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Operational Objectives and the Transformation Process in the Energy/Electricity Industry

Stromproduktion in der Energiewirtschaft: operationale Ziele und Transformationsprozess

Research Paper (undergraduate) 2009 16 Pages

Business economics - Supply, Production, Logistics

Excerpt

Table of Contents

1. Introduction

2. The transformation process at EXAMPLE
2.1 Definition of the EXAMPLE operations
2.2 Characterisation of the key operations process
2.3 Electricity – product or service?

3. Operational objectives for EXAMPLE

4. Conclusion

Appendix A: Description of fossil power plant

References & Bibliography

1. Introduction

Operational processes represent the core of businesses. Whether it is in manufacturing or in the service industry, operations play a major role in serving the customers’ needs (Galloway et al. 2000). Transformation processes are the key to delivering value to the client by transforming inputs (such as materials, information...) into outputs, such as products or services (Slack et al. 2004).

This report will identify and describe the key transformational processes for a case company and derive operational objectives for it. The growing importance of services in operations will be critically discussed with reference to the selected firm.

For this purpose, secondary research was undertaken to provide a framework for the analysis. This will be enhanced by relevant information from within the model company.

As the case organization, the German electricity generator “EXAMPLE GmbH” (henceforth: EXAMPLE) has been selected. This company is operating as the electricity generation unit of the international Utility company “EXAMPLE AG”. It is active in a number of generation technologies (e.g. nuclear, gas, coal). However, given the expected extent of this report, operational descriptions have been limited to coal-fired plants as the exemplary technology.

2. The transformation process at EXAMPLE

2.1 Definition of the EXAMPLE operations

Transformation processes are a key part of a company’s operations. When a set of inputs is transformed to provide outputs, this is called “transformation process” (Slack et al. 2004). In the following, this basic model will be applied to energy generator EXAMPLE.

Input resources are separated between transformed (processed) resources (therein material/ information/ customer) and transforming resources (therein facilities/ staff) (Greasley 1999).

At EXAMPLE, the transformed resources are mainly materials such as fuel (e.g. coal) to be fired during the transformation process. Additive materials used in the process are air and water (Dyckhoff 1994). Although information (e.g. demand data) does play a role in planning operations, it is not changed during the transformation process. Also, customers are not converted as part of the production process, thus are not key part of the operations at EXAMPLE.

The transforming resources, mostly facilities, play a major role in power generation are. The power plant’s key components (e.g. steam boiler, turbine or generator) are the core of transforming the energy that is bound in the fuel into electrical energy (Oeding / Oswald 2004). Thus, building, running and maintaining power plants is the key function of EXAMPLE. Due to the complexity of the equipment, a highly skilled workforce is required to run the power plants as efficiently as possible. However, the staff is mostly not directly carrying out, but far more supervising the transformation process (Waters 1999).

In accordance with the importance of the inputs for the transformation process, the conversion of the material inputs can be considered as the key aspect of the transformation at EXAMPLE, using the existing facilities (EXAMPLE 2005a). A characteristic of materials processing is the change of physical properties of the material inputs (Slack et al. 2004). At EXAMPLE, this is the case for the fuel (e.g. coal) that is fired, whereas the bound energy is converted into gas (steam)[1].

There are sub-processes in operations to this energy conversion process, such as engineering and maintenance of the equipment, procurement of fuels, but also marketing of the energy produced. These can be considered as support processes in the operations hierarchy (Greasley 1999).

The key output of the key process (via turbine/generator) is electricity. Outputs – products and services - are usually classified by their tangibility (Greasley 1999). For electricity, it is argued whether it is a product or a service. Whilst clearly not tangible and difficult to store (characterizing a service), it is still considered as a sort of material by many, especially as materials are the main input to the transformation process. However it is widely discussed to what extent the differentiation between products and services does matter (Slack et al. 2004) (please also refer to section 2.3 of this report).

There are other outputs from the transformation process that could be considered in power generation (Dyckhoff 1994): the condensed water from the steam, the heat from cooling down the steam, the smoke gases and the ashes from burnt coal. Some of them are reused within the transformation process (cooled water), provided as a by product (long distance heating), collected and sold (ashes, to construction material fabricants) or collected to be disposed as toxic waste (smoke gases from filters). However, it is obvious that these are just complementary outputs for a power generator[2].

The figure below summarizes the above:

illustration not visible in this excerpt

Figure 1: Indicative transformation process model for EXAMPLE (Source: Author’s preparation, on the basis of (Slack 2004, p.12))

2.2 Characterisation of the key operations process

Processes can be characterized by four distinct aspects (Brown et al. 2000):

- Volume of output
- Variety of output
- Demand variation
- Customer visibility

Applying this to EXAMPLE, this turns out the following for electricity: Concerning volume and variety, electricity is a commodity with no need for varied output (e.g. colours, types etc.). Thus, the main aim is to produce the biggest volume possible. Due to high effort of starting up the transformation process, power plants are usually continuously run (Waters 1999), only interrupted for maintenance. To react to demand variation (e.g. seasonal or day/night), the input (fuel amount) is usually levelled and the power plant adjusted to run at a lower utilization rate (EXAMPLE 2005b). Lastly, electricity as an (invisible) commodity does not focus on customer interaction to a large amount. In summary, it can be said that EXAMPLE’s core transformation process clearly can be classified as a “continuous process”

[...]


[1] A basic description of a coal-fired power plant can be referred to in the Appendix A

[2] Long-distance heating is considered as a by-product because its delivery is limited to a certain distance and is only required in heating periods during the year.

Details

Pages
16
Year
2009
ISBN (eBook)
9783656145691
File size
609 KB
Language
English
Catalog Number
v190102
Institution / College
Robert Gordon University Aberdeen – Aberdeen Business School
Grade
1,0
Tags
Operations Management Energieerzeugung Energiewirtschaft Stromproduktion Produktionsprozess

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Title: Operational Objectives and the Transformation Process in the Energy/Electricity Industry