Tactical supply chain planning for a forest biomass power plant under supply uncertainty

Uncertainty in biomass supply is a critical issue that needs to be considered in the production planning of bioenergy plants. Incorporating uncertainty in supply chain planning models provides improved and stable solutions. In this paper, we first reformulate a previously developed non-linear programming model for optimization of a forest biomass power plant supply chain into a linear programming model. The developed model is a multi-period tactical-level production planning problem and considers the supply and storage of forest biomass as well as the production of electricity. It has a one-year planning horizon with monthly time steps. Next, in order to incorporate uncertainty in monthly available biomass into the planning, we develop a two-stage stochastic programming model. Finally, to balance the risk and profit, we propose a bi-objective model. The results show that uncertainty in availability of biomass has an additional cost of $0.4 million for the power plant. Using the proposed stochastic optimization model could reduce this cost by half. (C) 2014 Elsevier Ltd. All rights reserved.