Optimal Design of a Forest-Based Biomass Supply Chain Based on the Decision maker’s Viewpoint Towards Risk

Abstract

Abstract Economic viability is one of the main considerations in bioenergy and biofuel projects and is impacted by uncertainty in biomass availability, cost, and quality, and bioenergy and biofuel demand and prices. One important aspect of decisionmaking under uncertainty is the viewpoint of the decision maker towards risk, which is overlooked in the biomass supply chain management literature. In this paper, we address this gap by evaluating alternative supply chain designs taking into account uncertain future conditions resulting from changes in biomass availability and cost, and bioproduct and energy prices. Three decision rules, maximax, minimax regret, and maximin, representing, respectively, optimistic, opportunistic, and pessimistic perspectives, are used for evaluation. It is assumed that the decision maker has knowledge about the potential future events, but the likelihood of their occurrence is unknown. According to the results of the case study, investment in bioenergy and biofuel conversion facilities was recommended based on optimistic and opportunistic viewpoints. Production of both bienergy and biofuels would not be profitable under pessimistic conditions. Therefore, investment in only bienergy facilities was prescribed under pessimistic conditions.