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In this paper, we study the coordination mechanism in the forestry supply chain between strategic forest management and tactical production planning. We first formulate an integrated model to establish a theoretical benchmark for performance of the entire supply chain. It is a mixed integer programming model that involves harvesting, bucking, transportation, production, and sales decisions for both tactical and strategic planning levels. We then present two sequential approaches S-A and S-B where the coordination is done through internal pricing. S-A is the approach currently used in practice where harvesting in the forest is the main driver of the supply chain activities and internal pricing is introduced to control bucking decision in a separate stage. In contrast, S-B takes downstream demand information into consideration and internal pricing directly influences harvesting decision in the first stage. In order to find the appropriate setting of internal pricing that leads to the system optimum, we suggest two heuristics H-I and H-II. The internal pricing in H-I is based on dual values and in H-II, it is derived from a Lagrangian decomposition. A real-life case study in the Chilean forestry industry is used to compare the results of different approaches. It is shown that the new sequential approach S-B generates as good feasible solution as that obtained from the integrated approach but in much less time. Both heuristics H-I and H-II bring about near-optimal feasible solutions. H-II also provides optimistic bound of the optimal objective function value, which can be used as a measure of the solution quality.

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Traditionally, most applications in the initial stage of forest supply chain deal with sawlogs to sawmills, pulpwood to pulp or paper mills and forest residues to heating plants. However, in the past decades, soaring prices of fossil fuel, global awareness about CO 2 emission and increasing attention to domestic resource security have boosted the development of alternative renewable energy, among which forest bioenergy is the most promising and feasible choice for medium-and large-scale heating and electricity generation. Different subsidies and incentive policies for green energy further promote the utilization of forest bioenergy. As a result, there is a trend that pulpwood may be forwarded to heating plants as complementary forest bioenergy. Though pulpwood is more expensive than forest residues, it is more efficient to transport and has higher energy content. The competition between traditional forest industries and wood-energy facilities, expected to grow in the future, is very sensitive for the forest companies as they are involved in all activities. In this paper, we develop a model that all raw materials in the forest, i.e. sawlogs, pulpwood and forest residues, and byproducts from sawmills, i.e. wood chips and bark, exist in an integrated market where pulpwood can be sent to heating plants as bioenergy. It represents a multi-period multi-commodity network planning problem with multiple sources of supply, i.e. pre-selected harvest areas, and multiple kinds of destination, i.e. sawmills, pulp mills and heating plants. The decisions incorporate purchasing the raw materials in harvest areas, reassigning byproducts from sawmills, transporting those assortments to different points for chipping, storing, wood-processing or wood-fired, and replenishing fossil fuel when necessary. Moreover, different from the classic wood procurement problem, we take the unit purchasing costs of raw materials as variables, on which the corresponding supplies of different assortments linearly depend. With this price mechanism, the popularity of harvest areas can be distinguished. The objective of the problem is to minimize the total cost for the integrated market including the purchasing cost of raw materials. Therefore, the model is a quadratic programming (QP) problem with a quadratic objective function and linear constraints. A large case study in southern Sweden under different scenario assumptions is implemented to simulate the integrated market and to study how price restriction, market regulation, demand fluctuation, policy implementation and exogenous change in price for fossil fuel will influence the entire wood flows. Pair-wise comparisons show that in the integrated market, competition for raw materials between forest bioenergy facilities and traditional forest industries pushes up the purchasing costs of pulpwood. The results also demonstrate that resources can be effectively utilized with the price mechanism in supply market. The overall energy value of forest bioenergy delivered to heating plants is 23% more...

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