By Robert Ziner | CIHC, Canada
Growing hemp to process into fiber goes back more than 10,000 years. The fact that hemp could be easily grown to provide food, clothing and shelter means it has been a very important crop down through the ages. For much of that time, hemp was grown almost exclusively as a local product that served the basic needs of a farmer, his family and his neighbors. The cost of processing was not a key issue. Human survival was.
But in those days there was no value chain per se. Farmers grew the crop, processed the plants and made the finished products they needed to personally survive – or could trade for other staples.
Today, however, with specialization, high labor costs, erratic cannabis laws, mass distribution and other limitations, a transparent hemp fiber value chain is critical to production at industrial scale. It’s not that the steps in the chain have changed; it’s that every step involved ultimately impacts the end-to-end production process – by impacting a product’s marketability.
Clearing things up
Although contemporary hemp farmers need to be able to measure their costs relative to the revenue they expect to generate, they have no actual hemp fiber value chain to rely on. There is no way to source the data needed to determine actual market prices, or factor in such critical considerations as cost, availability, reliability and quality. Considering the relative newness of this industry, this lack of clarity is not surprising.
Traditionally, it takes time to evolve a market structure and define standards, cost-effective market opportunities and up-to-date market price levels. This would also be the fate of the hemp fiber industry except for one thing: Artificial intelligence (AI), which can speed up this development process.
Artificial intelligence has been around since 1955. A special kind of software that can “learn” or solve problems by simulating human intelligence, it operates machines that are specifically programmed to “think” or “reason” like humans, and generate decisions and actions. Beyond “thinking,” AI chooses the best answer from a range of possible ones, and much faster than any human can.
The hemp fiber value chain defines all the actions which must take place to bring hemp fiber to an end-user – from planting seeds all the way to ensuring reliable after-sale service. The costs and mark-ups incurred along the process required to ultimately achieve the sale of a product define its marketability, and thus its financial opportunity!
The transparency of a value chain is critical to the stability of an industry. Each of the stakeholders must have a clear understanding of their individual margins in order to stabilize the growth of a new industry such as hemp. All these operations must be profitable for an industry to maintain a healthy value chain.
AI brings forth a new realm of real-time data, flexibility and future market insights. When this 21st century high-speed system processing technology is embedded into a digitally driven production environment, it inevitably redefines the economics of production, and the market opportunities.
AI’s inherent machine learning capabilities means huge amounts of data can be accessed and analyzed to identify patterns that are not otherwise easily identified, with the results valuable to improved operational outcomes.
What AI can do
AI can impact the hemp fiber value chain from start to finish. Here’s how:
Farming: Everything starts with the farmer, who is the ultimate entrepreneur. Every year, farmers must have faith that nature will reward them for their hard efforts. What they need to help nature is data. From statistical information about seed genetics, to data about weather, soil, irrigation and fertilization, AI can provide deep insight and guide future decision making.
AI is behind such things as planting seed equipment, GPS-driven autonomous field equipment, drones for aerial field inspection and robotic harvesting.
Processing: Beyond farming and harvesting, decortication is the primary process of breaking the hemp stalk down into its two kinds of fibers: bast and hurd. It is a low margin business which operates today strictly in commodity markets. AI allows a company to deliver much higher margins by enabling it to reliably generate large volumes of automatically quality-controlled fiber. The system can measure and adjust bale weight for moisture content, do fiber quality scans to match customer order criteria, predict maintenance and help with production planning and scheduling.
Tracking the material throughout the value chain, AI generally controls production, planning & scheduling, supplying the logic for flow and process control. It can also signal predictive maintenance, integrate secondary production with primary processing, and provide flexibility for turning out customized products. Finally, AI sits on top of inventory control and sorts out other logistics.
Other operations: Moving through the value chain to the wholesaler or secondary producer, AI provides these vital intermediary operations timely data regarding supply, demand, logistics, quality and after-sales service — all vital to maintaining equilibrium in the hemp fiber marketplace. With more accurate forecasting, and automated scheduling & ordering, AI can help reduce supply chain costs by 50%; and costs related to transport and warehousing up to 20%. Automated order monitoring provides customers traceability and tracking.
Ad hoc value chains
Thorsten Wuest, one of the world’s leading authorities on artificial intelligence, has written that “future supply chains need to reinvent themselves, embracing disruptive technologies and reimagined processes – thus creating digital supply networks that are capable of rapidly adapting to all kinds of scenarios. One crucial capability is to leverage a diverse set of organizations by creating efficient, ad-hoc value chains.”
Given the ad hoc shape of the hemp fiber industry today, that’s a clear roadmap. In order to deliver market stability, the industry needs to focus on providing digitally-driven supply capabilities to connect all parts of its current value chain. This will provide the invaluable real-time data, transparency and production flexibility which is needed to optimize the entire production network, and point the way to a prosperous future for the fiber industry and the many sub-sectors it can serve.
Robert Ziner is Founder & CEO, Canadian Industrial Hemp Corp. (CIHC), Toronto, which is developing an advanced hemp stalk processing and optimization system. Ziner has more than 30 years in the building materials distribution and secondary wood processing industries.