• To see if the proposed design is viable from an economic point of view. • To do a cost analysis against current technology.
KEEP FRESH embodies the final biosensor device. The SENSE and DETECT elements were first assembled in a plasmid so the function of the overall biocircuit could be tested. Following this, various engineering considerations such as selectivity and specificity were taken into account, along with government policies surrounding GMOs, to design a feasible product with viable real-life applications. The BUSINESS PLAN presents a full plant sizing and costing of implementing this technology, having delivered a successful pitch to potential consumers in Avocados Australia, Zespri and Fresh Produce Group.
For the stickers, instead of creating a prototype we evaluated the size of a plant required to produce a set volume. As a starting point, to phase in the product, avocados in Australia were chosen as the focus of this sizing.
According to Avocados Australia,
- 3.4kg/person of avocados are consumed per year in Australia
- The total production in 2015-2016 was 12,130,205 5.5kg trays of avocados, equivalent to 66,716 tonnes
- Given an average fruit size of 215 grams, roughly 310,307,621 avocados were grown in Australia in the last year alone
- 18% of avocados were exported, so it can be concluded that 254,452,249 avocados were consumed locally
- Assuming constant avocado production throughout the year, rather than seasonal surges, and also assuming a 10% allowance for error, 292,620,087 stickers would be required to cover this volume
An analysis was conducted based on this figure, to evaluate the volume of latex/cell mixture required for this one-year period, and the required amount of paper to produce sufficient stickers. One main assumption was that the stickers were printed upright in rows, rather than on an angle to maximise paper space.
Table 2. Amount of paper, latex mixture, and operating conditions required to produce required stickers for avocados in Australia for one year, based on 2015/2016 consumption
Any paper production or alteration process operates at a much faster speed than the minimum calculated above. That being said, the process of coating the roll of paper with the latex-cell mixture is most definitely a more delicate process than printing or cutting. It is expected that this process will take more time than other common paper treatments. It should also be noted that this method would also be used to produce paper test strips for use in the plate design. The only difference would be the size of each strip, and that following the coating stage, these strip would not continue on to an adhesive addition stage.
It is suggested that rather than build a new plant solely for the production of these stickers, an extra processing stage can be added to a current sticker production plant. This would not only decrease production issues that may be faced when opening a new plant, it would also decrease capital costs required significantly.
The only equipment required to alter a current plant to be able to manufacture this biotechnology would be a series of bioreactors to grow the cells, a mixing vat to prepare the latex, and a Meyer roller pull-down system to administer the latex mixture to the paper.
The bioreactors are recommended to be set up in series of increasing volumes, such that the broth can be passed through to larger vessels once the cells have reached the maximum growth phase in the smaller vessel.
Meyer rods vary in diameter based on the required thickness and performance. They often turn in the range of 10-90 RPM, but this is highly dependent on the density of the mixture being spread. They have a very low capital cost, thus making it a reasonable addition to a manufacturing plant.
In order to evaluate the economic feasibility of this proposal, an analysis of the investment required and estimation of the ongoing production costs are necessary. This costing again refers to the requirements for the production of stickers solely for avocados produced in Australia. Capital Costs
Given that production of these stickers has been sized for a year term, it is assumed that the cells required will be grown up in batches to prevent cell death or the need for cell storage throughout the year. The first piece of equipment required is a bioreactor in which to grow the cells, however it is proposed that a series of four vessels are used instead to maximise cell growth potential. Cells will initially be grown in a small (~300mL) shaker flask to maximum concentration, before being transferred to a 3L seed tank. Following a further growth period, the cells are transferred to a 35L inoculum tank, then finally to a 350L fermenter. The sizes of these vessels were back calculated based on the required size for the final fermenter.
Assuming one batch equates to producing enough latex/cell mixture for coating one roll of paper, 175L of mixture is required. Of this, 50% by volume must be cells, or 87.5L. Following a rule of thumb that cell growth is optimised when the growth vessel is at most 25% full, a final vessel of 350L is optimal. Equipment for the Meyer rod pull-down application process must also be bought.
The average cost of each piece of equipment required is summarised in the table below. The summation of these costs make up the total capital cost required to complete this add-on to a current plant.
Total Capital Investment
Aside from the equipment costs, there are many other expenses that make up the total capital investment required. The inside battery limits (ISBL) investment accounts for both the direct and indirect field costs associated with installing the equipment, such as civil works, labour, utilities and other various overheads such as import duties. The offsite (OSBL) investment reflects the modifications that must be made to the existing site, through additional cooling requirements, emergency services, landscaping and pipes, for example.
Engineering costs summise the design costs of implementing the plant, including all project management aspects of the installation. Finally, contingency costs cover unexpected variation in any of these other areas, like fluctuations in prices or building issues that might arise.
The working capital is the amount of money that the company must have access to on a day-to-day basis, and is largely dependent on accounts payable and accounts receivable.
Total Cash Cost of Production The next value that is of critical importance when assessing the viability of a proposed project is the estimated total cash cost of production. This accounts both the variable and fixed costs of production. It can be seen below that the estimated total cost of production for this proposal is $2,173,891.62, with $1,993,458.13 of that being fixed. This means this cost will be incurred regardless of the output and thus regardless of up-scaling that may occur in the future.
Margins and Profits
To draw a conclusion on the viability of this investment, the return on investment must be calculated. Assuming each sticker is valued at $0.01, a 34% return on investment will be achieved in the first year of production, with a gross profit of $752,309.24.
It can be seen that this is an economically viable addition to a current paper processing plant, with a significant return on investment being achieved.
The profit margins calculated above depend on the notion that the stickers will be produced by one company and sold to the produce suppliers. It is indeed realistic that this process will be off-sourced, however it is important to point out the potential for profit even is this is not the case.
Should produce suppliers invest in this technology for their own processing plants, the stickers would obviously not be sold and thus the investment and production costs must be covered by the supplier themselves.
It is at this stage that the benefit of this application must be considered. According to the UN, over 50% of global produce is wasted each year, which obviously incurs a huge cost to growers and suppliers. Resources invested in growing this produce do not provide a 100% return when half of the product is not put to market. The technology that this plant will produce aims to reduce the volume of wastage produce due to unmonitored ripeness.
Better control of the produce through accurate and convenient measurement of ethylene levels will allow for produce to arrive at supermarkets in a better sale condition.
A larger amount of produce on the market inevitably results in a higher revenue for the production chain, and this difference could easily cover the costs associated with this proposed plant addition, even if only partially.
A larger volume of fresh produce on the market could alternatively have the consequence of lower sales price due to lower demand. This would encourage the consumption of fresh produce, a trend that would have widespread benefits in other aspects of society. For example, it could aid in lowering obesity rates as fresh foods could be offered at comparable prices to unhealthy fast food options. This could even attract government subsidy of the implementation costs of the technology.
A small bench-top gas chromatograph can be purchased for as little as $15,000, however industrial scale ones of appropriate sensitivity retail for upwards of $80-100,000. Upon talking to Zespri, one would be needed for each storage facilities, and would be used on a daily or multiple times per week basis.
Operating costs and associated utility costs are excessive, and will differ from case to case. Processing each sample comes with a cost, and an individual sticker that could cost as little as $0.01 is undeniably a more cost-effective option. Avocados Australia currently purchase their labelling stickers at an equivalent cost of $0.04 per sticker, further emphasising how profitable this could be.