Guided tour: Implementing the forest biorefinery (FBR) at existing pulp and paper mills

existing assets and pursuing new product development. The strategy to achieve these objectives while mitigating risk is far from obvious. The “titans” of the natural resource industries, as the President of Domtar calls DuPont and other leading manufacturing companies, typically achieve good returns over the long term through product development. On a continuous basis, these companies typically seek to replace existing revenues through new products, and even divest products that have become commodities and provide minimum margins. One of the most important challenges that forestry companies considering the biorefinery must face concerns which biorefinery products to manufacture, and those in particular that are likely to have a promising market potential over the long-term. Incorporating new products in addition to the existing pulp and paper product portfolio is a complex problem – and perhaps the key to a company’s success in diversification. Those who will eventually succeed with implementing the biorefinery will define their product portfolios considering the optimization of profit margins via advanced supply chain strategies. There are critical related questions that must be addressed by companies establishing biorefinery strategies. What is the optimal product portfolio, and the best business partners and business model for implementing this? What emerging production processes (biochemical, thermochemical or chemical) enable this product diversification, while providing the targeted return on investment? What would be the most successful product/process scenario for a given mill, and then for several mills within a forestry company? What would be the ature commodity industries such as pulp and paper are characterized by low R&D intensity, and as demand growth for products has fallen, R&D activities have migrated from process and product innovation to enterprise efficiency research, e.g. supply chain optimization. There is little argument over whether the North American forest products industry is in deep distress. In response, the corporate strategy for many North American forestry companies in recent years has been to merge and acquire (M&A), plus to establish programs for continuous belt tightening and selling ‘non-core’ assets – seeking to be the lowest cost producer. M&A activity has undoubtedly been critical. Combined with several mill closures in recent years, this has led to price optimism for the near term. However, this may not be a long term sustainable situation for the cyclical industry sector. With a multitude of biorefinery innovation providers and chemical and petrochemical companies hungry for biomass sources and engaging in partnership discussions, forestry companies must act quickly to secure their opportunities, as the biorefinery world is evolving at a fast pace. Accordingly, the forest biorefinery (FBR) is being seriously considered by some forestry companies (and likely more as time moves on) as a strategy for diversifying their basic business model [1]. However, the implications of this strategy go beyond a requirement for significant capital spending by a cash-limited industry. In our view, diversification to a new business model is essential in order to successfully transform into a sustainable FBR, while at the same time, optimizing the value of M Abstract: The forest biorefinery (FBR) is being considered by many forest product companies as an option for improving their business models. FBR implementation presents significant challenges for mills, related to key technological, economical, financial, cultural, and operational risks – and most importantly, related to enterprise transformation (ET). Product platform definition needs to be systematically considered in order to develop sustainable biorefinery strategies, which in turn precipitates corporate transformation, while increasing overall profits. Foundation concepts with regards to ET and product design are presented in this paper. A hypothetical “guided tour” is given for the biorefinery implementation for the production of ethanol, in which a phased approach is proposed, and key issues that a given mill should consider for implementing the FBR are highlighted.