Staying Stocked: Supply Chain Constraints Are Improving, But ...

by Luke Geiver (Ethanol Producer Magazine) he U.S. supply chain can be described in two ways. There is the complicated explanation for the state of supply in 2022 that requires a deep dive into shipping container availability, fuel prices, post-pandemic hangover, Ukraine and a handful of other intricate factors. There is also a simpler way of looking at the U.S. supply chain. As CoBank, one of the largest private providers of credit to the U.S. rural economy, recently said in a quarterly report created for the rural industries it serves, “Supply chains are still a mess.”

Ethanol Producer Magazine spoke with entities from across the greater ethanol industry to shed light on these lingering supply chain restrictions to see what’s being done about it and when normalcy might return.

The Benchmarking Expert
Connie Lindstrom, senior biofuels analyst for Christianson Benchmarking LLC, offers insight to the supply chain challenges of 2022—down to the penny. Ethanol producers are rethinking inventory levels to ensure they aren’t short on a critical ingredient or necessary part, she says. That new focus on inventory is increasing operational costs per gallon.

“Fortunately, two things are helping mitigate the impact of this: generally good continued profit margins, and the ongoing process efficiency improvements throughout the industry.”

Lindstrom sees plants looking for ways to gain flexibility in the supply chain, including through the addition of onsite storage, power generation and even transportation partnerships. Some larger plants have been able to leverage things like pooled parts and supply inventories, while smaller organizations have sometimes found partners to help mitigate the higher costs of maintaining larger inventories.

Ethanol Plant Manager
Mick Henderson, general manager at Kentucky’s Commonwealth Agri-Energy LLC, says his team has experienced supply chain issues like most other sectors of the economy.

The worst issue for Commonwealth has been sourcing spare parts, according to Henderson. There have been long delays combined with higher prices for the parts. Most ingredients have also taken longer to get and cost more, he adds.

“Parts inventories will improve soon. Ingredients also. Being forced to look for alternatives to all of the above has helped us in the short term. We will be better in the long-term, too.”

Equipment Specialist
Michael Cohen, vice president of the equipment acquisition group for Illinois-based Aaron Equipment Co., helps the ethanol industry become more cost-efficient by purchasing their excess equipment or helping them auction off inventory.

Cohen says his team can help ethanol clients in multiple ways right now. For a CFO or accounting team, Aaron can help with appraisals as well as inventory, so that there is a clear understanding of what equipment is where, and what the value of that equipment is.

For a plant manager or operations team, Aaron can help them find the equipment they need to replace or purchase. Most plants have a “boneyard” of old equipment or discarded parts. “We can help clean up the boneyard by purchasing equipment or linking the plant to a reputable scrap company. This frees up space as well as generates cash.”

Agriculture Economists
Through its work helping rural customers access credit, CoBank has its research finger on the pulse of ag and biofuel production. The team recently provided a detailed summary of the supply chain as it exists in Q2 and Q3 of this year.

First, there have been fewer exports issues from China related to the COVID-19 lockdown there. Second, there has been slightly lower transportation price inflation. READ MORE