supply chain management of the canadian forest products industry under supply and demand uncertainties: a simulation-based optimization approach
abstract
the canadian forest products industry has failed to retain its competitiveness in
the global markets under stochastic supply and demand conditions. supply chain
management models that integrate the two-way flow of information and materials under
stochastic supply and demand can ensure capacity-feasible production of forest industry
and achieve desired customer satisfaction levels. this thesis aims to develop a real-time
decision support system, using simulation-based optimization approach, for the canadian
forest products industry under uncertain market supply and demand conditions. first, a
simulation-based optimization model is developed for a single product (sawlogs), single
industry (sawmill) under demand uncertainty that minimizes supply chain costs and finds
optimum inventory policy parameters (s, s) for all agents. the model is then extended to
multi-product, multi-industry forest products supply chain under supply and demand
uncertainty, using a pulp mill as the nodal agent. integrating operational planning
decisions (inventory management, order and supply quantities) throughout the supply
chain, the overall cost of the supply chain is minimized. finally, the model integrates
production planning of the pulp mill with inventory management throughout the supply
chain, and maximizes net annual profit of the pulp mill.
it was found that incorporation of a merchandizing yard between suppliers and
forest mills provides a feasible solution to handle supply and demand uncertainty.
although the merchandizing yard increases the total daily cost of the supply chain by
$11,802 in the single industry model, there is a net annual cost saving of $17.4 million in
the multi-product, multi-industry supply chain. under supply and demand uncertainty
without a merchandizing yard, the pulp mill is only able to operate at 10% of its full
capacity and achieve a customer satisfaction level of 9%. the merchandizing yard
ensures pulp mill running capacity of 70%, and customer satisfaction level of at least
50%. however, the merchandizing yard is economically viable only, if the sales price of
pulp is at least $680 per tonne. efficient and effective management of inventory
throughout the supply chain, integrated with production planning not only ensures
continuous operation of forest mills, but also significantly improves the customer
satisfaction.