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Improving sustainability of value-added forest supply chain through coordinated production planning policy between forests and mills

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  • Rijal, Baburam
  • Lussier, Jean-Martin

Abstract

Commonly-used sustained yield harvest policies ensure sustained supply of harvest timber volume over a planning horizon. However, implemented policies gradually decapitalize forest values over time that threatens the sustainability of ecosystem and wood industries. Different business units of a forest-product supply chain have different ways of valuing forestry resources, different supply and demand policies, and corresponding business policy models to implement them. The objective of this study was to evaluate ecological and economic impacts to participating business units of a supply chain when implementing different business policies. We constructed six business models in a linear programming framework and solved them using data from commercially-managed forests. Our empirical results showed that compared to a base model (Model 1; unilateral decision by forest business unit), the best model (Model 6; integrated harvest and production planning) reduced the median harvest volume and area by 25% (12–31%) and 24% (7–40%), respectively, but increased net revenue by 88% (6–218%) over a 150-year planning horizon. Hence, efficiency increased by 158% (20–373%) per unit of harvest area and 163% (23–364%) per unit of harvest volume. Furthermore, when the models were simulated using a hard constraint to preserve at least 20% of old-growth forest area, the revenue was least affected (15%; 11–19%) by Model 6 compared to Model 1 (26%; 14–45%). We conclude that vertically-integrated harvest policy that embeds forest values in the planning model reduces the gap between the business units, and enhances ecosystem conservation with the least fluctuation of harvest and revenue by period over a planning horizon.

Suggested Citation

  • Rijal, Baburam & Lussier, Jean-Martin, 2017. "Improving sustainability of value-added forest supply chain through coordinated production planning policy between forests and mills," Forest Policy and Economics, Elsevier, vol. 83(C), pages 45-57.
  • Handle: RePEc:eee:forpol:v:83:y:2017:i:c:p:45-57
    DOI: 10.1016/j.forpol.2017.06.003
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    References listed on IDEAS

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    1. Nalle, Darek J. & Montgomery, Claire A. & Arthur, Jeffrey L. & Polasky, Stephen & Schumaker, Nathan H., 2004. "Modeling joint production of wildlife and timber," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 997-1017, November.
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    1. Rijal, Baburam & Raulier, Frédéric & Martell, David L., 2018. "A value-added forest management policy reduces the impact of fire on timber production in Canadian boreal forests," Forest Policy and Economics, Elsevier, vol. 97(C), pages 21-32.
    2. Baburam Rijal & Luc LeBel & Shuva H. Gautam & Pierre Cantegril, 2020. "A Sequential Optimization Approach in Tactical Planning for Value Creation in the Forest Products Industry," Sustainability, MDPI, vol. 12(12), pages 1-23, June.
    3. Santos, Andreia & Carvalho, Ana & Barbosa-Póvoa, Ana Paula & Marques, Alexandra & Amorim, Pedro, 2019. "Assessment and optimization of sustainable forest wood supply chains – A systematic literature review," Forest Policy and Economics, Elsevier, vol. 105(C), pages 112-135.

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