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

Abstract

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.

Quantitative Techniques for Sustainable Decision Making in Forest-to-Lumber Supply Chain: A Systematic Review

“…Ref. [41] three linear programming models were proposed to determine the most cost-effective and sustainable approach to timber harvest planning in Canadian forests. Model A was based on sustained yield principles and maximized the allowable cut by ensuring a uniform flow of harvest volume per period for the entire planning horizon.…”

Towards Forest Supply Chain Risks

“…Meyer et al (2019) considered the social aspect in supply chain design in Argentina. Rijal et al (2020) Forest supply chains are integrated networks composed of suppliers, wood processors, and logistics providers that work across organizational boundaries to deliver goods and services to consumers (Bettinger et al, 2017;Sun et al, 2018). It also comprises many types of wood products including logs, wood panels, pellets, biomass, etc.…”

Wood Products Manufacturing Optimization: A Survey

“…Instead, tactical decisions should be made with medium-term horizons (e.g., several months to few years) [25]. Decisions about harvesting equipment, bucking instructions, medium-term harvesting planning, and production logistics are some examples of tactical decisions [27]. Rather, the operational decisions consist in short-time horizons (e.g., real-time, daily, weekly, or up to one month), and are often highly detailed [24].…”