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An integrated strategic and tactical optimization model for forest supply chain planning

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  • Luo, Li
  • O'Hehir, Jim
  • Regan, Courtney M.
  • Meng, Li
  • Connor, Jeffery D.
  • Chow, Christopher W.K.

Abstract

Opportunities exist for forestry companies to vertically integrate operations to include both forest estate management and timber processing. However, forest supply chains have traditionally functioned in a decoupled manner where forest operations and timber processing are uncoordinated in their planning and operation, leading to sub-optimal supply chain configuration and outcomes. To maximize the benefits of vertically integrated forest supply chains, the planning method needs to include both strategic and tactical decisions simultaneously. This paper demonstrates a mixed integer linear programming integrated forest planning model that integrates strategic level forest management on a long 40-year planning horizon with sawmill operations in the tactical level decision over multiple shorter horizons with the 40 year overall planning period to cover the decisions related to forest and the wood processing plant. The results show that when compared to uncoordinated forestry and processing model outcomes, the incorporation of forestry and processing operations in an integrated optimization model can increase the NPV of the combined enterprise over 20%. The results are tested to a range of sensitivities, including discount rate, harvest cost and harvest volume. The revenue from selling processed wood products made possible when a forest management firm owns its own timber mill accounts for the integrated model profitability increase, which is not available in the strategic model representing a forest firm without timber processing capacity. The results emphasize that the integrated planning method could bring more economic returns and support forest managers' decision-making.

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  • Luo, Li & O'Hehir, Jim & Regan, Courtney M. & Meng, Li & Connor, Jeffery D. & Chow, Christopher W.K., 2021. "An integrated strategic and tactical optimization model for forest supply chain planning," Forest Policy and Economics, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:forpol:v:131:y:2021:i:c:s1389934121001775
    DOI: 10.1016/j.forpol.2021.102571
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    References listed on IDEAS

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    Cited by:

    1. Zahraee, Seyed Mojib & Shiwakoti, Nirajan & Stasinopoulos, Peter, 2022. "Application of geographical information system and agent-based modeling to estimate particle-gaseous pollutantemissions and transportation cost of woody biomass supply chain," Applied Energy, Elsevier, vol. 309(C).
    2. Ramos, Francisco López & Batres, Rafael & De-la-Cruz-Márquez, Cynthia Griselle & Anzures, Melina López, 2023. "Optimization models for nopal crop planning with land usage expansion and government subsidy," Socio-Economic Planning Sciences, Elsevier, vol. 89(C).
    3. Amadu, Festus O. & Miller, Daniel C., 2024. "The impact of forest product collection and processing on household income in rural Liberia," Forest Policy and Economics, Elsevier, vol. 158(C).
    4. Alex Vinicio Gavilanes Montoya & Danny Daniel Castillo Vizuete & Marina Viorela Marcu, 2023. "Exploring the Role of ICTs and Communication Flows in the Forest Sector," Sustainability, MDPI, vol. 15(14), pages 1-23, July.
    5. Luo, Li & Gao, Yuan & Regan, Courtney M. & Summers, David M. & Connor, Jeffery D. & O'Hehir, Jim & Meng, Li & Chow, Christopher W.K., 2024. "Emissions offset incentives, carbon storage and profit optimization for Australian timber plantations," Forest Policy and Economics, Elsevier, vol. 159(C).

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