Forest fibre network design with multiple assortments: a case study in Newfoundland

The Canadian forest industry is facing several challenges including high fibre cost, decline in commodity profitability, and low investment levels at relatively old manufacturing plants. To enable transformation of the industry, innovations are needed to develop value-added products and to shift to an efficient integrated value chain. In this regard, improved logistics for better handling of raw material, forest biomass utilization, and use of new technologies are some promising avenues. In this paper, we propose a generic value chain model that includes locating new sorting yards and biorefineries maximizing the overall profit of the value chain. This integrated planning problem deals with strategic decisions including investments in new facilities and technologies and tactical decisions comprising backhaul transportation and fibre flows across the value chain. To solve such a problem, we developed a mixed integer programming model to design the forest value chain network. This model is used in an industrial case study in the province of Newfoundland, Canada. We have generated and analyzed 32 scenarios evaluated on 12 predefined key performance indicators. The results show that collaboration through backhauling, common terminals, and new assortments are important opportunities to improve the profitability and efficiency of the value chain. The potential improvement over the current situation is as high as 23% considering the aforementioned actions.