive cash-to-cash cycle, where you get paid for goods before your input costs are due. At that point, you are generating free cash flow in addition to gross margin.
• The cost of space for holding inventory on a cost per kilogram and cost of space for one pallet. The cost of inventory is around 1-cent per kg per month or around $5 per month for a pallet holding 500 kg of product. This is an activity-based costing exercise that looks at the cost to move, hold and finance inventory. Refrigerated and frozen storage has a higher cost than dry storage. Outside storage often costs more than on-site storage.
• The cost of handling a pallet to move it from production to storage and racking, and to retrieve that pallet for further process or shipment. Third-party warehousing companies charge for every pallet their workers touch going into storage, out of storage or for cross-docking.

Calculate how much space inventory physically occupies for the cube it is stored in.

Solutions

Develop an inventory placement plan

Review your inventory requirements based on the volume of flow and space requirements for your inputs and outputs. High volume, fast-turning items require dedicated space that is the easiest to reach and manage. Balance dedicated inventory locations with real inventory requirements. A product that requires one rack berth does not need a row and high-volume products that get shoved into single berths get lost.

In addition to an inventory plan, partner with suppliers so that they become part of your inventory management plan. Suppliers will carry inventory in exchange for guaranteed annual sales. Digital inventory systems make it possible for suppliers to set up stores on your shop floor, where volumes warrant their inventory investment. A mid-sized manufacturer might consider this strategy for maintenance and equipment parts with a local distributor as part of a reliability centered maintenance plan.

Establish inventory cycle reminders

Inventory takes space and space is a cost. Where inventory sits idle for a year, the cost of holding that inventory has probably eroded any profit, exceeded its shelf-life and gotten dusty.

Deal with deadstock

Consider cash and carry sales to employees, donations to food banks, repurposing discontinued packaging or the sale of un-used packaging for salvage. It is not unusual for deadstock to occupy 1-10% of your inventory capacity.