A hierarchical planning system to assess the impact of operational-level flexibility on long-term wood supply

Gautam, Shuva; LeBel, Luc; Beaudoin, Daniel

doi:10.1139/cjfr-2016-0264

Cited by 9 publications

(2 citation statements)

References 21 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Forest planning is essential for achieving sustainability in forestry [62] and, according to Gautam et al [63], the dominating paradigm for planning consists of three stages, namely, strategic, tactical, and operational planning. Strategic planning deals with company-wide questions such as plans for sustainable harvest levels or changes for another variety of plant or crop (e.g., Gunn [64]).…”

Section: Identifying Transformations Options Of a Forest Companymentioning

confidence: 99%

Valuing Forestry Agronomic Potential under Seasonal Mean-Reverting Prices

León

Marin

Toscano

2023

Forests

View full text Add to dashboard Cite

In the valuation of forest resources, the alternative use of the land is one of the central themes. In most cases it is made without taking into account the uncertainty and the possible flexibility of the alternative use. Within these alternatives, the strategy of shifting to a more profitable and sustainable crop is a well-studied topic in forest research. Although the transformation opportunity could add great value to the project, the valuation of this flexibility is obviated by traditional discounted cashflow criteria (NPV). The application of real options theory (ROT) makes it possible to assess this flexibility based on the uncertainty that the transformation entails. However, the hypotheses that are made about the future evolution of the underlying asset, in this case the value of the new crop, may condition the precision of the result. Usually some researchers model these conversions under the hypothesis of geometric Brownian motion (GBM), hypotheses that are not plausible when the new crop has a strong seasonal component. In this work, an adapted model framework is proposed to evaluate forest transformation opportunity into another crop when land use has both high agronomic potential and high seasonal component, a context in which classic real options framework is not applicable. As a work based on a theoretical model, after methodological motivation, the strawberry crop is chosen as alternative due to its seasonal component. Using private data for this crop, we model through the Ornstein–Uhlenbeck process, with mean-reversion (MR) to a seasonal component, and then we use of Longstaff and Schwartz’s algorithm to calculate the option value. The results show that when considering flexibility in option valuation it leads to an increase on the return of more than 4%. Furthermore, robustness analysis evidence shows that option value is very sensitive to seasonal component, reinforcing previous evidence that suggests that the MR process offers a more accurate and appropriate valuation over the traditional GBM in the arena of agronomic potential valuation. Specifically, the result of valuing this transformation through the MR process is between 1.5 and 1.7 times the value of the NPV, which results in approximately a 13% annual return. If GBM had been used, the valuation would have been a 72% annual return, an unrealistic result in this context, due to the non-consideration of the seasonal mean-reverting prices process.

show abstract

Section: Identifying Transformations Options Of a Forest Companymentioning

confidence: 99%

Valuing Forestry Agronomic Potential under Seasonal Mean-Reverting Prices

León

Marin

Toscano

2023

Forests

View full text Add to dashboard Cite

show abstract

“…Forest management planning is considered the upper hierarchical level, and forest products supply chain planning is considered the lower level; both acting independently in their decision processes [23,24]. There are a number of planning models designed for industrial fiber demand and procurement, but they tend to ignore long-term forest sustainability [10,25]. Similarly, forest management planning models usually do not explicitly consider industrial fiber values.…”

Section: Introductionmentioning

confidence: 99%

A Sequential Optimization Approach in Tactical Planning for Value Creation in the Forest Products Industry

et al. 2020

Self Cite

View full text Add to dashboard Cite

Strategic, tactical, and operation-level forest management plans are commonly formulated by forest planners following even-flow yield principles. Although strategic planning ensures a sustained supply of timber over the long term, it disregards individual mills’ requirements, which leads to discrepancy between supply and demand. We hypothesize that a value-based timber allocation decision, which accounts for individual mills’ demands during tactical level planning, reduces such discrepancy by increasing value over the entire supply chain. Three types of linear programming models were constructed: Model A—status quo volume-maximization model, Model B—supply chain net present value-maximization (NPV) model, and Model C—a novel approach with sub-models embedded that maximize the NPV of individual mills in the allocation decision. Our results showed that only 58% of the annual allowable cut was profitable and the mean net revenue per harvested area was $2455 ha−1 using Model A. The respective values using Models B and C were 64% and $3890 ha−1 and 96% and $4040 ha−1, respectively, showing that Model C generated the highest net revenue for all mills. Such a method of value-based sequential optimization (Model C) will be crucial in sustainable use of forest products and sustaining future bioeconomy, particularly for managing mixed species stands that contain timber suitable for manufacturing a wide range of products with different market values.

show abstract

Bibliography

2025

Effects of Climate Change on Forests

View full text Add to dashboard Cite

A hierarchical planning system to assess the impact of operational-level flexibility on long-term wood supply

Cited by 9 publications

References 21 publications

Valuing Forestry Agronomic Potential under Seasonal Mean-Reverting Prices

Valuing Forestry Agronomic Potential under Seasonal Mean-Reverting Prices

A Sequential Optimization Approach in Tactical Planning for Value Creation in the Forest Products Industry

Bibliography

Contact Info

Product

Resources

About