Integrated forest biorefinery network design under demand uncertainty: a case study on canadian pulp & paper industry

Transforming Pulp and Paper (P&P) mills into Integrated Forest Biorefineries (IFBR) is a prominent solution to save Canadian P&P industry that has been facing decline of conventional paper demand. We propose a comprehensive decision model for the design of IFBR value chains by taking the uncertain demand of bioproducts into consideration. In particular, we propose a multi-stage stochastic programming model to obtain the optimal investment plan over a long-term planning horizon in the presence of various market trends. We also develop a Monte-Carlo simulation platform to validate the proposed model and to compare its performance with alternative decision models. The model is applied to a realistic case study inspired from P&P companies in Canada, where the value of incorporating the dynamic nature of uncertain demand has been estimated. Further, we elaborate on the value of considering flexibility in terms of adjusting the investment plan in response to changes in the demand. Our results indicate that the demand for bioproducts has a substantial impact on the profitability of the IFBR. We also demonstrated the significant value of explicitly incorporating the uncertainty in IFBR network design as well as adapting the investment plan to the changes in the demand.