Tactical supply chain planning in the forest products industry through optimization and scenario-based analysis

Abstract

A mixed integer programming model that aims at supporting the tactical wood procurement decisions of a multifacility company is presented. This model allows for wood exchanges between companies. Furthermore, the material flow through the supply chain is driven by both a demand to satisfy ("pull" strategy) and a market mechanism ("push" strategy), enabling the planner to take into consideration both wood freshness and the notion of quality linked to the age of harvested wood into log, chips, and end-product demands. An inability to consider alternative plans for implementation, and the difficulty of assessing the performance of these plans in an uncertain environment, are two shortcomings of the manual planning process. A planning process, based on human planner – decision support system interactions that allows a company to overcome these shortcomings is therefore presented. The process combines Monte Carlo methods and an anticipation mechanism that will, in the long term, enable the company to take into account equipment transportation costs. The proposed planning process leads to a multicriteria decision-making problem where the human planner has to select a plan to implement from a set of candidate plans. A hypothetical test case shows that it is possible to manage the wood flow from stump to end market in such a way as to preserve freshness and extract higher value from the logs processed in the mills. The test case also shows that the proposed planning process achieves an average profitability increase of 8.8% compared with an approach based on a deterministic model using average parameter values. Finally, a sensitivity analysis reveals that the accuracy of standing inventory on harvest blocks and the anticipated market conditions are the most important parameters to consider in selecting a good wood procurement plan.