Modelling and optimization of material flows in the wood pellet supply chain

To reduce the use of fossil fuels, forest-based biomass appears as an engaging source of energy. Nevertheless, logistics costs represent one of the main barriers in the use of forestry residues and wood waste for bioenergy and biofuels production. The relatively low energy density of biomass contributes to a higher transportation cost per unit of energy content compared with fossil fuels. Other issues, such as raw material availability, seasonality, production and storage capacity constraints, and transportation distances for product distribution also are critical in the management of biomass supply chain. The interconnectedness of these factors directly impacts into the movement of materials along the logistics chain. In this way, this paper researches the alternative of using forest residues and wood waste as raw material sources for wood pellet production through the modelling and optimization of all logistics activities performed in the supply chain. The objective is the minimization of the total operative cost, which in turn allows determining the minimum profitable selling price of produced pellets. Besides production and inventory decisions, the proposal determines the more profitable routes for biomass collection and pellets distribution. A standard decomposition technique, consisting in designing routes first and later computing products and raw material flows, is employed to solve the optimization problem. The proposal is tested on a large-size case study designed with real data from the forest industry in the Argentinean Mesopotamia. Due to the close interaction between all logistics decisions in the supply chain, several scenarios are assessed to estimate the impact on the solutions of some changes in the problem configuration.